DOJ sues realpage for algorithmic pricing scheme that harms renters • Hacker News Board

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

#51

Post by legitster » Fri, Aug 23, 2024, 5:21 PM UTC

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 Blue Book is a great example because the number is so often discarded in almost all sales.

Another example would be stock trading apps, especially ones that give you forecasts and estimates as to when to buy and sell.

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

#52

Post by Manuel_D » Fri, Aug 23, 2024, 5:23 PM UTC

Carrok wrote: post #33

Manuel_D wrote: post #25

Earlier quoted context omitted.

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…

If price controls on housing exist in SF but not elsewhere, and this causes developers to not build there, then the issue is not that price controls exist in SF. The issue is that price controls do not exist elsewhere. Set the same price controls across the entire nation, suddenly there is no disincentive to not build in any one area.

Set the price controls across the nation, and developers will redirect their money towards something other than residential real estate. It's frankly disappointing to see this faulty thinking on HN. Price controls fundamentally disrupt the feedback loop between supply and demand. If you limit the profit to be made on building housing, you're disincentivizing it from being built.

Imagine a county is in the middle of a famine, and the government in a few provinces set price controls on food. The famine worsens in those provinces. Is the problem helped by setting price controls nationwide?

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

#53

Post by toomuchtodo » Fri, Aug 23, 2024, 5:23 PM UTC

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?

This would be an unproductive use of time. It is very clear you are pro "no regulation" around housing (based on your thread comments, "just build more"), so a heated argument with the potential for the subthread to be detached by dang does none of us any good. I'm not here to change your belief system, and to attempt to do so would provide no meaningful impact to macro outcomes.

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

#54

Post by raincom » Fri, Aug 23, 2024, 5:23 PM UTC

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…

Realpage is involved in a vicious loop, not a virtuous loop. Even in the Bay Area, corporate landlords jack up rent like 10% every year, whereas small landlords are happy to raise rent by 3%. That's the difference due to algorithmic collusion set and controlled by RealPage.

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

#55

Post by Sohcahtoa82 » Fri, Aug 23, 2024, 5:24 PM UTC

Manuel_D wrote: post #24

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…

Lots of people want to blame rising prices on price fixing, when there really is growing demand without commensurate increases of supply. They want a silver bullet to bring down prices, without tackling the underlying problems. > That being said, I price my rental properties against what similar square footage gets at nearby apartments... Sooo if they are going up my rent is going up as well, and I bet most landlords…

> Lots of people want to blame rising prices on price fixing, when there really is growing demand without commensurate increases of supply. They want a silver bullet to bring down prices, without tackling the underlying problems.

Yup. The underlying problem is a single word: supply.

Build more supply, the prices come down. But of course, developers know that. They don't want the prices to come down, so they don't build supply.

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

#56

Post by legitster » Fri, Aug 23, 2024, 5:25 PM UTC

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.

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

#57

Post by itake » Fri, Aug 23, 2024, 5:25 PM UTC

toomuchtodo wrote: post #46

itake wrote: post #42

Earlier quoted context omitted.

I'd love to see the data on this. Usually when you increase construction costs, via additional regulation, you're going to increase the price of rent/sale. What expert thinks increasing costs will lower prices?

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 does regulations reduce any of those numbers?

[0] - https://www.kiro7.com/news/local/king-county-taxpayers-payin...

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

#58

Post by alpha_squared » Fri, Aug 23, 2024, 5:25 PM UTC

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'm not sure I understand what politics have to do with this. Housing is essential. It's "politically charged" because of the lack of affordability. Part of that is due to lack of building and now, evidently, part of that is due to price-fixing.

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

#59

Post by bbatsell » Fri, Aug 23, 2024, 5:25 PM UTC

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…

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 on the table like that. If you had trouble filling, you'd look at the market and adjust downwards, or offer better amenities, or do whatever you wanted to attract customers. The tension between demand and supply leads to market equilibrium.

RealPage tells its clients that if they all work together to set their prices higher than market equilibrium, hold out for far longer than they normally would want or what a free market would lead to, then the simple inelasticity of housing demand — everyone needs a home! — means that customers will eventually have to give in to the higher price in order to live their lives, and landlords will rake in the profits over time.

They use the data and actions of their clients working in concert in order to manipulate a fair market into a deeply unfair one which does not properly adjust to market forces.

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

#60

Post by bick_nyers » Fri, Aug 23, 2024, 5:26 PM UTC

Manuel_D wrote: post #24

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…

Lots of people want to blame rising prices on price fixing, when there really is growing demand without commensurate increases of supply. They want a silver bullet to bring down prices, without tackling the underlying problems. > That being said, I price my rental properties against what similar square footage gets at nearby apartments... Sooo if they are going up my rent is going up as well, and I bet most landlords…

I agree that the underlying issue is a lack of supply. However, if a landlord is commanding a 30% profit margin on a non-luxury apartment then I think they are contributing to the problem (to be clear, I'm not insinuating anyone in this thread is doing this). I think the only objective way to tell if it's priced too high is by the profit margin, but of course even that can be inflated if e.g. a developer took a huge margin on it before selling it to a new owner.

As to what an "ethical and not terrible for society" profit margin would be is above my pay grade, but I would estimate 15%. It also probably depends on how easily you can make money on the stock market as well.