Lawmakers Seeking to Outlaw Rent Price Fixing Reported by Propublica

https://www.propublica.org/article/senators-introduce-legislation-stop-landlords-algorithm-price-fixing

by toomuchtodo • 2 years ago

46 56 2 years ago

Title adjusted from "We Found That Landlords Could Be Using Algorithms to Fix Rent Prices. Now Lawmakers Want to Make the Practice Illegal." due to title character limits.

mc322• 2 years ago

Price fixing of this kind as well as the rent control kind should all be outlawed.

Government should pay the diff, if they want to subsidize grandma and grandpa or low level service job workers in their apartments --and I am for subsidies for people how do need them; I just don't think rent control is a good instrument.

Arguably rent control is a soft form of expropriation. Governments can pass taxes and build/buy, if they like.

philipov• 2 years ago

Because price caps cause shortages? Subsidies are just a scheme to funnel taxes to landlords: bad idea. If you want to avoid using price caps, then you gotta flood the supply with cheep housing to crater the market instead. I think landowners are going to fight that even harder than landlords fight rent control.

samatman• 2 years ago

Because there's no such thing as a price cap. This applies to rent controls as much as it does to "gouging" laws.

An imposed maximum price which is below the market-clearing rate just means that some of the cost has to be paid in a different way. With apartments this is often information, you have to be in the know to get a chance to rent. Sometimes it's just illegally charging the difference between the rent controlled price and the market price: if you won't pay it, someone else will. Or you get a second mini-landlord, someone rents at the artificially-low rate and subleases the apartment at market rate. For rent "stabilization", which is rent control lite, the cost is paid with friction (people who would move but can't because they're paying below market), scarcity, and (as a consequence of that scarcity) higher prices when the landlord is finally free to charge market rates.

But you can't just defeat market pricing by fiat, it just doesn't work.

Retric4• 2 years ago

It’s outlawing collusion via algorithmic adjustments not setting a specific price.

“A group of senators are set to introduce legislation Tuesday that would make it illegal for landlords to use algorithms to artificially inflate the price of rent or reduce the supply of housing.”

MSFT_Edging2• 2 years ago

Protect the landlord's profit at all cost

Why should the gov subsidize the landlord in order to allow people to not be homeless? The market rate is too high, sorry landlords.

mc322• 2 years ago

Because presumably it's your property and they are interfering with market prices. If the gov wants to make them free they can, if they buy your property and through taxes make it available to indigent people. That's not something you should shoulder.

itake3• 2 years ago

Landlords have the opposite problem on the west coast:

Instead of the gov subsidizing landlords, private landlords subsidize the government.

The rental protections give renters a softer landing for non-payment on the landlord’s dime. Landlords literally have to pay tenants to leave. The "cash for keys" money comes from the backs of future tenants.

Also, for most of the usa now, it is cheaper to rent than buy. My mortgage, taxes, and insurance is way beyond what I could rent my house for. It makes zero sense to create more rental properties.

standardUser• 2 years ago

Many rent control implementations are fairly extreme and you end up with people paying $400/mo for a $4000/mo unit. What we need is better rent control, wherein prices are capable of rising to market rates gradually, but are not allowed to spike in ways that destabilize families and neighborhoods. We also need laws mandating 2-year rent increase notices and multi-year lease options.

lumb63• 2 years ago

Wait until people figure out this is going on for salaries as well… I don’t see how this is any different from what companies do with data they but from, e.g. PayScale.

mikeyouse4• 2 years ago

We use salary bands from these types of companies when hiring -- which isn't at all what's happening here. This would be more equivalent to Google + Amazon + Facebook + Apple all hiring e.g. engineers with 5-years experience and then making them a "take it or leave it" offer at the same precise dollar amount as determined by PayScale. Paying market rate is much different than forming a pricing cartel with a loosely "3rd party" tool serving as your cover.

pphysch• 2 years ago

This sounds like a bandaid fix. How do you disambiguate between really active price discovery, and price fixing. I believe the current situation is closer to the latter, but the solution is making historical housing data more transparent, especially for tenants.

The current "price discovery" mechanism is more or less "whatever those desperate suckers looking for housing are willing to pay". That's ripe for abuse. There needs to be more feedback from the tenants and public administration.

The government should require all housing units on the market to be registered in a public database that requires details about vacancy, price history, detailed corporate ownership, major maintenance/disaster history, possibly prior (anonymized) tenant reviews, etc. Otherwise the information asymmetry will continue to drastically favor the property managers, regardless of the extent price fixing is prohibited.

TheGlav• 2 years ago

It's not so much that they're "Fixing" prices, but that so many companies/businesses are all using the same algorithm. Man, if only they knew how many industries do this exact same thing. Services like this exist for just about every market, from housing price estimation, to salaries, to magic the gathering cards.

What they're effectively saying is that "Services that estimate rent prices should be illegal."

OK. Good luck with that.

Retric4• 2 years ago

Normally this is self correcting.

In most markets when a single participant defects from a cartel they can flood the market.

When 70% or housing is under control of a single pice of software the other 30% can’t flood the market.

jcrben• 2 years ago

It's also affected by the fundamental barriers to entry in offering a competing product - homes don't get built quickly and people can't move that easily.

treffer• 2 years ago

It's not that. It's basically the old question: can algorithms format cartels?

I am strongly on the side of: yes, they can.

In a time where most offerings are public you just need to make sure you stay slightly above the p50 and prices will go up.

Similarly on the buying side of e.g. Ads most algorithms and platforms have a "bidding war avoidance". Stop bidding more even of it would make you money, in order to keep the proce low.

In all those cases you try to sync and rise /lower the price (as seller/buyer).

It's not about just estimating a price. It is doing that on a large scale with an algorithmic outcome of upwards price fixation.

burkaman• 2 years ago

It's not just landlords using the same algorithm, they're using the same company that tells them all to set the same artificially high price. In other words, RealPage isn't saying "average rent around here is $2000 so that's what you should charge", it's saying "I just told every other building in this city to charge $2000, so you should too".

If there were 50 of these companies all competing in a particular city it wouldn't be a problem, but when most apartments are priced by just one or two companies, it is.

rufus_foreman• 2 years ago

They are looking at what competitors are charging before setting their own prices. That should be illegal?

Does anyone think that software developers should be prohibited by law from looking at what other software developers are charging before deciding how much money to ask for? I don't believe that. Why would it be illegal for landlords to do it?

The article shows no evidence of price fixing. It shows companies doing absolutely normal things that every company does in order to determine what price to charge. Yes, that means looking at what other companies charge for the same service. Yes, for landlords it sometimes makes sense to accept a higher vacancy rate in exchange for higher rents. Sometimes it would also make sense to accept a lower vacancy rate in exchange for lower rents. Yes, landlords are going to want to look at market data to determine what the vacancy rate is that makes them the most money.

notaustinpowers4• 2 years ago

They are looking at what competitors are charging before setting their own prices. That should be illegal?

That practice isn't what's illegal. What people are having issues with is that RealPage which is used by a large number of landlords (from private landlords to megacorps), recommends prices to the landlords when it comes to marketing a unit. This data is pulled from other rentals on the market and what other RealPage users are charging. A majority of the time, landlords just use that number to advertise. That's why some apartment communities have prices that change daily, since RealPage changes their numbers daily. As such, this is a roundabout way of price fixing as RealPage is in a position that artificially raises rents across a wide location range.

This isn't a case of companies looking at what other companies charge for the same service. This is one company that's comparing their pricing against themselves. This results in cases such as a primarily affordable apartment community can see rents shoot up $300-$400/month all because a luxury apartment opened on the other side of town and both management companies just so happen to use RealPage.

It's removing relevant comparisons from the actual pricing schedule, which in some cases can be seen as price fixing as the prices no longer reflect the actual market.

flutas• 2 years ago

To jump in and even clarify a little...

A majority of the time, landlords just use that number to advertise.

It isn't even that loose, RealPage REQUIRES landlords use their price 80% of the time, and requires landlords to get approval FROM REALPAGE to not use it.

Specifically, every morning, RealPage provides participating Lessors with recommended price levels. Lessors typically must communicate to a RealPage “Pricing Advisor” that they have “accept[ed]” or “confirm[ed] the “approved pricing” within a specified time frame. If Lessors wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. RealPage encourages participating Lessors to have daily calls between the Lessors’ employees with pricing responsibility and the RealPage Pricing Advisor.
If there is a disagreement between the participating Lessor and the RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management for resolution, and specific reasons justifying a departure from RealPage’s pricing level are usually required. But RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating Lessors must adopt RealPage’s pricing at least 80% of the time.

Ekaros• 2 years ago

Why not actually mandate that rent prices are public information? At least for participants in such sharing schemes. That is both renters and rentees would get the information of current rents of comparable units. Then they can make educated choices on both sides?

notaustinpowers4• 2 years ago

This is something that I've been wanting to try to implement within my local government, but there's just no easily enforceable way to do so. The agreements are private, so what information should be shared? How can this information be verified? What are the punishments for not complying? Who will enforce the punishments? Is it a self-report database?

Unfortunately, many of these questions are something that no local government wants to tackle or even attempt to enforce. Especially when we get into the more under-the-counter transactions like Mike paying Bob $500/month to live in his basement with a handshake agreement.

Maybe a self-report online database could be beneficial, but then the concern becomes getting users, ensuring the information is fresh and routinely updated, etc. Not even taking profitability into consideration.

zie2• 2 years ago

We managed to do it with health care (well OK we are still in the rolling out period), but it's slowly happening.

julienb_sea• 2 years ago

In their example (Seattle) this is already the case. I've seen this software in action, the rent price for each unit is available online but fluctuates day to day according to market demand, and is automatically higher when a unit is available e.g. 3 weeks out instead of immediately.

You can look at Kiara, Onni SLU for examples of how this works, just go to floorplans and all the prices are in the open

zooq_ai• 2 years ago

I hope the landlords / software makers take these case to Supreme Court. This is pure interference to free markets and price discovery

interactivecode• 2 years ago

Perhaps we should have a system where there is a basic level of housing available for anyone to afford. And anyone who wants something with any luxuries can rent something from a business / landlord?

That way private landlords can run their business how they want, and if a customer sees value in what they offer they can pay for it.

JumpCrisscross2• 2 years ago

we should have a system where there is a basic level of housing available for anyone to afford

There is plenty of cheap land in the middle of the country. The problem is getting (and wanting to get) there.

OkayPhysicist• 2 years ago

It's a cyclical problem: There are no jobs worth moving for in most of the middle of the country, which means no one wants to move there, which means that there's no workforce for big companies, which means there's no jobs worth moving for. Likewise for social scenes, services, etc., It's the same feedback loop that makes the existing big cities attractive. Good jobs bring people with skills and money, which support services and provide a labor pool for companies that want to hire, which provides a glut of good jobs.

arcbyte• 2 years ago

Ive been playing with the math on usong Pareto distributions to provide universal rental assistance. A city could require reporting yearly of all rent prices as part of licensing. Then levy a tax on the 20% most expensive apartments that is sufficient to allow the distribution of that fund to renters in the bottom 20% of income.

Or some such scheme. It should provide a strong disincentive on very expensive apartments while allowing the most vulnerable population to live comfortably in 80% of the city's rental offerings.

Plasmoid• 2 years ago

That would have to be an absolutely crushing tax to make that work. It would also make a really cliff where there are no rental properties between X & Y because the tax pushes up prices so much.

dantheman3• 2 years ago

It'd be a good way to drive wealth out of your city, much like the hollowing out of detroit. Only so many people can live at the expense of someone else before they decide to leave.

robocat• 2 years ago

provide a strong disincentive on very expensive apartments

Why is that useful?

levy a tax on the 20% most expensive apartments

This attitude pisses me off. When is enough taxation fair? Seemingly minor taxes increases in other areas add up to a lot extra in total. I already pay over 50% taxes[1] in New Zealand, but the same attitude as yours is common.

I do think it is great to help the less fortunate - that is what most of government taxes are spent on, and why low earners get a boost by paying less tax.

The right answer isn't retributive taxes.

The right answer is working out how to fix the real estate markets, which are broken because residential property is an investment, when it should be just for housing. Residential property should not be an investment for financial profit - a Ponzi scheme which is screwing everyone except the well off.

In New Zealand our property market is as broken as the USA from what I can tell. Building more houses helps according to micro-economics but it isn't the answer: New Zealand is building lots of houses but prices for the majority remain out of reach. There is enough land by definition.

[1] Top tax rate in New Zealand is 39% and GST (NZ sales tax) is 15%. And Most investments are taxable here. I'm currently investigating residential real estate investing because there's few other reasonable choices. I hate property investment but all the government incentives push me towards it.

ProjectArcturis• 2 years ago

This is called Section 8 housing, and it already exists. Though certainly not without problems.

mattw2121• 2 years ago

Problem #1 is that it doesn't meet the requirements of OP. I can't go rent Section 8 housing because I make too much money.

dantheman3• 2 years ago

Just allow people to do what they want with their land. If a neighborhood want's low rises, let them buy the air rights from each land owner. Then the neighborhood can sell them or not, but there's a cost.

End minimum parking requirements, end min room size requirements, let lots of different types of housing be built.

thatcat• 2 years ago

That will never happen, not many people support repealing the ADA

fnordpiglet• 2 years ago

Anyone can afford means zero, FWIW. Many people that are homeless aren’t broke, but most are.

There have been experiment with public housing over the years all over the world and in the US. The anyone can afford was achieved by pegging rent in the federal programs at 25% of income.

The problem is “any luxuries” boils down to safe, maintained properties not riddled with crime. To get economies of scale they were built as large projects which essentially created high density zones of inescapable poverty. They were / are extremely unpopular with literally everyone, especially the people that live there. Unfortunately the alternatives don’t scale well in the US given all the exact same reasons that cause housing to be so expensive in the first place.

https://en.m.wikipedia.org/wiki/Public_housing

Retric4• 2 years ago

The solution which works in other countries is to have local governments build a large percentage of all housing. If 60% of the population is in nice housing pegged to income then the crazy can be get diluted across the general population.

What the US tried was to stick all the crazy in a tiny area so it became a self reinforcing problem. We’ve adjusted to paying market rates for subsidized housing which spreads the crazy around, but unfortunately costs more than just building housing.

jeffbee• 2 years ago

The underlying belief here seems to be that if you inhibit price discovery, prices will be lower. There is no evidence of this. Slow price discovery can just as easily set a too-high price. There is plenty of evidence of that.

jlhawn• 2 years ago

It seems they'll do anything but tax land values

dantheman3• 2 years ago

I'd bet they'd support land value taxes before they allow new construction.

thomastjeffery• 2 years ago

The root problem is that we allow vacancies.

People can't just choose to not live somewhere and participate in the housing market. Vacancies allow renters to take advantage of this asymmetry by limiting market supply. They are naturally empowered to do this, because participation is inherently guaranteed.

Renters don't even have to coordinate this behavior: it's a shared goal already (to maximize the price each asset, while minimizing the number of total assets that are sold/rented), which means this pattern will emerge naturally from any efficient real estate market.

Like other commenters have recognized, this system can be compared to contract work. A contracted engineer can choose to allocate any arbitrary amount of her time to not working. This is a desirable pattern, because a person not working is a desirable outcome. In real estate, it's an undesirable pattern because a vacant home is an undesirable outcome.

Lawmakers Seeking to Outlaw Rent Price Fixing Reported by Propublica

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