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DOJ sues realpage for algorithmic pricing scheme that harms renters

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Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#121

Post by bena »

Sohcahtoa82 wrote: post #40
legitster wrote: post #30

I am a small-time landlord. There's no "marginal cost" to determine how much to charge for rent. The only thing I use to determine the price is the current market rate. And all I have to do is open up Zillow or Craigslist and do a search on similar properties with similar characteristics. It only takes ~5 minutes of research to get a competitive market rate. While RealPage might command 80% of the market for this typ…

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average.

There's two major companies in the area that rent out apartments.

I rented from one a few years back. In my unit, there were 12 apartments (I think). IIRC, four per floor, with three floors. I believe there were 8 to 12 units surrounding a common area in our "block". Then this "block" was a part of a larger group of complexes and in the area, they had five or six of these groups.

That's around 50 - 100 units.

They also had other locations. They probably manage at least 1000 units.

The other company manages fewer, but not by much.

If RealPage gets both of them, they've effectively set the prices for all apartments in the area.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#122

Post by everforward »

legitster wrote: post #56
currymj wrote: post #4

Algorithmic pricing that learns to tacitly collude is a hot area of study in computer science and economics. For example, if you train simple online learning algorithms to adjust prices, sometimes they can learn to keep prices high or to take turns winning customers, rather than just competing. People have found some empirical evidence of this on platforms like Amazon where a lot of small sellers use pricing bots. Ho…

This gets into prisoner's dilemma though. If everyone but me is using the price fixing app, I have a strong incentive to undercut them, even by just a few dollars. So without a cartel-like enforcement mechanism, there is no reason it wouldn't just fall apart naturally in the long run. In the complaint there was a mention of "compliance" which could get into that piece though.

I think you’re presuming elastic supply, where you can make up the lost profit from undercutting by selling more units.

Real estate supply isn’t very elastic, and demand already outpaces supply. Your units will likely get rented, as long as you aren’t in the top 0.1% of prices.

Therefore your incentive is to maximize profit per unit since you can’t move more units. Your incentive is to also join in on price fixing, because it’s the only way to make more money.

Supply outpacing demand would cause this to dissolve, as landlords actually have to compete for tenants and the highest priced landlords have empty apartments.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#123

Post by Alupis »

switch007 wrote: post #87
Alupis wrote: post #67

Earlier quoted context omitted.

> The fact that providing people with housing is even seen as an "industry" > It is essential to living a decent life. What troublesome phrasing. "Provide" implies people should get housing for free, and "decent" implies getting "decent" housing for free... Well, so who is actually paying for it then? Magical handwavy "government" money? Everyone knows where government money comes from, right? Right? Do we want more…

I'll totally accept you're speaking just in the context of the USA but... > The fact that some people actually truly believe "free government housing" is going to be "decent" is absolutely tragic Council houses are fairly highly regarded in the UK (i.e. the property, in terms of space, light, build quality. The estates/tenants, not so much...). They also have a track record of maintaining them far better than private…

Wikipedia indicates most of these Council Homes were built in the early 1900's - and are not modern construction. An additional average of a around 100 homes total were built per year from the 40's through 1980. So these don't appear to be helping a significant portion of the population.

Wikipedia also indicates in the 1970's the UK government dramatically and suddenly cut back on funding for these homes (among other things), which led to some very poor living conditions.

Your quality of life being dependent on the whims of politicians and budgets outside-your-control seems awful...

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#124

Post by stackskipton »

everforward wrote: post #113
jasode wrote: post #78

Earlier quoted context omitted.

>So it could be argued it's not "private prices" I added "private prices" as one of the factors because the official DOJ wording in the complaint mentions "nonpublic/confidential/sensitive" prices in 3 different places: > The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates >“We allege…

I don’t think they’re talking about the price they’re renting the apartment for; I can’t imagine that number is secret in any meaningful sense of the word. Who rents an apartment without knowing the price? I think they’re talking about more sensitive internal numbers. What are the costs and margins on the unit? How quickly are units moving at a certain price? What’s the turnover at particular prices? I think the core…

Another big one is when do the leases end for inventory control. RealPage is why Apartment dwellers report getting options to renew at cheapest price for odd number of months like 17. Realpage is trying to prevent a bunch of leases ending and flooding the market.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#125

Post by legitster »

RhodesianHunter wrote: post #114
legitster wrote: post #56

Earlier quoted context omitted.

This gets into prisoner's dilemma though. If everyone but me is using the price fixing app, I have a strong incentive to undercut them, even by just a few dollars. So without a cartel-like enforcement mechanism, there is no reason it wouldn't just fall apart naturally in the long run. In the complaint there was a mention of "compliance" which could get into that piece though.

>I have a strong incentive to undercut them Not in a supply constrained market where your rental will be occupied either way.

If your rental is $2400, and it sits on the market for 2 months, you lost potentially lost $4800. It would take a huge rent increase to justify that.

It's one thing if the software is helping landlords jack up prices to the market rate. It's quite another to convince them to collude against their best interests.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#126

Post by Manuel_D »

itake wrote: post #57
toomuchtodo wrote: post #46

Earlier quoted context omitted.

It's the other way around. Regulation around pricing forces housing providers to provide housing within a constrained cost model (land + materials + labor + cost of capital + permitting/AHJ requirements [regulation]). If they cannot meet the market (or choose not to, for whatever reason), public housing is an option, with muni bonds issued to finance construction. This removes the profit component, which a for profit…

where does the public housing come from? WA and CA can't seem to figure out how to build public housing. In WA, the best I've seen is the gov buying hotels and having the hotel sit empty for years [0]. If regulations make it impossible to build housing and public housing has the same regulations, who is paying that bill? The existing residents via sales and property taxes? you can google construction costs in sf. how…

Washington has at least done a better job than San Francisco. Seattle has built over twice (IIRC three) times as many homes per-capita than SF over the last decade, despite lower population. The fact that rent control is banned statewide has a big role to play there.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#128

Post by djyaz1200 »

A key problem with rent pricing is that a form of price fixing is imposed by fair housing law in a way that educated folks know how to circumvent, but many do not.

When a lease is advertised at X price, it is not legal to offer one monthly price to one tenant and a different one to another, so no negotiating can occur. This also allows smart landlords to price fix without software because all rates are known since the posted rate is the rate. This inhibits true price discovery.

The cheat code is to ask for free months and spread that discount over the lease term. However, this creates a situation where, at the end of the lease, the landlord has you set at the regular month price (or higher), and you have little leverage. Also your good deal is unknown to others who will continue to overpay.

Attacking a software is an easy out, attacking the system that artificially increases rents in the whole system by outlawing more aggressive tenant negotiation is the hard problem.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#129

Post by 0x457 »

Manuel_D wrote: post #47
toomuchtodo wrote: post #28

Earlier quoted context omitted.

Profits are fine, excessive profits at the cost of people who need housing are not. There is no silver bullet, but increasing supply along with strong regulation to protect renters is welcome vs them being cattle to be squeezed by for profit entities. Human rights are a thing, there is no right to profit. > The six largest publicly traded apartment companies in the U.S. — all of which are linked to an alleged rental…

The phrase "protect renters" is often used as a dogwhistle for price controls. For example, rent control and affordable housing mandates that require a certain % of units to be rented at below market rates. Can you elaborate on what exactly you're referring to here?

> For example, rent control and affordable housing mandates that require a certain % of units to be rented at below market rates.

The issue that we have here - market rates controlled by RealPage. Since everyone uses RealPage, in terms of price for renters it's essentially the same as if every building was owned by the same company.

I'm appalled how long it took for this lawsuit to be filed. We knew about this price fixing for quite some time.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#130

Post by Manuel_D »

bdcravens wrote: post #120
Manuel_D wrote: post #117

Earlier quoted context omitted.

Gasoline isn't subject to price controls, though! They were in the past, and the results were disastrous. This is what price-controls on gasoline look like: https://www.federalreservehistory.org/-/media/images/essays/... The way that the government influences gas prices is that they stockpile or release oil from the US strategic reserves. They don't regulate prices. They influence supply in order to influence prices.…

You can be prosecuted for price gouging of essential goods.

"price gouging" is not the same as price-fixing. Price gouging refers to raising prices in response to natural disasters: https://www.cato.org/blog/anti-price-gouging-laws-entrench-s...

> Texas’s APGL kicks in when a disaster is declared by the governor or the country’s president. Under the law, merchants are not allowed to sell or lease fuel, food, medicine, lodging, building materials, construction tools, or other necessities at “exorbitant” or “excessive” prices, with those caught facing civil penalties of up to $10,000 per violation, rising to $250,000 if elderly consumers are affected.

There's very specific, and very short-term windows in which prices cannot be raise excessively. It's not even remotely comparable to price controls on rents.

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