Pricing software adds billions to rental costs, White House says

https://www.axios.com/2024/12/17/realpage-rent-landlords-white-house

by elorant • 2 years ago

69 66 2 years ago

axios.com

bell-cot• 2 years ago

Um, yes?

If they'd noticed (& done something about it) a few years ago, then Joe might not be facing eviction now.

to11mtm• 2 years ago

On one hand this is a 'duh' thing...

At the same time, It's worth digging deeper and asking questions as to why/how we are repeating mistakes.

By that, I mean, We have seen historically, 'oopsies' and/or 'problematic patterns' around 'automated trading' and feedback loops that can result.

TBH we are likely seeing similar impact in used car market.

Possibly all done by people who couldn't hack it in algorithimic automated trading...

FireBeyond• 2 years ago

To the users of this software, it isn't an oops at all, it's absolutely _desired behavior_.

To hapless tenants, it is a negative. They're the _victims_ of the algorithm, not the users.

tiew9Vii• 2 years ago

I think the incentives are completely clear, it’s about maximising $$$, profit, returns.

People are not making mistakes, it’s a conscious effort to increase profit as much as possible. The only mistakes is allowing this to exist and not regulating it out of existence.

wordpad25• 2 years ago

maximizing profit is expect and desired behavior in a perfect market

perfect competition in open market is supposed to push all profits to zero, maximizing value for consumers

nothercastle4• 2 years ago

What’s wrong with the used car market? Prices are basically a commodity. https://www.cargurus.com/ aggregates national prices and makes price discovery a breeze.

asdasdsddd3• 2 years ago

Disagree with algos being problematic. The crux of the issue is that vacancy needs to be taxed on rental units in high demand areas when its above a certain threshold.

n4r93• 2 years ago

The problem is not simply the use of algorithms. The problem is that the algorithm is coordinating prices for a large percentage of rented properties. It's effectively a cartel.

ryan29• 2 years ago

You can see the same thing starting to happen in the domain industry. Registries are buying pricing data rather than setting their own prices, so high-value keywords end up having the same price across TLDs that should be competing with each other.

asdasdsddd3• 2 years ago

That's fine, if apartments are too expensive for people and landlords are penalized heavily, then the rent will come down otherwise landlords will be underwater. If tenants are still moving inspite of the high prices, then the price is probably right.

sokoloff• 2 years ago

Isn’t the real problem not enough units?

If there are enough units, there’s no need for extra taxation on vacant units as it becomes a self-correcting problem (or someone pays a whack of property tax while consuming less than the proportional services, meaning they’re subsidizing others).

jfghi• 2 years ago

The algorithm would create scarcity by having some sit empty.

aegypti• 2 years ago

There is a strong negative correlation between vacancy rates and rent, that would immediately deincentivise the new housing construction that actually leads to lower rental costs.

cyberax4• 2 years ago

Except that new construction does NOT lead to lower rental costs.

Yes, yes, supply-and-demand, market, blah blah blah.

It's the simple reality: new construction that increases housing density in cities does NOT lead to lower rental costs. The best results are one-time single-digit percentage decreases in rents immediately near the new construction.

dlcarrier• 2 years ago

Anything that provides information makes a market run smoother.

In a healthy market, where supply can increase to meet demand, better information decreases prices. As it stands, with most states having regulations that severely limit housing supply, prices will keep increasing until birthrates drop or the rate of people moving out increases.

The politicians that pass those policies are to blame, and any pricing information is just the messenger.

godzillabrennus• 2 years ago

If the market was free I’d agree but that invisible hand likes to smack folks like you and me pretty hard…

anomaly_• 2 years ago

The government and its planning bureaucrats are the ones smacking you.

chimpanzee4• 2 years ago

Anything that provides information makes a market run smoother

This is not necessarily true. Market failure can occur due to information which is provided asymmetrically or which facilitates collusion.

SR2Z3• 2 years ago

Yeah, but it's significantly harder to pull off collusion when there's competition.

This software is very clearly price-fixing, but in a world with more housing it should be next to impossible to do that effectively.

add-sub-mul-div• 2 years ago

Do you think that describing price fixing as merely parties "providing information" to each other makes it not a crime?

devmor• 2 years ago

Your honor, I merely transported funds from the bank vault.

washadjeffmad• 2 years ago

If rents go down, as they should, you won't have people flooding into new construction unless it's cheap.

You're not wrong about it being a housing supply issue, but it's not because we don't have enough - it's because this software-facilitated rental price fixing and collusion scheme allowed a few individual property management companies to take over 80% of a market, raising prices so far above valuation that they could warehouse more than 20% of those rentals while still meeting their repayment obligations, artificially pushing people into houses, which private equity had also been investing into. It was the biggest scam of the century.

Supply doesn't imply mere existence, otherwise someone could just claim all the gold in the sun was theirs. In this case, the demand was for "affordable housing", and the supply was artificially constrained so that mortgages became more affordable than rent.

And who are the customers of mortgages? Largely wealthy pensioners. Blame them, not the feds (for housing, at least... it's not a federal power). Hell, blame the local homeowners that voted to zone out new construction, MFDs, manufactured housing, or anything that might allow any transient or poverty associated person into their schools and communities.

chmod775• 2 years ago

How is any of what you're saying related to the issue at hand?

Is this a defense of cartels?

"We're not fixing prices, we're merely sharing information"

euroderf• 2 years ago

"We're not 'fixing' prices, we're 'repairing' prices."

YetAnotherNick• 2 years ago

I don't have issue if the parameters the pricing operates is transparent and reviewed by government. e.g. What what you pay as tax depends on 100s of different factors.

hoppp• 2 years ago

"Anything that provides information makes a market run smoother."

Depends. If the information provider is also a middle man that profits from manipulating the information, then that can unbalance the market.

E.g: if renters pay through realpage, then the incentive for realpage is to increase the prices to collect more fees.

bcrl• 2 years ago

Except that it's not just "providing information" as it does not supply information to both the buyer and the seller. In a stock market, both the buyer and seller see the range between bid and ask, and historic prices are readily accessible. That is very much not what RealPage was doing, as it exclusively focused on providing pricing information for landlords from other landlords, enabling them to collectively increase prices without informing renters.

The Behind the Bastards podcast on this topic is quite informative; see: https://www.iheart.com/podcast/105-behind-the-bastards-29236... .

ethagknight9• 2 years ago

“The big picture: The U.S. is in the grips of a housing affordability crisis — creating huge financial headaches for many Americans”

This is just not true. Talking point being pushed by some group, I’m guessing those lobbying for subsidized housing programs.

There’s an “affordability crisis” for ultra desirable locations, but across most of America, there’s plenty of underwhelming but functional housing to be had.

redserk• 2 years ago

Typically these desirable places have optional amenities that people want, like jobs.

Not many tech positions available in Huntington, WV.

ethagknight9• 2 years ago

Pretty much every major US city besides NYC, LA, and SF is dealing with a massive over supply of multifamily housing

cyberax4• 2 years ago

Why is the parent downvoted?

It's the truth. The US is near the all-time high record high number of housing units per capita. We'll likely exceed it some time within the next 2 years.

There is absolutely no housing crisis of any kind. There is a _density_ crisis, that is forcing people into unaffordable locations.

Gigachad4• 2 years ago

People per dwelling has gone down quite a lot over the years so even with more houses per capita housing still a pretty constrained resource.

ethagknight9• 2 years ago

In a nutshell, people paying super high rents in elite locations believe there’s a housing shortage and believe they should get assistance for living in super desirable locations.

Calling it a crisis is disingenuous at best. Specifically calling a “affordability crisis” instead of “availability crisis” is telling. People being unwilling to live with a roommate(s) is the biggest driver here. Rent controls are also a significant factor driving market imbalances. Yes of course growing areas need more housing, but it’s not a crisis.

SR2Z3• 2 years ago

The US is near the all-time high record high number of housing units per capita.

And that would be a reasonable thing to say if housing was a national issue, but it's not. It's always been a local and regional issue.

The United States does not benefit by moving people into decrepit houses in the Midwest. People should live where there are jobs and opportunities - they should CHOOSE where they live.

The individual regions of the United States with extreme housing prices are NOT near record housing per capita levels. They've dramatically underbuilt compared to how they've grown.

There is absolutely no housing crisis of any kind. There is a _density_ crisis, that is forcing people into unaffordable locations.

Any kind of regional issue is a "density crisis" by this logic. Shortage of plumbers? "Density crisis." Hurricane hit the town and now a lot of people need to be rescued? "Density crisis." Sewer line burst and now it smells? "Density crisis."

This is a shortage of housing where people need it. If your entire point rests on you pretending "housing shortage" means something else, well... that's not very convincing.

ChrisArchitect3• 2 years ago

Actual article: https://www.whitehouse.gov/cea/written-materials/2024/12/17/...

ChrisArchitect3• 2 years ago

Related U.S. case discussion from 3 months ago:

DOJ sues realpage for algorithmic pricing scheme that harms renters

https://news.ycombinator.com/item?id=41330007

ChrisArchitect3• 2 years ago

Landlords Are Using AI to Raise Rents

https://news.ycombinator.com/item?id=42353948

Pricing software adds billions to rental costs, White House says

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