https://arstechnica.com/tech-policy/2023/11/14-big-landlords-used-software-to-collude-on-rent-prices-dc-lawsuit-says/
Suit claims employees were told pricing outside the algorithm was "unacceptable."
I work in this industry. The biggest problem with the software is it gave the management companies instant access to everyone else’s current prices. The industry has used “market surveys” for years but you had to actually call around and gather those prices yourself. It’s a very time consuming process so many only did their surveys sporadically.
With the software you had instant access to current price data and everyone pretty much raised their prices to match the market average. Then the newer/fancier properties saw the new higher average and thought “We’re a better property so we can raise our prices above the competition.” Which then led to a higher average that the rest then met again. Rinse and repeat and you have a de facto price fixing cartel.
This is why 'competition lowers prices' is a load of bullshit.
Ya'll ever seen Walgreens and CVS? Same prices, right next to each other.
What about 2 gas station on opposite sides of the street, charging the exact same price for their fuel?
It's a gentleman's agreement at best, and a cartel at worst. Either way, no business is going to start an 'undercut war' because they don't want their opponents to do the same thing.
Here's another fine example: Nvidia and AMD. AMD releases worse GPUs, then just piggybacks off of Nvidia's ridiculous prices.
It's all a game to funnel as much money as possible to as few people as possible.
competition only lowers prices if supply isn't limited sadly. And due to how the housing system works, that would virtually never happen.
It could. If something causes housing to be less in demand. Like negative population growth.
A duopoly is not a competitive market. It's only when you have lots of suppliers and lots of purchasers that a market is actually competitive.
While true, there are some markets where these properties are fighting for a very finite supply of tenants. If they see they are lagging behind in their leasing, they really don’t have any other choice than to lower their prices to make sure they don’t have any vacant units. The industry term is called “vacancy loss” and it’s the one thing the upper management money men actually fear. A unit without someone inside it is literally bleeding money from them so they’ll do nearly anything to fill it.
Hopefully soon they won’t be able to share their prices as easily and they’ll have to fight for their lives by lowering prices to fill vacancies before another property snaps them up.
You're right, except in 99.9% of these situations they don't ACTUALLY lower prices. They just offer a "signing bonus" like 1 month free rent, then charge just as much as everyone else for the other 11 months.
That signing bonus doesn't appear in this tool, so prices don't actually go down.
I had one landlord offer me $200 off my security deposit if I would clean the two-foot-high mound of actual dogshit from the kitchen before moving in. Like, not even a break on the actual rent, just a lowering of the deposit and she thought I'd be too stupid to know the difference. TBF she probably never returned anybody's deposit so in a sense she really would have been saving me money.
there are some markets where these properties are fighting for a very finite supply of tenants.
True, but these aren't usually the markets in major cities. It's why rent is actually affordable outside of them.
Office buildings would like a word with you.
It's the reason so many large corporations a talking about RTO, office real estate prices are set to plummet if everyone's keeping to WFH.
Sadly, that's only tangentially related to housing (although I believe to have read something about new subsidies for landlords converting office space into appartments).
"It’s a gentleman’s agreement at best, and a cartel at worst. Either way, no business is going to start an ‘undercut war’ because they don’t want their opponents to do the same thing."
Play any MMO and you'll see the fallout from that. When it doesn't actually matter in the real world and people go do that everything plummets in value to near 0 and makes it not even worth your time to attempt even in a damn video game. They'll never drop prices to compete in reality because of that reality.
I've been out of it the industry for over 10 years, but we always just looked at online rental ads to set our prices. I don't see how comparing prices to the average and/or your competitors is a "cartel" or "collusion".
No, that’s normal and how it should operate. The problem arises when everyone is using the same software suite so everyone has immediate access to current prices, and the software essentially tells you what you should price your units at to maximize your income.
Maybe cartel was the wrong word as it wasn’t an intentional agreement between companies, just an outcome of the system and accelerated by instant access to information. A runaway feedback loop may be more appropriate.
It's a more efficient use of time, I get that, but you are still operating month to month, on vacancies, and year to year on contracts. The end result each month is going to remain the same.
Of note, RealPage also advised on leaving units vacant to artificially reduce supply. It did this across entire metro areas. This is very much illegal collusion.
Besides being a stupid business model, what is illegal about hiring a consultant to advise you how to run your business? There can't be a law saying all landlords MUST lease out all their properties is there?
There isn't a vacancy law in the US yet afaik. But businesses talking to each other specifically to manipulate the market is very illegal. And that's what RealPage's entire business model is, pay to share information with your competition and everyone gets to raise rent together.
The 2020 Revenge Tour will continue until morale improves we decide we're done bleeding the plebs dry.
It's quite pathetic to me.
The peasants have the capacity to be smarter than cows cooperatively, obliviously marching into the slaughterhouse, they've just been propagandized from birth never to point that capacity at our economy.
It's quite remarkable. My enemy the capitalist is cruel, selfish, narcissistic, and sociopathic, but I can't deny the cold, calculating efficiency they crow about in all those things.
There's companies that own over 100k single family homes, while regularly circle jerking each other on linked in about how "they are dedicated to provided affordable housing to those in need"
Man those were some bad typos, I can't believe they missed them in the final edit.
It's supposed to read: We are dedicated to prying affordable housing away from those in need for our profit.
I thought basically every landlord now uses some software to make sure they charge “market prices” even though their properties are trash.
God, I want to become a mayor or governor or something so I can push a rule through that says only 5% of single-family properties in any jurisdiction are allowed to be rentals, and landlords have to purchase what amounts to "tokens" from the city that are priced inverse proportionally to the ratio of tenant income to rent to be able to keep the rental. Also, wage discrimination is not allowed. If a potential tenant comes forward with proof, the landleech has to prove that they did not discriminate or they will not be allowed to purchase tokens the next year.
Idk, something. Some limitations on the number that any individual can hold in a city and punish them for overcharging.
There's something to this. Sounds like taxi medallions.
I would settle for a law requiring owners of rental properties to be residents of the same state so they can be properly hauled into court when they break laws.
I've seriously been considering checking out what it would take to build homes and just make a company that only builds starter homes that can't be sold to corporations. Fuck this system running out of control... Rent through the roof and no housing for the poor/lower middle class....
I absofuckinglutley do not in the slightest bit care about being rich, if the company could survive and support a "normal" life for me that would be more than enough.
It's absolutely absurd that we allow the market to run rampant like this and just shrug it off. "Housing crisis? I don't see one, we're selling large houses like hot cakes! Most well over asking price!"
So something like a for (ethical) profit Habitat for Humanity? I have had a similar fantasy, start companies in each of the major problem sectors that operate openly and honestly only slightly above solvency and offer quality at good prices just to drive the greedy fucks out of business, then I just stay there. I don't take advantage of the monopoly, I just live as I have been. I envision putting the actual material and labor cost of each product on the packaging in plain English. Kinda like a dietary and ingredients info table for a television. Don't put in spyware, don't put in random hidden cameras behind a screen, don't take permissions on devices so I can listen in on people. Do a bank that micro-lends at a 1% markup from the interest rates on my savings accounts. Make everything repairable and put a wiring schematic on the inside of the case if it is a large enough unit. Etc. You know, be ethical in the way I treat my employees and customers. I know, radical concept. I guess that is just the effect of having a math degree, I'm used to radical concepts.
No renting at all? Why buy a home then? You’re just setting yourself up to become trapped in a bad situation. If you don’t have the flexibility to rent out your property when you get a new job somewhere else, or lose your job and can’t cover the mortgage, then you’ll either be foreclosed on or forced to sell possibly at a loss. Remember, when you buy a property, you are immediately under water due to selling costs of 6-8% of the property’s value.
Let’s picture this scenario:
If renting isn’t an option, this rule would create a lot of problems for people. The solution isn’t to regulate what people do with their own property more, but to build more housing supply. Your idea would disincentive building housing because it can’t be rented unless you’re in that special 5%.
Edit: Guaranteed everyone downvoting me has never owned a property and has not a clue what the stakes are.
Market based pricing : based on the values in our area, I think we can set the price and fill enough of our units to make a profit.
Collusion : between the 14 of us, we own most of the homes in an area, I can safely jack up the price 200 bucks a month while cutting services and maintenance because we have a gentleman's agreement to keep the prices level. This way we all make money, it's a win-win? What are these people with no safety nets and exploitative employment gonna do, go homeless?
That's even pushing it. there's the common understanding of collusion, which this could maybe fall under, but doesn't matter legally. And then there's the legal definition of collusion which they aren't being accused of. The article doesn't say what law they are violating, or even if the suit is claiming they are.
I guess if you think using Glassdoor to look up salary rates in your area is collusion as well.
Is it collusion for employees to coordinate their negotiations? Last I checked that was called "a union" and was a protected labor right. Businesses coordinating in a similar fashion isn't though.
Hiring marketing consultants to help you figure out how best to sell your product is perfectly legal. This lawsuit isn't even claiming a violation of any laws.