RealPage, maker of YieldStar, is almost singlehandedly the ones causing rent to skyrocket across much of the United States.
One of the algorithm’s developers told ProPublica that leasing agents had “too much empathy” compared to computer generated pricing.
You can learn more about them here and why this antitrust case is so important:
https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent
The software vendor does have a point: the software doesn’t set prices itself, it just makes suggestions based on the metrics it sees, and ultimately the property owners are the ones that raise rents. But I don’t think the developer realizes the role it is playing in the feedback loop.
Landlords pay for this software to help them set “fair” rents. But if the software consistently sets rents that the landlord sees as too low, they will question whether the software is worth paying for, and the software vendor goes bust. On the other hand, if the software sets rents that are too high, landlords will see that software as working well, and will continue to use it. So the developer is incentivised to goose the numbers up a bit, knowing that landlords are free to set their rents lower…
… except we all know that’s not what actually happens, particularly for these large real-estate conglomerates whose tenants are just lines in a spreadsheet. Some pencil pusher is just using these numbers from the software as-is, because there is probably more paperwork involved in justifying a rent change to their boss, while if they just accept the computers’ numbers they can make it to Happy Hour a bit early.
It gets even worse when most of the real estate in an area is owned this way, because then the additional “the computer told me to charge this” surcharge gets “baked into” the overall market, and gives landlords who don’t use the software a reason to raise rates, because of “the market”. Then next year, it all rises again, because the software sees the overall increase in rates and thinks it’s because of “the market” and not because of its role in the increase last year.
The incentives in this system benefit everyone but the renter. This may be a appropriate place for the government to step in and force change. Government is accountable to voters, and there are more voters who are renters than landlords.
No, they don’t have a point. The software is clearly created explicitly for the purpose of collusion for maximizing rent.
But that’s the thing, it’s not “collusion” in the sense that rental companies all conspired to raise rates at the same time. None of them actually collaborated with each other.
At the same time, the software isn’t designed for collusion at all. It is just hoovering up public data. It is not doing anything that the companies couldn’t do themselves, and they have to keep all their client data separate.
The end result is collusion, once enough companies are using this software that their price increases drive the public market and then get sucked into the algorithm and generate more price increases. But there is no action by any party which a court can point to and shout “Collusion!”. There are enough independent actions that just happen to go in the same direction. That’s the reason why new legislation may be necessary, in order to catch this sort of distributed algorithmically-enabled collusion.
It is collusion. Information like occupancy and operating costs are shared with the software service to determine the “fair” rent rate. The software takes into account these metrics from many different management companies. If rental management companies were to share this info with eachother directly in order to set pricing, that would constitute an antitrust violation. All the software does is turn the trust into a shell game that’s more difficult to prosecute.
Exactly the point. The software did that for them. On purpose. And then they used it because they knew it would do that work for them. It might be a different kind of collusion but I’m not convinced that matters much, unless like you said, we can make new legislation to state more explicitly that this exact behavior is illegal collusion.
Yeah, I feel like people are too focused on whether or not it’s “legally” collusion.
At the end of the day, it’s a single entity with an overrepresneted ability to set prices.
Yeah, I don’t think this is strictly collusion either, any more than any other data aggregation tool.
But if we would just build housing it wouldn’t even be a fucking problem in the first place.
If that’s the goal, landlords would save so much money by calculating fair rent in some spreadsheet or such. Calculate how much their monthly costs are per building, divided by how many units, plus some percentages to set aside for emergencies and renovations… but we all know that’s not the case.
But someone in their org has to set up the spreadsheet, and more importantly, take the blame if the numbers don’t match Management expectations, even if they are correct.
By outsourcing this to the software vendor, they also can outsource responsibility. Instead of Management leaning on the team to conjure “better” numbers, the team can say “We get these numbers from this independant vendor outside the company, who has all the info and is totally impartial, nudge nudge, wink wink”. Questioning the numbers then becomes questioning the financial decision to employ the vendor in the first place. Just so much easier to do what the nice computer tells you to do.
I agree. I’m a capitalist but this seems, effectually, like price fixing to me.
The a few accusations that make this worse, and probably illegal if proven: