* If this software system managed to add, say, 1% to hundreds or thousands of people's rents... that's a lot of money and the company probably deserves what's coming to them, civil or criminal.
* Housing prices are still set by supply and demand. You can't charge LA prices in Atlanta no matter what kind of fancy scheme you run.
People want a bogeyman so bad for the housing crisis, but it's mostly stuff like this, where local NIMBYs stop homes from being built:
https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...
That doesn't mean this company isn't gouging people a bit too, though.
The "market" is not real and hasn't been in years, and tech has 100% helped destroy it.
Cartelization used to be difficult because it was tough getting all market participants on the supply side on the same page. Tech makes it way easier.
Before things like RealPage and social media, if you wanted to collude with 100 other landlords in the area, you'd have to somehow set up meetings with all of them.
Now that's just a small slack group. Or software like RealPage
If the government's allegations are true, in markets where RealPage landlords control most of the rental supply, prices are not set by supply demand due to market failure.
Given how expensive many cities make being a landlord, it makes sense there will be some where commercial landlords control most of the rental supply.
Right now, it may be possible a rental company could own a large amount of apartments without fear of new units being added.
If YIMBY policies were in place, new apartments could be added within a year or two and in the long-term this would mean housing prices are met by supply and demand. The landlords only have power when supply is artificially capped.
It's not market failure, which refers to mutually beneficial transactions not happening.
monpoly/cartel power vs competition is what moves the price along the the axist between "cost to produce" and "value to consumer"
What you describe is the "price bracket" (say Atlanta vs LA, or good neighborhood in Atlanta vs bad neighborhood in Atlanta). Sure, you can't do that.
But the actual price has a lot of wiggle room inside that bracket, and apparently the final price is not (always) set by supply and demand, but (in cases such as this) by big landlords doing colluding price-fixing instead of competition. The demand not being very elastic, many will pay a little more, but only because unhealthy collusion has made options for less dissapear.
Landlords, on the other hand, can accumulate, and leave properties empty, sometimes for years, until someone desperate enough arrives. Rent is not grain where they must sell it by a deadline or it goes bad.
It's a market disproportionately skewed in favor of the landlords.
I used to set my properties rent to be competitive with the other rentals in the area. In would vary a lot - sometimes more sometimes less. At this point there are so many companies setting price with subscription services that prices always go up.
> Landlords, on the other hand, can accumulate, and leave properties empty,
In a healthy market this strategy will leave small landlords bankrupt. The problem right now is that the small landlords can play along with big property management companies on price collusion.
LA is out of control. Average price on the west side is $3800 (vs SF which is $3200). I don't know how anyone affords that except a few lawyers and FAANG employees.
It's so bad, landlords are able to rent out bedrooms in shared apartments for $2500-$3500 a month.
https://losangeles.craigslist.org/search/apa?query=co-living...
Also, while NIMBYs might be part of the problem there is no room on LA's roads for more cars for more people. They'd need Tokyo level of trains to make it work and at the pace they're building it will be 200yrs before they get there, if ever.
"The bogeyman is mostly immigrants"
Just to be super clear I'm arguing against one sided statements and not (legal) immigration which I don't have a problem with. However our politicians cannot allow population growth without also providing housing and infrastructure growth otherwise we end up here.
This isn't about supply and demand.
Another thing that can be true is that a company can be engaged in an illegal attempt to fix prices and still fail to raise prices, e.g. because they stupidly got half the landlords together to withhold units which only caused those landlords to have a higher vacancy rate while the other half got to enjoy a lower vacancy rate, leaving the average the same but costing the conspirators money because they had disproportionately more empty units.
Attempting to fix prices is still illegal even if your attempt blows up in your face and costs you money instead.
That’s missing the point of collusion. The point of collusion and price fixing is to break the market and prevent supply and demand from getting to natural equilibrium.
This type of collusion is real. Years ago several big tech companies were caught colluding to keep wages down. The demand for engineering talent was there, the supply was limited, but they agreed to not poach each other’s employees. After that was broken up, wages went up.
Supply and demand only works when the market isn’t under substantial collusion.
https://www.investopedia.com/terms/l/law-of-supply-demand.as...
And yet the market can remain irrational longer then you can remain liquid. We do not live in a fair market.
It feels good to blame some big, far-off company but it's not where the bulk of the problem lies. That doesn't mean the company isn't gouging a bit though and if they are, fine, nail them.
We’re just not building enough housing.
> RealPage's effects can be seen most noticeably in Atlanta, where software-based pricing affects more than 80% of rentals. Since 2016, rents in the city have grown by 80% — and higher vacancy rates have not driven prices down.
https://www.redfin.com/news/redfin-rental-report-april-2024/
Collusion is criminal, it does not matter if you make money on it or not, or if “the market could bear the costs of our collusion” or “the collusion was only possible because of other market inefficiencies”
Whereas if there are a million households who need a housing unit and there are only 750,000 housing units, you've got a big problem. For which the solution is to build more units.
Next HN is going to argue you can't actually war profiteer since the fact that there is a war is driving up prices too.
Collusion allows firms to get somewhat closer to the monopoly price.
I don’t how much this software really does to enable collusion, though? It seems like some landlords might defect if they have too many vacancies?
This part of RealPage's offerings is a commercial price fixing collusion tool, plain and simple.
- Disclosure: I formerly wrote software for and was employed by RealPage, though not on this specific product.
Alternatively, we're letting too many people in. Land and resources are finite.
Illegal collusion and price fixing happens when owners of competing companies communicate to set prices.
Apartments prices were historically a highly volatile compared to their lease lengths. One would have to own a majority of the apartments in a market to gain the data necessary to know things like upcoming tenant renewals, apartment renter influx/outflow, etc to combat things like mass-tenant exodus to a nearby apartment complex offering $100 less rent per month. This industry has been historically very competitive.
Realpage does the colluding for them inside a database and whispers back "here's our number".
How are non-participating properties punished? Debt Servicing. Try getting business loans for these properties without running Realpage's tools.
Look at the investors and board members of RealPage, InvesTran, etc. and those in the property management companies. They are a very small circle hiding normally illegal activity behind algorithms.
Encrypting or obfuscating illegal communications doesn't suddenly make them legal. Neither does charging money for the privilege.
But one thing is found critical is that he always made sure his apartments were priced at the low end. He’d rather make sure they were all full all the time instead of dealing with volatility.
The man is hugely successful and they just named one of the colleges after him at my University.
Before RealPage, most large landlords would aim for 97-98% occupancy and set their rents accordingly.
RealPage would encourage landlords to instead aim for 90-95% occupancy by setting higher rents. Most of the time, this turned out to be a more profitable strategy, even though it makes property managers nervous because they feel like empty apartments = lost money.
100% occupancy at 90% of the market price with high quality tenants makes you more money than 80% occupancy + agent advertising / finding fees at full market price with bad tenants.
Almost everyone I've met who has ended up in trouble with the law in business got where they are by this exact pattern. When they get caught, it's usually just naked, obvious crime. I've seen:
* Trading fake invoices between subsidiaries to increase top-line revenue leading to fraud charges.
* Fake billing between companies to paper over private use of a business jet.
* Medical billing software where diagnostic codes were optimized by matching the procedure to the highest paying service scenario. i.e. making applying a bandage be a emergency surgery bandage application which would be billed at 9x the price of a normal office visit.
* Lots of startups that started with a forward looking "were' going to build invention x" only to discover two years in that invention x is not possible. Instead of pivoting, the founders double down on invention x to raise more money with a "we're close" or "we are commercializing as we speak" pitch.
* Taking loans against customer owned securities. Behold infinite non-diluting cash, and infinite jail time when caught.
In every case, the pattern was completely ok from the founder's point of view, but when you look at the practice in total it was pretty easy to see crime.
Businesses doesn't get kicked out by Experian if they grant a loan to someone with a low Experian credit score.
I think it's under-studied how information and markets interact. There was the great "markets are efficient if and only if P=NP" paper. Basically the insight was that prices are information and a market is (supposed to be) a computing mechanism for finding "optimal" transactions. Price discovery is often difficult. It is natural for participants to outsource it to computers. But if all those computer services are run by the same company .. suddenly you have a single agent setting prices, not a market.
Wow, have never thought about this. Yes, yes they are similar... That's why I get basically the same interest rates across all financial institutions. There's no competition, basically they're communicating to "price fix" a rate.
Though I doubt America would raid the holy grail of capitalism, financial institutions
This isn’t talked about enough.
https://calmatters.org/housing/2024/03/institutional-investo...
There is a conspiracy theory it's happening though - a funny thing is that the people repeating it can't decide if it's caused by "Blackstone" or "BlackRock", which are two different companies that sound the same.
More importantly you can't enforce a cartel in housing without legal force, because every participant is motivated to defect. So the way landowners enforce one is through zoning laws. Just get rid of those!
The US also has a better tax system since it uses property taxes more often, which reduces land values.
It really is that simple.
What are you trying to convey with this tautology?
Another reason why landlords need extreme oversight.
(Do they just manage the property and collect condo fees, or do they also collect rents?)
The market price is as high as it is because we have a housing shortage. RealPage just helps landlords take advantage of an underserved market.
What we do see is landlords (corporate and private) taking things off the market on purpose to keep prices up, in addition to the collusion this thread is actively talking about.
By every conceivable metric housing has kept up with population.
Shortage? No.
Constructed scenarios that force people to lower their standard of living so landlords can make more money? Yes.
The cartels and PE investors are investing in NIMBYism. It’s a bet that resistance to construction will continue to keep supply artificially constrained, forcing prices up.
If that resistance is removed these investments will underperform.
A vacant property still has to be insured, maintained, heated/cooled, taxes paid, mortgage or commercial loans paid.
So if the supply is high enough that landlords can't afford to hold enough of them vacant to maintain high rents, they will eventually have to rent more of them.
The landlord cartel theory requires landlords both to have unselfish solidarity with other landlords, and be selfishly greedy against renters.
But in rental market, the demand is not dynamic. You HAVE to get an apartment to live in once your lease is up. If 80% of the complexes around you are on this and on top of that the independents also set their pricing based on the market controlled by the majority, then they can charge you whatever they want. You HAVE to buy and you HAVE to get it with the price dictated by them. There is absolutely no supply and demand in this at play.
doesn't it just anchor prices at $n?
Right now renting is even cheaper than owning!
Fixed that for you.
But we see the opposite — NYC has a vacancy rate of 1.4% and peak rental pricing.
As one of the largest real estate private equity firms in the world, with $136 billion of assets undermanagement...
That was in 2019 when this report was written. It's now over a trillion.
In neighbourhoods heavily invested by private equity firms including Invitation Homes, more than 7,400 families and individuals are evicted every day. In Charlotte, North Carolina, for example, it was found that in 2013 Invitation Homes filed eviction proceedings against 10 percent of its renters.
Invitation Homes is part of Blackstone.
Blackstone is by no means the only financial actor adopting the business model mentioned above. However, because Blackstone is a leader in implementing the new residential real estate business model and one of the largest global actors in residential real estate...
https://www.ohchr.org/sites/default/files/Documents/Issues/H...
Blackstone AUM: $1T (2% of market)
Evictions per year: 7400 * 365 = 2.7M
Homes owned by Invitiation: 2.7M / 0.1 = 27M
% US Population in Invitation: 27M (x avg househould size) /400M > 5%.
But Invitation is only a fraction of Blackstone.
Something doesn't add up.
Whatever it is, you’re mixing geographic regions and using aggregate numbers for all companies as if they were all as one.
The big problem is we've financialized housing, a basic human necessity. This is wealth extraction and, really, state violence. People buy into this model because they think they're building wealth. For the vast majority of people they own only their own home so they're not really growing wealth at all. After all, they can't just sell their house. They have to live somewhere.
And no, this isn't a supply issue. We have enough housing.
Second, landlords can form an effective cartel by all using the same tool that spits out the same numbers to all of them. If a company bought up 80-90% of the housing supply and jacked up the prices we'd all recognize the anticompetitive behavior. There's simply one level of indirection here. It's naive to think that cartel-like behavior is an unintended consequence.
But taking out this one player won't fix the underlying problem.
Sherman Antitrust Act:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.
Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor [. . . ]
This is a classic Sherman Act violation - multiple companies explicitly colluding to raise prices.
Discussion: https://news.ycombinator.com/item?id=40562834
Discussion: https://news.ycombinator.com/item?id=40562834
