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

 

[ktmglen]

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.

Maybe a high tax rate on vacant units that makes it almost always worth it to lease at a below market rate rather than leave many apartments vacant too often or for too long?

To me, what's happening today in the residential sector mirrors what happened in decades past in the commercial sector with REITs and PE firms buying up commercial properties. That turned unprofitable during the pandemic so they turned their focus to repeating that strategy in the residential sector. Which sucks.

 

[Derecho Imminent]

Not saying they didnt do this, but this kind of comparison software could also be used to undercut your competitors. Just having the software wont be enough proof for court. It will have to be shown that they did use it to cartel and not compete.

 

[Photon_plumber]

Interesting. When does a 'business idea' become an 'illegal racket'? Is this another sign of 'late stage capitalism'?

When someone’s idea or need to enrich themselves screws everyone else over in a major way. Yes, it’s LSC.

More of a matter of what Lindsey Graham said about why he kept blocking popular legislation in the Senate when he was Majority Leader.

"Because I can."

That's not an acceptable answer for doing anything that fucks over people.

Uh... when was Lindsey Graham ever the Senate Majority Leader?

Hopefully never.

 

[Uragan]

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.

I won't deny there are some industries like that, but I used to work for a company selling a commodity with only a few big vendors, and we tried pushing through price increases combined with a press release announcing the increase to the market. Instead of following our lead, our competitors dropped prices slightly, and we ended up losing 80% of our volume for the quarter. Didn't get it back until we reversed course and dropped prices below where we'd been before the announced price increase. And we had something like 30% market share before the announcement.

There are times when our prices and competitors prices all went up at the same time, but it was usually when someone's plant was down for whatever reason (repairs, normal upkeep, the olympics shuttering plants in china, etc.). Supply/demand economics do still work most of the time.

Airlines and other large businesses often do this sort of price signaling. Southwest will raise (or, less frequently, lower) the price on a given route and wait to see if their competitors match the change in price. If they do, then the new price becomes the new price.

Yeah... and not surprising, the airlines were recently sued for collusion for their ticket fares.

 

[PetterOfCats]

Strange how the free market always steers towards turning people into serfs. Wonder why that is.

because capitalism is just feudalism by another name. swap out nobility with corporations and you start to understand this.

 

[House of Propane]

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.

I worked for a major internet retailer and public prices are absolutely used to signal to others what is going on. All prices are run by software that continually scrapes and makes choices about future pricing.

When we would see Walmart put widget X on sale, we would look at the page to see if it was clearance (we wouldn't match, they were getting rid of it) or markdown (we would match). Amazon announces sales far in advance so that competitors can call up their suppliers and get support for running a similar deal in that timeframe. The fun part is that the software is written by essentially a large pool of people who go from company to company, so everyone knows what the "rules" are.

 

[notcoffeetable]

I work in an industry with a high level of anti-trust scrutiny including my boss testifying before congress and others being fired at the allegation of price fixing. Even the most cynical capitalist in our business would recognize this product as clearly outside of safe harbor.

 

[siliconaddict]

I've been mulling over selling my house and moving to something larger. As the house is paid off I considered renting it out. And then realized the ethical and moral issues I would have to address. Forget about cost for a minute. Needing to kick someone out because they can't pay their rent which puts you in a bind to pay property taxes, home maintenance, etc. In the end I said fuck it. Nope. Being an ethical, and compassionate landlord is an oxymoron of a concept. At some point you may need to be a dick. Granted there are landlords who seem to go out of their way, and actually enjoy being one.

 

[Not Sid Haig]

It would be a terrible shame if this company were hit with waves of ransomware and had all their data exfiltrated. The tears of sorrow I would shed.

 

[Fatesrider]

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.

That would be a great start. I would like to add, ban foreign ownership of local real estate, especially not owner occupied at least 51% of the year.

Other countries do that, for good reasons.

On one hand, I would really support that to avoid homes being built specifically for wealthy foreign investors (this is a big issue in NYC) as piggybanks. On the other hand, given the animosity towards foreigners from one of the two major parties, I suspect this would end up targeting foreigners working on visas while leaving a big loophole for the billionaire investor class.

You'd be wrong.

Launder the donations though a shadow corporation donating to a less shadowy PAC that donates to the RNC and you have paid the "animosity toward foreigners" party for their time and trouble to allow a tidal wave of foreign investment in U.S. housing market. As long as unlimited funds can come from PAC's, that will continue.

Look at where these rich-bitch neighborhoods go, and who represents them, and you'll see that the "animosity toward foreigners" party is fine with it as long as they pay up. The OTHER party is the one mostly into multi-residential projects.

 

[LetterRip]

Hmm what about capping rental prices at 30% of the combined income of the units renters. If you want to charge more, find higher income renters or allow more people on the lease per unit.

 

[prestonf]

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.

I don't think it's so similar. In the gas station situation, the buyer and the seller have access to the same information, not in the apartment renting situation.

The key difference is the private data. "The software considers actual rents paid to those rivals—not just what they are advertising, the company told ProPublica."

 

[siliconaddict]

Next go after the airbnb and the home flippers. If you look at realstate listing, you literally see flippers taking 150k houses, apply fake wood floor and coat of paint then flipping it for 300k.

Stop buying 300K houses that sold for 150K a few months earlier?

Because it's the only house left after the comerical landlords brought everything? I can either pay a landlord a ridiculous price or own a home after paying a ridiculous price.

It is true. There are investment groups trying to purchase all the housing stock. What a disaster things are becoming. I'm glad I already have a house. If the housing stock is built up and more empty houses exist one assumes eventually things will get back to a more normal market.

Yeah we are heading towards another bubble pop because of these assclowns. I'm tempted to sell my house (Its paid off.) put the money aside somewhere safe, put most of my stuff in storage, get an apartment, and ride out the rest of this bubble and then buy when it pops. That said. That pop could be 10 years away or next week. All I know if I have a house and I'm thankful for that.

 

[Pablo_DC]

I hope these guys win. I also hope that the renters actually profit in some way from that win. (I feel a /s would be appropriate for the second sentence as the chance of any renter actually getting from such a result don't really need a calculator.)

 

[Shavano]

Interesting. When does a 'business idea' become an 'illegal racket'? Is this another sign of 'late stage capitalism'?

No. Cartels have been around a long time. This is just variations on a theme.

 

[Uragan]

Hmm what about capping rental prices at 30% of the combined income of the units renters. If you want to charge more, find higher income renters or allow more people on the lease per unit.

Just one more bad idea in an AOR that you have no expertise in...

 

[Shavano]

I can see this lawsuit having standing based on how many regular people it's screwed over.

it is not lawsuits that have standing, it's litigants, and renters obviously have standing to sue since they are the ones whose rents have been raised.

 

[carldjennings]

This one will definitely end up going to the California Supreme Court. I doubt that it becomes a federal case though; if all of the landlords' properties are in Sacramento (as implied in the article), then interstate commerce isn't involved.

Per the complaint, the suit was filed in federal court. One of the plaintiffs lives in Washington and most of the named defendants are incorporated and headquartered in other states so interstate commerce is definitely involved.

Not necessarily. If I live in DC but sell watermelons in Texas and the watermelons are grown in Texas, then it isn't interstate commerce. And I expect that the plaintiff's lawyers will use an argument fairly close to that in a motion to have the case dismissed.

It's the software company that's getting sued. If that software is used in multiple states it's a federal issue.

 

[watermeloncup]

Hmm what about capping rental prices at 30% of the combined income of the units renters. If you want to charge more, find higher income renters or allow more people on the lease per unit.

That would just mean that no one would rent to lower income people.

 

[Shavano]

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.

That's a two edged sword though. Near me, a new gas station moved in and used those prices to set their price significantly below the two nearby stations, all within sight of one another. That kicked off a price war where all of them successively and repeatedly dropped their prices, resulting in the lowest prices in a ten mile radius, at least, by a lot, for weeks.

 

[21five]

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.

Oh boy, just wait until you hear that Gas Stations have been using this exact same kind of software for a looooooong time (PriceAdvantage/Kalibrate). No need to even look out the window or adjust the prices yourself!

And very similar to the offerings Experian has for employers, using non-public actual payroll data associated with job codes (SOC) to allow employers to benchmark salaries in their location for the same type of work – and make salary offers and pay raises on the basis of that data.

(I suspect rent may have some additional protections to make it harder to use the same approach, compared to gas stations or salaries, but let's see what happens with the case.)

 

[terrydactyl]

I'm a cynic when it comes to class-action lawsuits. The lawyers become a third party seeking the maximize their own earning. And maybe their clients will do well also.

 

[_GntlStone_]

Oh no.

Anyway...

Yes... rental property owners working together to crank up rent to an amount where people feel even more squeezed and/or live from paycheque to paycheque is such a non-problem that we should ignore.

That's not the take I was going for, I was trying to show disdain for their business model by expressing how unsurprised I am that this is happening.

I don't just live paycheck to paycheck, but day to day as I work for tips.

But, sure, be a judgemental dick and assume you know anything about me.

You can't blame us for interpreting it as disinterest/disdain.

Maybe express yourself more clearly in the future?

 

[DarthSlack]

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.

I don't think it's so similar. In the gas station situation, the buyer and the seller have access to the same information, not in the apartment renting situation.

The key difference is the private data. "The software considers actual rents paid to those rivals—not just what they are advertising, the company told ProPublica."

The private data is a huge aspect, but collusion is collusion. The landlords have just outsourced the whole sitting around in a smoke-filled room hashing out the prices part. Even in the absence of private data, collusion would be illegal.

That said, RealPage may regret saying that part out loud to ProPublica.

 

[Shavano]

I'm a cynic when it comes to class-action lawsuits. The lawyers become a third party seeking the maximize their own earning. And maybe their clients will do well also.

when lawyers are compensated proportional to the size of the judgment, that aligns their interests with those of their clients. What do you want them to do, work pro-bono? Settle for much less than they could get?

 

[fknuckles]

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.

As far as we know, the petrol stations don't all use the same software service that "suggests" what their prices to be by "scanning" what their peers are doing.

 

[watermeloncup]

I'm a cynic when it comes to class-action lawsuits. The lawyers become a third party seeking the maximize their own earning. And maybe their clients will do well also.

It's a pretty rotten system, but it makes some sense if you think of it more as a way of regulating corporate wrongdoing rather than making the victims whole. The US almost completely lacks a useful regulatory system in most areas of life, so class action lawsuits are often the only way to reign in corporate abuses. Instead of the executive/legislative branch creating laws and punishing companies, it's been outsourced to the courts. Unfortunately it's a monumentally inefficient system with lawyers getting almost all of the proceeds. But it's what we have to work with, so I would never support limiting class action lawsuits without also increasing regulation of corporations.

 

[Jeff S]

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.

I mean yeah and that's fine for commodities and luxury goods. Setting price at the maximum that the market will bear isn't a problem for widgets and doodads and fancy purses. Housing is a need though which makes price fixing more of a hostage situation.

Food items are commodities, and that's a problem for food too.

 

[s73v3r]

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.

Most people who are renting out other properties that they own are not doing so like that.

 

[bbanditx79]

This will be an interesting lawsuit. I'm curious to see how it plays out. I know my current apartment leaser uses RealPage and they definitely do hold some units off the market.

A few months ago the late 70s early 80s guy that lived down the hall passed away and I know his apt sat vacant for a few months. I would go online and periodically check to see if it was listed yet since I was coming up on my lease renewal and wanted to know what similar apts around me were going for on the open market. The apt was held off the market until right before summer when rents are typically the highest even though it was vacant since the end of Feb.

 

[marsilies]

Not saying they didnt do this, but this kind of comparison software could also be used to undercut your competitors. Just having the software wont be enough proof for court. It will have to be shown that they did use it to cartel and not compete.

My understanding is that the service doesn't actually offer "price comparison," but instead processes all that data behind-the-scenes and just offers the user a "recommended" price, which they "strongly urged" users not to deviate from.

Also, this bit of grossness from the original article:
https://www.propublica.org/article/yiel ... lpage-rent

Such agents sometimes hesitated to push rents higher. Roper said they were often peers of the people they were renting to. “We said there’s way too much empathy going on here,” he said. “This is one of the reasons we wanted to get pricing off-site.”

Their stance seems to be "why should landlords have empathy for their tenants? Just price gouge them as much as you can, and if they can't afford it anymore, kick them out and get another tenant."

 

[s73v3r]

Not saying they didnt do this, but this kind of comparison software could also be used to undercut your competitors. Just having the software wont be enough proof for court. It will have to be shown that they did use it to cartel and not compete.

This software also suggested leaving units vacant specifically to drive up prices.

 

[justin150]

This is an interesting law suit, it definitely has a chance although I suspect at higher courts, especially SCOTUS, it will fail but that has more to do with the political make up of the judges than the actual legal merits.

The odd thing is that in huge swathes of rural areas, almost irrespective of which country you live in, there are one at most two property agents who between them acting for just about every landlord in the area - and you can just about guarantee the agents play golf together (or some other appropriate activity) on a regular basis where they most definitely do not swap stories of what rents they have got recently. RealPage is just a bigger, more high tech version.

I have little problem with landlords having access to close to all relevant pricing information for their areas on a close to real time basis, the problem is that the tenants do not have access to the same information. If there was a way to provide that to tenants as well then I do not see it as collusion

 

[s73v3r]

Hmm what about capping rental prices at 30% of the combined income of the units renters. If you want to charge more, find higher income renters or allow more people on the lease per unit.

Great way to make it so poor people will never be allowed to rent an apartment ever again.

 

[FactsAreMyReligion]

When saying could literally cause you to die sooner*, there is no "rate the market will bear" because people will pay everything not to be homeless.

* Los Angeles did a study that shows being homeless shaves 20% off the average lifespan.

 

[JohnDeL]

This one will definitely end up going to the California Supreme Court. I doubt that it becomes a federal case though; if all of the landlords' properties are in Sacramento (as implied in the article), then interstate commerce isn't involved.

Per the complaint, the suit was filed in federal court. One of the plaintiffs lives in Washington and most of the named defendants are incorporated and headquartered in other states so interstate commerce is definitely involved.

Not necessarily. If I live in DC but sell watermelons in Texas and the watermelons are grown in Texas, then it isn't interstate commerce. And I expect that the plaintiff's lawyers will use an argument fairly close to that in a motion to have the case dismissed.

Yeah I don't think you realize how much the courts have stretched the interstate clause over the decades.

A farmers growing wheat for personal consumption that would never be sold to anyone even in state was ruled to fall under interstate commerce clause because the wheat he didn't sell would have an impact on wheat prices.

Production quotas under the Agricultural Adjustment Act of 1938 were constitutionally applied to agricultural production that was consumed purely intrastate because its effect upon interstate commerce placed it within the power of Congress to regulate under the Commerce Clause.

https://en.wikipedia.org/wiki/Wickard_v._Filburn

What you stated may have been the original intent but hasn't been true for 80+ years now. Personally I am not really sure the ICC should be that broad but it is water under the bridge now.

Fair enough. This isn't my field, so I don't really keep up with the changes in it.

And it should be noted that I emphatically do not believe that what the landlords are doing should be legal.

I'm just pointing out the tactics that I expect the landlords' lawyers and the software company's lawyers to use.

 

[Eurynom0s]

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.

When I'm out walking around cars parked blocking the sidewalk is routinely a far bigger problem for me than people parking a bike or scooter poorly. Plus all the sidewalks that are basically impassible because the entire width is taken up by streetlights or signs for motorists.

 

[McTurkey]

National. Rent. Control.

It's not communist, it's humanitarian.

 

[Boskone]

This one will definitely end up going to the California Supreme Court. I doubt that it becomes a federal case though; if all of the landlords' properties are in Sacramento (as implied in the article), then interstate commerce isn't involved.

IMHO, it is collusion and should be against the law. Whether or not it will be found to be collusion and against the law is a toss-up at this point, given the quality of some of the judges on the bench.

The properties in question may all be in Sacramento, but I'm pretty sure I used to rent from Greystar in College Station, Texas

And the interstate commerce clause had been interpreted ludicrously since like the '40s. There was a farmer who overproduced something or other, with the intent of feeding the extra to his cattle. The govt dropped a hammer on him because had he not done so, he would have had to engage in interstate commerce to provide that feed.

 

[watermeloncup]

This one will definitely end up going to the California Supreme Court. I doubt that it becomes a federal case though; if all of the landlords' properties are in Sacramento (as implied in the article), then interstate commerce isn't involved.

IMHO, it is collusion and should be against the law. Whether or not it will be found to be collusion and against the law is a toss-up at this point, given the quality of some of the judges on the bench.

The properties in question may all be in Sacramento, but I'm pretty sure I used to rent from Greystar in College Station, Texas

And the interstate commerce clause had been interpreted ludicrously since like the '40s. There was a farmer who overproduced something or other, with the intent of feeding the extra to his cattle. The govt dropped a hammer on him because had he not done so, he would have had to engage in interstate commerce to provide that feed.

For a similar but more recent abuse of the Commerce Clause, check out Gonzales v. Raich.