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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

#151

Post by [deleted] »

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?

[deleted]

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

#152

Post by bogwog »

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…

I think you're over analyzing and confusing things. Price fixing is when competitors work together to raise prices above what they would normally be in a competitive market.

Using your gas station example, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money. Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice.

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

#153

Post by ahoy »

legitster wrote: post #43
lukev wrote: post #16

Some quotes from the filing: > Discussing a different RealPage product, another landlord said: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing . . . .” > In fact, as RealPage’s Vice President of Revenue Management Advisory Services described, “there is greater good in everybody succeeding versus essentially trying…

[flagged]

I don't think Funko Pops and housing are comparable.

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

#154

Post by redserk »

legitster wrote: post #111
bbatsell wrote: post #59

Earlier quoted context omitted.

RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions. In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money…

Again, I have experience in this market so I have first hand experience. I understand the cartel allegations here, but I think people are vastly underselling the competitive forces at play. If you are not filling your unit immediately, you are losing thousands of dollars a month. Cartels break down because of the incentive to undercut (prisoner's dilemma). But in this case, it would be very, very profitable to underc…

How are the forces being undersold here? A large-scale property management company can drastically influence the market without needing to fully capture it or even hold a majority.

Let's say of a given market, 30% of all units are owned by a large-scale property management company using this software.

If the prices of the 30% of those properties was artificially kept high, it would push renters to look at the 70% of other landlords whose prices were kept low as a result of not using this software, causing a demand on that part of the market.

As demand rises in the 70% of open-market-priced apartments, I would expect these property owners to see that there's a bump in demand and would understandably see this as an opportunity to nudge prices up a bit.

If your property only received 10 potential tenant candidates a month a year ago, and you're now seeing 14-15, you might be leaving money on the table.

Removing the cartel claim for a moment:

Say I'm at a farmers market with 4 produce stands. If one stand hikes their prices 40% for whatever reason, presumably people would start to consider visiting the other 3 produce stands.

Why wouldn't the other stands consider raising their prices with the increased attention?

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

#155

Post by skeeter2020 »

Manuel_D wrote: post #25
Carrok wrote: post #23

Earlier quoted context omitted.

> industry The fact that providing people with housing is even seen as an "industry" is a big sign of what is wrong with the world right now. It is essential to living a decent life. It should not be a driver of lining the pockets of people who are already rich.

Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return? If there's no profit to be made in building housing, why would anyone want to build housing? 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. If it's proven that landlords colluded to fix prices, that…

>> leads to rising demand which has not been satisfied by new housing construction

we seem to accept this at face value, but there's lots of evidence that supply is not the only issue, or even the biggest. Example: in Toronto this year there's been over 220 large real estate projects go insolvent. There's clearly a limit on the demand side.

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

#156

Post by consteval »

game_the0ry wrote: post #10
ajhurliman wrote: post #5

This blows my mind that they're actually pursuing this, the two complaints are that they schemed to decrease competition among landlords and that they monopolized commercial revenue management software. Both are completely bogus. You could say the entire profession of appraising real estate prices "decreases competition" if the first complaint is valid. And they certainly haven't monopolized the software space, I'd n…

I wouldn't be happy either if I was a landlord. But the landlord-ing business is a tough business, and business is about to get tougher.

I think being a landlord is pretty much the easiest business ever. As compared to real businesses, who really produce products and really participate in competitive markets.

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

#157

Post by bluGill »

legitster wrote: post #111
bbatsell wrote: post #59

Earlier quoted context omitted.

RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions. In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money…

Again, I have experience in this market so I have first hand experience. I understand the cartel allegations here, but I think people are vastly underselling the competitive forces at play. If you are not filling your unit immediately, you are losing thousands of dollars a month. Cartels break down because of the incentive to undercut (prisoner's dilemma). But in this case, it would be very, very profitable to underc…

> If you are not filling your unit immediately, you are losing thousands of dollars a month.

This is false. If you have 100 units with monthly rents at: 100x$900 = $90000, 90x$1000 = $90000. 85x$1100= $93500. Of course we have no idea how many people will decide to not rent from you at different rates, but it should be obvious that the numbers can work out to it being better to not rent a few units if the price goes higher by enough as a result.

You are correct that a cartel has incentive to defect, but is it enough? You are correct that this is prisoner's dilemma, but it is a multiple round game which has very different incentives from a single round. You are better off in a single round defecting, but you are better off in repeated rounds if everyone plays with the cartel and so they are not defecting. (or at least not too much)

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

#158

Post by pfisherman »

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…

What you are doing is just good business. You are not implicitly or explicitly colluding with other property owners to set you prices. You are simply doing market research based on publicly available data and making an independent decision.

Contrast this with a cartel that includes a significant number of landlords in your city (i.e. way more than just a couple of your buddies) that (1) shares non public info such as current occupancy rates, current lease terms and durations, etc., (2) sets prices as a bloc, and (3) enforces compliance on pricing targets.

It’s qualitatively different from how you described your situation.

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

#159

Post by bluGill »

kelnos wrote: post #109
bbatsell wrote: post #59

Earlier quoted context omitted.

RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions. In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money…

> running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate In my view, holding units vacant intentionally in order to increase profit should be illegal. Vacancy taxes don't go far enough; landlords who do this should be forced to sell any units they've decided to keep vacant, or see their properties seized. Optimizing profit around providing people s…

That is very easy to cheat though. Two obvious ones: a different unit is held open every month; or these units are closed for remodeling. Until you get to long term 40% vacancy it is really hard to tell - and be careful not to kill rural small towns that no longer have demand and so apartments that will never be full anymore get torn down thus harming the few renters who remain (since it isn't worth replacing the building at current rents and many cannot afford the rent that a new apartment would need just to be worth building)

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

#160

Post by underseacables »

Reading this is depressing. The best decision I ever made was talking to a realtor, who connected me with a good lender, and buying a place. It wasn't easy but continuing to assume ownership was out of reach, and throwing money away on a rental, in hindsight would have been far worse.
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