Company that makes rent-setting software for landlords sued for collusion

RealPage worked with some of the nation’s largest landlords to raise rents, says lawsuit.

Read the whole story

 

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In a whole lot of industries, there is a sort of "soft cartel" anyhow. I mean, I do hope they bust this app and the landlords using it, but. . .

In most industries, there is at the minimum, all participants tracking the pricing of "the market" and raising prices accordingly.

There is a difference between independent companies assessing the market, and a single entity telling them what to charge and discouraging deviation.

This is textbook anticompetition, and I hope their entire business is deemed illegal.

 

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Things are pretty ugly in my town. With borrowing rates being so low, a couple of large investment groups from Denver borrowed a shit ton of money and basically bought up everything up here. From what I've seen, rents are up over 40% in the last 18 months, and there's nothing anybody can do because it's the same people that own everything. I wonder if something like this software gave them the idea that they could walk into the market here and clean up or if they just had the business plan or creating a monopoly.

And the only way to fight them is have the economy tank, people go homeless, and those stupid investment groups go upsidedown.

Freakin 2008 all over again.

Or just fix our fucked up zoning codes across the country so that there's a lot of new housing supply. These investment groups getting into housing put it right in their prospectuses that they think housing is a good investment because they expect the crisis-level undersupply of new housing to continue indefinitely.

Something like 90% of the occupied land in their US is zones exclusively for single family homes. Including for instance places right next to light rail stations here in the Los Angeles area. It's ILLEGAL to build more than a SFH on most of this land, SB9 in California notwithstanding. So yeah no duh finance is interested and landlords are able to collude on ratcheting up rents, that's what happens when you create crisis-level scarcity of a necessary good.

This also feeds into the climate crisis. Santa Monica has a daytime population of 250k and a mightier population of 90k (the latter is about the same as it was in 1970). Most of this is because we took in a ton of new jobs while barely building any housing. It's not a coincidence that even by Los Angeles standards, Santa Monica is notorious for extremely bad traffic, although I'll say that traffic is really only on streets headed to the freeways, it's rarely ever that bad driving around locally. Which is another strong hint about what's creating the traffic.

Not to rip on Santa Monica, but last time I was there traversing the sidewalks was a pain in the butt because of the rental bikes dropped willy-nilly wherever people decided to abandon them.

 

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This app certainly doesn’t help, but housing becoming a speculative asset to put money in and not a roof over your head is what caused this.

Break the big conglomerates and ban things like hotel houses and that will also help a lot.

Frankly, I'd go even further with single-family homes and make it ruinously expensive to own a house you don't live in. Eliminate the so-called passive-income aspect of home ownership and you get rid of landlords sitting on properties for years and letting them slowly decay until they can't squeeze any more money out of them. It'd be a lot easier for folks who just need a place to live if the market wasn't artificially inflated to suit the whims of capital.

I'll admit I don't have as neat a solution for apartments, and I think there should probably be some sort of rental market, but at the end of the day I think we, as a society, are going to have to start treating housing more like a right than a privilege before any of this gets meaningfully sorted out.

Personally, I like doubling your property taxes for every home you own that you don’t live in 8 months out of the year.

In the case of apartment buildings/complexes, the entire building counts as a single unit for the doubling, but C-level execs (or the appropriate parallel) living in a building 8+ months reduce the unit count by 1 to a minimum of 1.

Own six apartment complexes in Detroit and live in a house in Ann Arbor?

Your home = property taxes x1
Apt 1 = x2
Apt 2 = x4
Apt 3 = x8
Etc

Sounds good, except we own a condo we "lease" to my mother-in-law. Her rent is about ten percent of what we pay, because that is what she can afford.

 

[graylshaped]

This app certainly doesn’t help, but housing becoming a speculative asset to put money in and not a roof over your head is what caused this.

Break the big conglomerates and ban things like hotel houses and that will also help a lot.

Frankly, I'd go even further with single-family homes and make it ruinously expensive to own a house you don't live in. Eliminate the so-called passive-income aspect of home ownership and you get rid of landlords sitting on properties for years and letting them slowly decay until they can't squeeze any more money out of them. It'd be a lot easier for folks who just need a place to live if the market wasn't artificially inflated to suit the whims of capital.

I'll admit I don't have as neat a solution for apartments, and I think there should probably be some sort of rental market, but at the end of the day I think we, as a society, are going to have to start treating housing more like a right than a privilege before any of this gets meaningfully sorted out.

Personally, I like doubling your property taxes for every home you own that you don’t live in 8 months out of the year.

In the case of apartment buildings/complexes, the entire building counts as a single unit for the doubling, but C-level execs (or the appropriate parallel) living in a building 8+ months reduce the unit count by 1 to a minimum of 1.

Own six apartment complexes in Detroit and live in a house in Ann Arbor?

Your home = property taxes x1
Apt 1 = x2
Apt 2 = x4
Apt 3 = x8
Etc

Sounds good, except we own a condo we "lease" to my mother-in-law. Her rent is about ten percent of what we pay, because that is what she can afford.

My parents have a similar situation where they rent a house to my step sister for their mortgage payment.

My fantasy legislation is open to some amendments re: family members, charity, and the like.

I've stopped tracking our costs, because she will never pay us enough for the tax implications to manifest. The good news is that she is 40 minutes closer to us, and can walk to our house if she wants her grandson fix. We also bought at a time when the mortgage was about a thousand dollars less than rent on a similar apartment. HOA fees cut that in half, but her quality of life has improved. Prior to moving, my wife would need to go to the hospital with her every other month or so. There have been no such trips since she moved closer to us.

 

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Just another example reason - housing should not be a commodity. You don't even have to make it one-property per person, property can stay in the market. Just limit both businesses and people to a couple of houses max.

Zoning laws are one of the biggest problems. Soviet Russia got a lot of things wrong, but they actually did housing pretty smartly. Lots of dense mass developments with accessible transportation to city centers are the way to go. Single family housing is a wasteful use of land that creates artificial scarcity when we could be building apartments instead.

Yeah, Soviet urban planning often followed a concept very similar to the modern idea of Super
Blocks, where multiple blocks are combined together with vehicle access only on the periphery. This created a pleasant semi-parkland right outside the front door of each building. Basic services were also provided within walking distance, making them a very convenient place to live. In addition, I think there's something to learn about how the Soviet planners were able to build an extremely large amount of relatively high quality housing for a low amount of money. City Beautiful had a video on Soviet urban planning that coverts this pretty well.

That said, I think in a free country like the US, there should be difference choices for housing, including single family homes. I just don't think that single family homes should be the only thing that's allowed to be built (the opposite of choice).

One thing American planners have to do if building a superblock that Soviets didn't worry so much about is ensuring adequate parking spaces (e.g. in a separate parking garage, or parking lot, etc).

Not so many people had cars in the Soviet Union (yes, I know there WERE cars in the Soviet Union, but my understanding is that only the 'elite' approx 10-15% of people in the Party had the cars). Everyone else walked, rode a bike, or took public transit, no?

True, high parking requirements would reduce the viability of the concept. A lot of these buildings do have parking, but probably not enough to support US levels of car ownership and I suspect that a lot of it was added after the fact. Parking is the enemy of density, or at least density at a reasonable cost. Parking could be built into the lower levels of residential towers (used to live in a building like this, first 6 floors of 25 were almost all parking), but this would of course raise the cost. So the concept would probably make the most sense in dense urban areas with relatively low levels of car ownership.

Many local apartment projects have gone to the city council to ask for wavers on parking requirements. We have a trailer park not too far from us that has NO parking for residents' guests, so often find cars parked in front of our house for days on end, and reject such requests, as do all our neighbors.

I am okay if some consider my position selfish.

 

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Just another example reason - housing should not be a commodity. You don't even have to make it one-property per person, property can stay in the market. Just limit both businesses and people to a couple of houses max.

An issue with that is huge areas are primarily vacation areas. I absolutely understand that can drive up locals housing prices and rental rates a ton. And that is an issue. But there is only a local economy and a reason for a lot of people to live there, because it is a vacation destination. And thus most people who own property own it only to vacation there. Or to rent it to others who want to vacation there. I am not sure how you fix that.

On other markets, I think the only way to fix lots of people being landlords and renting places out, would be that the government needs to step in and help people buy a property. Otherwise even if you limited ownership to get rid of landlords, vastly cratering housing prices, many of the people who rent, still couldn't own. They don't have the liquid funds for a mortgage and closing costs, or they don't have the credit, etc.

And I guess you could reform those markets to get rid of things like credit. But that also drives up loan costs for everyone else if you get rid of anything to look at to see how likely someone is to be able to pay back the loan they've taken out.

Etc.

I guess I don't see either of these things as particularly thorny issues that would be hard to solve.

For vacation/tourist destinations, rich people can stay in hotels/motels, just like everyone else. Or if you still must be fancy, even some sort of resort-style digs, where maybe you can stay in your own little bungalo or what not. The point being that short-term visitors don't get to individually own housing that could be better used by locals, i.e. by people who actually live there and just need a roof over their heads.

As for landlords, I don't see why the government would need to subsidize the purchase of their properties by normal people. If so many people have bad credit that they can't get a loan for the price that you're asking, then you lower the price until it sells. Boom! Problem solved. That's just the market at work. Sure, some landlords might take a loss, but that's the price we'll have to pay to solve the housing crisis. More broadly, my point is that there's no such thing as a free market; all markets are regulated to some extent. Right now the housing market is set up to funnel money from wage earners to capital holders. There's nothing stopping us from changing the market to strongly encourage a more equitable distribution of housing.

Parking spaces take up land. In a beach town, land isn't cheap. I understand why develeopers want parking requirements waived.

They can make enough money while not offloading their future tenants' needs onto the public streets.

 

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A.L.A.S.

All landlords are scum.

My mother-in-law might not disagree with you, since we have not replaced her clothes drier as she requested. On the other hand, when she travels, her landlord does stop by to make sure the cat is fed.

 

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[5 companies] which together manage hundreds of thousands of apartments.

Aside from the general scummy feeling one gets from reading that sentence, seems kind of like an oligopoly and a violation of the Sherman Act.

IANAL, but the situation here arguably rises to the level of 'allegedly entering into tacit agreements where only circumstantial evidence is available', which is one of the types of collusion laid out in the Act:

They all use this software, they all know they all use this software, and they all know what this software does (increase prices, ignore 'human' considerations like empathy, limit availability, etc.) and they all know that the end goal being to maximize profits and maintain high demand.

The software AS DESIGNED is intended to raise prices on its clients' behalf.

The more clients they have, the bigger the impact. Anti-competition at its finest. Decent lawyers will carve them up like a Thanskgiving turkey. Odds are they will settle and admit no wrong-doing, though, and continue their nefarious business.

 

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A.L.A.S.

All landlords are scum.

My mother-in-law might not disagree with you, since we have not replaced her clothes drier as she requested. On the other hand, when she travels, her landlord does stop by to make sure the cat is fed.

I’m sure you’re one of the good ones lol.

For real though, pointing out that profiting off the predatory and exploitative commodification of housing is a bad thing, and that most people who do so tend to be shitbags, is not a personal attack on you. If you have an adu or family property, there’s no bloody Maoist revolution coming for you, so relax.

But what the fuck bud, replace the dryer. If you rented it to her with a dryer, and now there’s no dryer, and you haven’t reduced her rent, that’s bad.

We're a two minute drive away, and our drier is available to her. I often carry her wet laundry into the house for drying.

The drier in her apartment works fine. It is just slow, and requests small loads. It is designed for the EU market, and Americans struggle with that. My daughter has survived for years with exactly the same model.

Internal venting limits ones options.

 

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This one is interesting. I did a business exercise a few years ago where we had to figure out if gas stations posting their prices on the signs should count as collusion since their competitors can look and then adjust prices, and if that helps them raise prices and unofficially fix them as a group. This software reminds me of the same thing in that it's just a shortcut to looking at a bunch of price sheets.

Examining competitor's pricing is not collusion, it's an important feature of properly functioning capitalism. Simply put, if you don't know what a competitor is charging, it's difficult to undercut his price. While it's absolutely true that this knowledge can be used to artificially keep prices high, in a competitive market, it almost always has the opposite effect.

The problem with the software isn't that the prices of competitors are identified, it's the encouragement to keep units off the market. That discourages competition.

The software has access to non-public rent information, e.g. what is actually paid, not what is included in the listing. If I rent an apartment for $1000/mo, then when my lease comes up for renewal, the landlord increases the rent to $1200/mo, and I renew because I have no options. The public listing never updates beyond $1000/mo, because it was never publicly listed at $1200/mo.

This software takes all those private rent increases, shoves them into an algorithm, and then tells all the landlords to raise rents to $1250/mo.

Anti-competitive.

I support this lawsuit with with my whole being, seeing how my daughter has been screwed with rising rents.

 

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Note, I don't want to defend the Soviet system in the slightest. I just think that their housing policy had some positive points, particularly the superblock style layout and the churning out massive numbers of prefab buildings to ease a housing crisis.

And of course we have to keep in mind the utter devastation left behind by World War II, and the long “reboot” that followed.

The extreme case would be Stalingrad (now Volgograd), the site of the (probably) bloodiest battle of all time, with the total death toll estimates varying by over half a million, from 1.25 to 1.80 million dead.

There wasn’t a habitable building of any kind left in the entire city, a vital important port town; while hindsight surely shows where they could have done better, the Soviet rebuild was overall a literally infinite improvement over the status quo and a net improvement over the pre-war housing stock for the non-elites.

That it came with Stalinism is tragic, but I suspect non-repressed ethnic Russians who lived there mostly saw the rebuild as a positive wonder.

Theory: Russia is targeting housing to make moving to Russia more attractive to Ukrainians.

It appears most of them are saying Fuck That Shit.