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Landlords Are Using AI to Raise Rents – and Cities Are Starting to Push Back

13 points by devonnull 2y ago

aurareturn 2y ago
I'll side with RealPage on this one. I think RealPage is right. The issue isn't that landlords are using software to help them price homes. The actual issue is the lack of housing. San Francisco banning the use of software to help landlords figure out the market value of their rentals is a bit crazy. Most landlords don't use RealPage. Therefore, if RealPage sets the price too high, it's the landlord who will lose money by having a vacant apartment. The basic money formula for a rental unit is occupancy * rental price. Both matter. Now, if all the landlords in an entire city or community is using RealPage, then it should be illegal. That's a different story.
- FrostKiwi 2y ago
  > Now, if all the landlords in an entire city or community is using RealPage, then it should be illegal. Exactly this is the monopoly that people are worried about and why there is strong push back.
  - aurareturn 2y ago
    Do we have data on what % of rental units in San Francisco uses RealPage? I'm a landlord myself and have never used RealPage or any software to help me price. I simply look at a few comparables, gauge the quality of my apartment vs theirs, and set a price. I can understand if some landlords don't have this skill or time and would rather let a 3rd party help them set a price. As far as I know, RealPage is more for very large landlords that own many units. Most San Francisco landlords are mom and pop.
    - AstralStorm 2y ago
      So you only collude tacitly instead of trying to compete. It makes no difference. If 1 in 5 landlords use this software and 4 in 5 look at their prices, the situation is identical to one where all of them would use this software. And here we find the true issue: free markets are a lie and collusion is a fact of life in capitalism. For the actual competition to work, the prices would have to be quite secret yet consistent and independent of the buyer. Quite tricky combination to pull off.
      - aurareturn 2y ago
        There is a huge difference between 1/5 and 4/5 using RealPage. If RealPage sets your price at $1,000 but 4/5 sets it at $950. Your apartment is at a disadvantage. One extra month of vacancy will make any higher rental price you set evaporate. Renters will have plenty of options. 1/5 won't make much of a difference, if any. But if 4/5, that's a huge impact. Now suddenly, 4/5 apartments are $1,000. The lone $950 apartment will get rented out fast but everyone else will have to pay $1,000.
        piva00 2y ago
        If RealPage is used by 1/5 and sets a price at $1,000 then there's a new higher anchor price that the other 4/5 not using it will look at and think "I could make it this high", the first few apartments at $1,000 will have a disadvantage but by creating a higher anchoring point the prices will gravitate towards that. The more people setting it at $1,000 because they see a few listings at that price will move the price point towards it. The impact will exist nonetheless, the only thing that a higher proportion using RealPage will do is to move the price point faster towards that price. New construction can tame prices but apart from huge financial crises I've never seen housing prices be steady or fall, those moments are fleeting. Unless construction outpaces demand for a long while the prices won't budge, developers want to sell it for as high as possible, they won't build if prices are constantly falling. We are stuck.
        AstralStorm 2y ago
        Additionally the banks do not want to use negative credit rates ever, or any effectively close to zero. Therefore if prices for building the houses are too high, they cannot bring them down. What they can only do is repossess, and that cannot bring the price down by much either. The situation is further complicated for the costs incurred for the maintenance of the buildings and general land tax - but that should theoretically push developers to make condos. But even those are getting too expensive.
        aurareturn 2y ago
        If RealPage is used by 1/5 and sets a price at $1,000 then there's a new higher anchor price that the other 4/5 not using it will look at and think "I could make it this high", the first few apartments at $1,000 will have a disadvantage but by creating a higher anchoring point the prices will gravitate towards that. The more people setting it at $1,000 because they see a few listings at that price will move the price point towards it. Why would the anchor be $1,000? It's supply and demand after all. The $1,000 apartment would just sit there and miss out on a month of rent or not get rented at all. But if enough of the market (4/5) uses RealPage and refuses to lower the price, then it is collusion. 1/5 is hardly a problem. The 4/5 will get rented first. The 1/5 might lower the price eventually or risk not getting rented at all.
    - cam_l 2y ago
      Most landlords only own one or two properties, but most properties are owned by people with more than 3. Both these things can be true. And it can also be true that though most properties are not run through such a system, only a very small number of properties are available at a particular time. And if such a system encourages more churn, then a much greater percentage of such properties would be available at any time, than the average. An effective monopoly could conceivably be maintained even if they only represented a fraction of the total market.
- rsynnott 2y ago
  > Now, if all the landlords in an entire city or community is using RealPage, then it should be illegal. Waiting for a cartel to be established _before_ acting against the cartel does not seem like a particularly good idea. Like, it’s not hard to see the argument that this is, essentially, price fixing, with some element of indirection.
- eesmith 2y ago
  > The actual issue is the lack of housing That is a really incomplete analysis. Part of the complaint is that housing is available, but the cartel withholds rental units from the market in order to maximize profits. Like, if 10,000 new residences have been built then the most profitable thing might be to buy them all up and keep them empty. > if RealPage sets the price too high By definition, 'too high' is when there's a problem. > The basic money formula for a rental unit is occupancy * rental price. That is too basic. You omitted elasticity. Rental price is a function of overall demand, which in turn is based on regional occupancy. Collusion to reduce regional occupancy can artificially increase demand, and therefore the rental price, giving an overall higher profit than true competition. > if all the landlords 100% is a pointless number. There will always be someone who, for example, rents out a place to a relative at below market rates, so 100% will never be met. The lysine cartel did not control 100% of the lysine market.
diebeforei485 2y ago
Collusion isn't legal even if you're using "AI" to do it. However, it only works in a shortage market. If these cities really want to protect renters, they'd permit a lot more housing.
xnx 2y ago
I'd rather have cities make rental contracts public record to bring some parity to the information landscape.
orwin 2y ago
Non-market housing (called council housing in the UK I think) for at least 30% of the renting demand is probably the best way to keep renting prices sane. If renting prices go down, so will the buying prices.

13 points by devonnull 2y ago

I'll side with RealPage on this one. I think RealPage is right. The issue isn't that landlords are using software to help them price homes. The actual issue is the lack of housing. San Francisco banning the use of software to help landlords figure out the market value of their rentals is a bit crazy. Most landlords don't use RealPage. Therefore, if RealPage sets the price too high, it's the landlord who will lose money by having a vacant apartment. The basic money formula for a rental unit is occupancy * rental price. Both matter. Now, if all the landlords in an entire city or community is using RealPage, then it should be illegal. That's a different story.

FrostKiwi 2y ago
> Now, if all the landlords in an entire city or community is using RealPage, then it should be illegal. Exactly this is the monopoly that people are worried about and why there is strong push back.
- aurareturn 2y ago
  Do we have data on what % of rental units in San Francisco uses RealPage? I'm a landlord myself and have never used RealPage or any software to help me price. I simply look at a few comparables, gauge the quality of my apartment vs theirs, and set a price. I can understand if some landlords don't have this skill or time and would rather let a 3rd party help them set a price. As far as I know, RealPage is more for very large landlords that own many units. Most San Francisco landlords are mom and pop.
  - AstralStorm 2y ago
    So you only collude tacitly instead of trying to compete. It makes no difference. If 1 in 5 landlords use this software and 4 in 5 look at their prices, the situation is identical to one where all of them would use this software. And here we find the true issue: free markets are a lie and collusion is a fact of life in capitalism. For the actual competition to work, the prices would have to be quite secret yet consistent and independent of the buyer. Quite tricky combination to pull off.
    - aurareturn 2y ago
      There is a huge difference between 1/5 and 4/5 using RealPage. If RealPage sets your price at $1,000 but 4/5 sets it at $950. Your apartment is at a disadvantage. One extra month of vacancy will make any higher rental price you set evaporate. Renters will have plenty of options. 1/5 won't make much of a difference, if any. But if 4/5, that's a huge impact. Now suddenly, 4/5 apartments are $1,000. The lone $950 apartment will get rented out fast but everyone else will have to pay $1,000.
      - piva00 2y ago
        If RealPage is used by 1/5 and sets a price at $1,000 then there's a new higher anchor price that the other 4/5 not using it will look at and think "I could make it this high", the first few apartments at $1,000 will have a disadvantage but by creating a higher anchoring point the prices will gravitate towards that. The more people setting it at $1,000 because they see a few listings at that price will move the price point towards it. The impact will exist nonetheless, the only thing that a higher proportion using RealPage will do is to move the price point faster towards that price. New construction can tame prices but apart from huge financial crises I've never seen housing prices be steady or fall, those moments are fleeting. Unless construction outpaces demand for a long while the prices won't budge, developers want to sell it for as high as possible, they won't build if prices are constantly falling. We are stuck.
        AstralStorm 2y ago
        Additionally the banks do not want to use negative credit rates ever, or any effectively close to zero. Therefore if prices for building the houses are too high, they cannot bring them down. What they can only do is repossess, and that cannot bring the price down by much either. The situation is further complicated for the costs incurred for the maintenance of the buildings and general land tax - but that should theoretically push developers to make condos. But even those are getting too expensive.
        aurareturn 2y ago
        If RealPage is used by 1/5 and sets a price at $1,000 then there's a new higher anchor price that the other 4/5 not using it will look at and think "I could make it this high", the first few apartments at $1,000 will have a disadvantage but by creating a higher anchoring point the prices will gravitate towards that. The more people setting it at $1,000 because they see a few listings at that price will move the price point towards it. Why would the anchor be $1,000? It's supply and demand after all. The $1,000 apartment would just sit there and miss out on a month of rent or not get rented at all. But if enough of the market (4/5) uses RealPage and refuses to lower the price, then it is collusion. 1/5 is hardly a problem. The 4/5 will get rented first. The 1/5 might lower the price eventually or risk not getting rented at all.
  - cam_l 2y ago
    Most landlords only own one or two properties, but most properties are owned by people with more than 3. Both these things can be true. And it can also be true that though most properties are not run through such a system, only a very small number of properties are available at a particular time. And if such a system encourages more churn, then a much greater percentage of such properties would be available at any time, than the average. An effective monopoly could conceivably be maintained even if they only represented a fraction of the total market.
rsynnott 2y ago
> Now, if all the landlords in an entire city or community is using RealPage, then it should be illegal. Waiting for a cartel to be established _before_ acting against the cartel does not seem like a particularly good idea. Like, it’s not hard to see the argument that this is, essentially, price fixing, with some element of indirection.
eesmith 2y ago
> The actual issue is the lack of housing That is a really incomplete analysis. Part of the complaint is that housing is available, but the cartel withholds rental units from the market in order to maximize profits. Like, if 10,000 new residences have been built then the most profitable thing might be to buy them all up and keep them empty. > if RealPage sets the price too high By definition, 'too high' is when there's a problem. > The basic money formula for a rental unit is occupancy * rental price. That is too basic. You omitted elasticity. Rental price is a function of overall demand, which in turn is based on regional occupancy. Collusion to reduce regional occupancy can artificially increase demand, and therefore the rental price, giving an overall higher profit than true competition. > if all the landlords 100% is a pointless number. There will always be someone who, for example, rents out a place to a relative at below market rates, so 100% will never be met. The lysine cartel did not control 100% of the lysine market.

diebeforei485 2y ago

Collusion isn't legal even if you're using "AI" to do it. However, it only works in a shortage market. If these cities really want to protect renters, they'd permit a lot more housing.

xnx 2y ago

I'd rather have cities make rental contracts public record to bring some parity to the information landscape.

orwin 2y ago

Non-market housing (called council housing in the UK I think) for at least 30% of the renting demand is probably the best way to keep renting prices sane. If renting prices go down, so will the buying prices.