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DOJ sues realpage for algorithmic pricing scheme that harms renters

justice.gov

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

#131

Post by tmoertel »

jasode wrote: post #19

>Armed with competing landlords’ data, RealPage also encourages loyalty to the algorithm’s recommendations through, among other measures, “auto accept” functionality and pricing advisors who monitor landlords’ compliance. I think the "private prices" + "autoaccept" + "compliance" is the key misbehavior that gets RealPage into legal trouble. If competitors want to converge on prices in a legal manner , they have to do…

The classic way that businesses openly coordinate their pricing is via price matching. Businesses advertise their preferred prices but also promise that they'll match lower prices from competitors. Competitors see these advertisements and set their own prices to approximately match.

The FTC does not consider this type of open signaling to be price fixing:

> Q: Our company monitors competitors' ads, and we sometimes offer to match special discounts or sales incentives for consumers. Is this a problem?

> A: No. Matching competitors' pricing may be good business, and occurs often in highly competitive markets. Each company is free to set its own prices, and it may charge the same price as its competitors as long as the decision was not based on any agreement or coordination with a competitor.

Source: https://www.ftc.gov/advice-guidance/competition-guidance/gui...

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

#132

Post by bluGill »

kpw94 wrote: post #65
jasode wrote: post #19

>Armed with competing landlords’ data, RealPage also encourages loyalty to the algorithm’s recommendations through, among other measures, “auto accept” functionality and pricing advisors who monitor landlords’ compliance. I think the "private prices" + "autoaccept" + "compliance" is the key misbehavior that gets RealPage into legal trouble. If competitors want to converge on prices in a legal manner , they have to do…

Many listings for apartments are on on-site.com (which is "a RealPage company") and are publicly available... So it could be argued it's not "private prices" + "autoaccept" + "compliance" But rather "public prices" + "autoaccept" + "compliance" Still problematic behavior (and probably add "private knowledge of inventory forecast" on top of that), but I'd argue price signaling of the available inventory isn't the main…

There is more than just pricing at question here. If you go to your typical local gas station with a 5000 gallon tank and fill up the station will raise their prices above the other stations in the area because they will only have a small amount of gas in their tanks and so they want everyone to go elsewhere until the next delivery fills the tanks up again. (depending on when you fill up the station may not even have 5000 gallons in their tanks.) How much tank is left at any station is NOT public information shared with other stations in the area.

RealPage though has information on how many apartments are empty and uses that in algorithms even though it isn't public information.

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

#133

Post by WarOnPrivacy »

RhodesianHunter wrote: post #118
bick_nyers wrote: post #18

Earlier quoted context omitted.

Housing is pretty inelastic. I think people are just willing to suffer financially to avoid the fate of homelessness. Just because there aren't vacancies anywhere doesn't mean that the price is fully justified, because housing will take priority over groceries for a lot of people.

Housing supply is inelastic due to the time it takes to permit and built. Housing demand is more elastic than you suspect. People have income on a curve, and at a certain point of price/quality will move further out and commute or move to a lower cost of living city entirely.

> People have income on a curve, and at a certain point of price/quality will move further out and commute or move to a lower cost of living city entirely.

This doesn't describe the major renter class who has few workable options to choose from. They take whatever they can get.

Once they manage a place to live, they're likely trapped there because they don't have a wad of cash on hand (required to move).

That's average renter difficulty. It can get far worse.

In 2021, the few rentals available here got 400 applications/day. We beat out 50 applicants for one that was advertised for 2 hours (offered 6mos up front).

We beat long odds and barely avoided homelessness (even tho we had good employment history + money in the bank).

Many, many others were less lucky. Every rent-by-the-week hotel filled up, typically with people exhausting their savings.

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

#134

Post by everforward »

legitster wrote: post #95
lcnPylGDnU4H9OF wrote: post #61

Earlier quoted context omitted.

> I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software. I don't think there's anything so far to indicate this or that; there's still a reasonable possibility that 80% of the market is controlled by large property management businesses.

This is easy to look up. There are approx 300,000 property managers in the US. Assuming RealPage isn't lying about their number of active customers, they would only account for 16% of the industry. Obviously the numbers could be skewed wildly but it's still far from a monopoly.

The allegation would be that they have a monopoly over rental pricing, in which case the relevant metric is the percentage of rental pricing they control, not what percentage of landlords use RealPage.

If Kroger, Walmart, and Safeway decided to collude, they’re probably less than a percent of grocery store brands. They are like 95% of the grocery supply, though.

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

#135

Post by Manuel_D »

0x457 wrote: post #129
Manuel_D wrote: post #47

Earlier quoted context omitted.

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…

Apparently, RealPage only serves 10% of the rental market in San Francisco: https://jacobin.com/2024/08/realpage-software-housing-landlo...

> The company has reported that it provides these services to 10 percent of the rental market in San Francisco.

RealPage doesn't have nearly enough market share to engage in price-fixing. If it tried, its units would stay vacant as other renters flock to the 90% of units that aren't using RealPage.

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

#136

Post by bluGill »

everforward wrote: post #122
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 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, b…

For the landlord units is elastic. If you have many units you can always not rent out a few, in fact you should always have a few units that you are remodeling and thus cannot rent out.

In general as a large landlord should have around 10% of units not rented, if you have more than that rented you should raise your rates until people go elsewhere thus bringing you down to 10%, while if you have less than 10% lower your rates until people start renting from you. Different landlords have different numbers, but 10% is a good starting place. 100 units at $900/month = 90,000, 90 units at $1000/month = $90,000, but you have a few units free in case someone desperate is willing to pay $1100/month (and of course you can remodel one of those empty units thus making it more desirable)

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

#137

Post by akira2501 »

bearjaws wrote: post #7

I am very curious how this will play out. On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year. FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental pr…

> I've seen some complexes down to 1-2 units by the end of July.

And you're sure the building is actually occupied and the units haven't been strategically taken off the market?

> I am not sure if this is price fixing,

It is on RealPage's part. It's their stated _intention_. Whether cases should open against landlords who used it, I agree, I'm not sure, but it _is_ clear that RealPage broke the law here.

> I think it really depends on the internal communication and what they sold to landlords.

The real question is "does realpage charge landlords for it's service?"

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

#138

Post by EVa5I7bHFq9mnYK »

Alupis wrote: post #105
kelnos wrote: post #72

Earlier quoted context omitted.

> This line of thinking is what leads to situations like San Francisco, where price controls on housing lead to few developers willing to build there. Not sure what "price controls" you're talking about, but the reason it's expensive to build in SF (which reduces the appeal for builders) is zoning, the byzantine planning process, the ability of local residents to effectively block or delay projects, and weaponized en…

[flagged]

True, just as people from Mexico don't have a right to live in the rich and nice USA, people from the sticks don't have a right to live in the rich and nice SF.

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

#139

Post by kerkeslager »

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. It's only a monopoly in that they offer a very niche product. So I doubt the implication the justice department is making here - that RealPage is having a significant impact on market price through widespread collusion.

Well, given your only justification for your doubt is that you compared clients to multifamily dwellings, I gotta say, your doubt is pretty not founded in reality.

> Furthermore, housing is a market - nobody is "competing on merits".

Oof, bro.

"Competing on merits" is the entire justification for why free markets are important. If you're arguing that nobody is competing on merits, then that starts to sound like you're arguing that competition isn't working here.

> Realpage advertising that it gets the best dollar for its clients isn't that much different than your Schwab account letting you know you shouldn't sell your MSFT share for $50.

The difference being that Schwab doesn't have the pull to price-fix MSFT. In cases where a single coordinates to control 80% of shares of a stock and then price-fix it, that is, in fact, illegal.

> While I appreciate the breaking up of a potential cartel here, and this is a software I would never use, I would hold my breath if I was expecting a sudden change in the rental market because of this. Inventory is still fundamentally limited, and unless the DOJ bans all market research, the going rate is still the going rate.

I agree with you that housing prices are not likely to drastically change as a result of this, but my reason is that this isn't the only price-fixing mechanism in place.

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

#140

Post by bluGill »

legitster wrote: post #125
RhodesianHunter wrote: post #114

Earlier quoted context omitted.

>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.

It is a different unit every month though as renters are moving out all the time. This isn't about 1 unit that is empty or not. It is about 100+ units where it can be 89,90, or 91 empty - if the other units that are not rented pay enough higher rent because the empty is not on the market you are better off.
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