Accused of Using Algorithms To Fix Rental Prices, RealPage Goes on Offensive (arstechnica.com) 109
RealPage says it isn't doing anything wrong by suggesting to landlords how much rent they could charge. From a report: In a move to reclaim its own narrative, the property management software company published a microsite and a digital booklet it's calling "The Real Story," as it faces multiple lawsuits and a reported federal criminal probe related to allegations of rental price fixing. RealPage's six-page digital booklet, published on the site in mid-June, addresses what it calls "false and misleading claims about its software" -- the myriad of allegations it faces involving price-fixing and rising rents -- and contends that the software benefits renters and landlords and increases competition. It also said landlords accept RealPage's price recommendations for new leases less than 50 percent of the time and that the software recommends competitive prices to help fill units.
[...] But landlords are left without concrete answers, as questions around the legality of this software are ongoing as they continue renting properties. "I don't think we're seeing this as a RealPage issue but rather as a revenue management software issue," says Alexandra Alvarado, the director of marketing and education at the American Apartment Owners Association, the largest association of landlords in the US. Alvarado says some landlords are taking pause and asking questions before using the tech.
[...] But landlords are left without concrete answers, as questions around the legality of this software are ongoing as they continue renting properties. "I don't think we're seeing this as a RealPage issue but rather as a revenue management software issue," says Alexandra Alvarado, the director of marketing and education at the American Apartment Owners Association, the largest association of landlords in the US. Alvarado says some landlords are taking pause and asking questions before using the tech.
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Re:It's not the algo (Score:5, Informative)
“Housing affordability is a national problem created by economic and political forces—not by the use of revenue management software,” RealPage says
Says the company under investigation. The word we're looking for here is collusion.
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Collusion itself is not a crime. Again how is it any different than using Zillow's recommended prices.
Re: It's not the algo (Score:5, Informative)
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Yep. That privately aggregated data is just making the collusion indirect, Seeing "for rent" ads is not as useful as what it actually rent(ed) for when those in group are wanting to maximize profit for all, rather than actually competing.
This is just my personal opinion based on information given, and putting myself (mentally) in a situation similar:
1. Profit-minded landlord with Multiple properties
2. Golf/socialize with similar business folks
3. Discover an application that I can see what others are prici
What's the problem? (Score:1)
The word we're looking for here is collusion.
How is this collusion? If I were renting a property through property agency I'd expect that agency to suggest a rental price for the property since they have knowledge of the market and what current prices are. I do not see a difference whether the number they recommend comes from some algorithm or a human using their knowledge of the market.
Unless RealPage have monopoly-level control over the entire rental market and are somehow using this to force landlords to use their recommendation or are colluding
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It's collusion because a large percentage of landlords are setting prices via the software from a single vendor.
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U
Re: What's the problem? (Score:2)
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Re: What's the problem? (Score:2)
Re: It's not the algo (Score:2)
Right, so the actual answer is it's both. More specifically Real Page software uses price collusion to keep rents at the landlord's optimum at all times in any given market. However the amount of money causing the inflated housing market which is allowing that landlord optimum to be so high is because the 2008 TARP bailouts and housing crash allowed institutes like Blackrock to buy up metric fucktons of real property and get into the housing and rental game for pennies on the dollar. They've been expanding
Re:It's not the algo (Score:5, Interesting)
Imagine you're an individual homeowner. Zillow comes up with an estimate. You get told by your local real estate agent (or maybe you list on your own) that your price is high, or lower than reality vs Zillow. You decide where to list.
RealPage is software that landlords subscribe to for naked collusion. Essentially, a landlord can tell the software that they have X number of 1br1ba units of 700 square feet, Y number of 2br2ba units at 1000 sqft, how many are filled and not, etc. and it will take into account all landlords in the market in their product and can tell one landlord they're undercharging relative to competitors, make rent renegotiations $200/mo higher, while telling another that they're $200 higher than the market, but leave those units unoccupied, because your long term bottom line will benefit by constraining supply and moving the market to higher rents.
They are trying to take an argument about RICO by saying "the software suggests, it doesn't compel" and it's not made in good faith. The software might as well be "a guy named Bob" and Bob tells all the landlords using it how to price to squeeze the market.
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would
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All 1BR apartments aren't the same and there should be a reasonably wide variation in cost. But when rents are as crazy as they are, lots of people would happily sacrifice new appliances for affordable rent.
The catch with sites like this is it overtly allows collusion to set a rent floor no matter how sketchy a place is. One can make the argument that people could just relocate but there's two problems with that: people don't usually want to leave the area they live in and this collusion is happening broa
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Re: It's not the algo (Score:1)
Essentially, a landlord can tell the software that they have X number of 1br1ba units of 700 square feet, Y number of 2br2ba units at 1000 sqft, how many are filled and not,
This has been a common thing in real estate since before computers. They call these "comps". I don't like the real estate sector either, but we're being dishonest if we're calling this new.
Re: It's not the algo (Score:2)
Comps werenâ(TM)t recommending to NOT sell in order to reduce the market and push the price of other homes up.
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umm, what?
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Basically, by not renting out every apartment you can, you can on average charge a bit more rent for all your other apartments and actually make more money.
It's like you sell 1M $1 widgets a year, costing you $0.90 each to make. You can sell 2M if you drop the price 8%. Which course makes the most money?
Trick is, for it to be true collusion I think, there needs to be a penalty for breaking free, not following the algorithm's suggested price, more than simply maybe nit making as much money.
The real fix wou
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All there needs to be for collusion is an agreement in restraint of trade. That could be agreements on prices, agreements to divide territory, agreements to limit product availability. Mechanisms to enforce that agreement are not required. The software suggesting landlords hold units off the market could run afoul of "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be i
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All there needs to be for collusion is an agreement in restraint of trade.
If there's no penalty for not taking the advice, is there actually an agreement?
And it's less that you agree to hold apartments off the market, and more that you decline to rent below a certain price - and said price means that you will have apartments available longer.
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Give me the math for when the second landlord losing 2k a month on an apartment is better for their bottom line than renting it....
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So the landlord next door sees the opportunity and sets his rent at $5 less and gets the tenant. So the 1st landlord lost $24,000 in revenue and the second made $23,940 and has no advertising expenses since all the units are rented.
Every industry which has more that a couple of players does this and it's been done before computers.
Bad but not Illegal (Score:2)
The software might as well be "a guy named Bob" and Bob tells all the landlords using it how to price to squeeze the market.
That sounds like normal business practice - getting expert advice to price your product to maximize your profits. It may be a sucky strategy to price at the maximum of what the market can bear but it's hardly illegal otherwise about 99% of all companies would be guilty of the crime.
The algorithm isn't the problem (Score:5, Informative)
They basically created Facebook for landlords where they could all get together and talk about what they were going to set their prices to and make agreements. That's the issue. It's just a basic antitrust violation. But they did it on a computer so it's confusing to people.
Uber did the exact same thing skirting labor law. They got away with it because they had a system to detect police early on who were trying to enforce the law and then later they had so much money they just bought off politicians.
Law enforcement has learned from those mistakes and even if they hadn't it's not like this company can hide itself like Uber did in the early days.
I can tell you that my rent didn't go up for the first time in over a decade. So just the threat of antitrust enforcement was enough
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Again, how is this different than using zillow?
There is no comparison (Score:5, Insightful)
If all these guys got in a room and they all listed out their prices and then they all agreed to raise their prices then you would very obviously call that collusion. But when there is a middleman in the form of a software program instead of them doing it in a room you're suddenly confused and defending them.
Again we've seen this trick used over and over again where software acts to facilitate a crime and people get confused by that and think no crime is happening because how could software commit a crime right?
It's like those people who tried to argue that they should be allowed to steal money and property from crypto exchanges because they did it with software and code is law. But that's not how the universe works. Just because you commit a crime with software doesn't mean it's not a crime
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Zillow is not just a bunch of prices. Zillow has a Zestimate for both rental prices and sale prices based on those values in the market. This tool works the same way, recommending prices based on what other people are charging, The one difference is it also recommends undercutting in an overstocked market, which is good for consumers.
The issue you are running into is there is no indication they all agreed to raise their prices, in fact according to back page they only took their recommendations less than 50
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Re: The algorithm isn't the problem (Score:2)
Zillow is also a contributor to the same problem.
Re:It's not the algo (Score:4, Insightful)
The problem is that the algo has access to a lot of insider information what wouldn't appear in Zillow. It has that because the other apartment complexes are also their customers. Their database IS the smoke filled room and the algo is the conversation that happens inside.
Re:It's not the algo (Score:5, Interesting)
I worked at RealPage...
They made clients sign this contract that stated that they would not offer discounts or individual exceptions below the price "suggested" by the system. No exceptions.
It was via this contract clause AND that they had 80%-90% of large corporate landlords for any given major area as clients under the same "no-lower" clause that it created implicit collusion-by-contract that all the other companies loved, because it wasn't, exactly explicit price fixing... it was all because of the clause in the RealPage contract.
It was the no-exceptions that really got to me. If a 10 year tenant got laid off, you couldn't give them a few months lower rent, due to that clause. Horribly predatory.
As soon as I found out, I quit. That same day. They didn't openly tell devs and engineers that's what we were making. I thought it was more like zillow, too, and I worked there. Highly compartmentalized and true designs obfuscated.
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A 10 year tenant should have an annual income saved and be able to handle a few months without income. That is expected in European welfare societies but in the US you seem to be see it as a failure if the salary isn't spent the day the next salary arrives. What is wrong with you?
A good rule of thumb is that you should save 5-10 % of your income EVERY month. That way, a "bad" month you first have 10 % margin, then you have another maybe 5-25 % margin because you can buy cheaper food, don't buy clothes, driv
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50%+ of the US lives paycheck to paycheck, that means having 0% to put away.
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No it means that you spend too much money. iPhones are more than 50 % of all phones sold in the US. iPhones are unnecessary expensive. If you buy a cheap Android instead you can save maybe $20/month. Just an example.
Re: It's not the algo (Score:2)
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Go find out what they are *actually* doing, then form an opinion.
Replace "Algorithm" with "some guy" (Score:5, Informative)
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Re:Replace "Algorithm" with "some guy" (Score:4, Informative)
Which is exactly what's happening via the software.
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Except their data suggests landlords listen to their suggestions only half the time.
Re: Replace "Algorithm" with "some guy" (Score:2)
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"Allegations of price-fixing that may constitute antitrust violations have dogged the software company since late 2022, when ProPublica published an investigation alleging that RealPage’s software was linked to rent rises in some US cities, as the company used private, aggregated data provided by its customers to suggest rental prices." https://arstechnica.com/tech-p... [arstechnica.com]
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So zillow is price fixing?
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So zillow is price fixing?
Hell of an example you picked, but you tell me why Zillow abruptly stopped buying houses to flip and proceeded to sell off what they had at a loss after a video went viral accusing them of exactly what you’re suggesting.
Zillow naturally denies any wrongdoing, but actions tend to speak quite loudly. Stock price took a hell of a hit after that action.
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Because they lost money buying and selling homes, not because it was illegal. They ended up selling all the homes they had left at a loss, which left to the stock hit
They *still* tell you the rental and sales estimate of every home.
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The key difference is the input data. Anyone is allowed to make public calculations based on publicly available data. RealPage is operating on private data and then coordinating who gets to know what.
btw, how much do they pay you to lick those boots?
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0, I wish they would pay me to ask yall to explain the difference yall dont seem to be able to tell me .
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People ride rich person dick for free.
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Zillow only lists prices set by realty companies.
Zillow bases prices on sold properties (Score:2)
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The reason why firms like this exist is to exempt landlords from the liability of price fixing. It doesn't matter what happens to this firm in the long run - landlords will get maximum revenue now while any price-fixing charges will be born by this firm.
And even in the case of this firm losing in court, A.) The process will take years, and B.) the company will go bankrupt paying the settlement, and most importantly, C.) the landlords will owe nothing.
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No, the difference here is that "some guy" knows exactly how much tenants are paying in every property in every market.
Note: how much tenants are actually paying: not asking price for vacant properties.
That's not what's happening here (Score:2)
"Some guy" made a space where all the landlords in your city could get together and post and discuss about the rates they were going to charge so that they could collude together to maximize rate increases and avoid competition.
There, FIFY
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Price fixing where over half the time the people dont listen to you lol.
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Price fixing where over half the time the people dont listen to you lol.
It is normal to only price fix the minimums, not the maximums.
Re: Replace "Algorithm" with "some guy" (Score:2)
Replace RealPage with Estate Agent (Score:2)
"Some guy" is charging landlords across the country a fee to help them decide how much money they can charge tenants on signing or renewing a lease. Yeah, that sounds like price fixing.
No, that sounds like someone getting advice on what price to charge for a product. If you sell a house through an estate agent they will tell you the price that they think that they can get for it so is that now illegal price fixing too? ...or only if they use an algorithm to come up with the number?
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Market research and setting the price as hign as a given market will bear is a fairly standard business practice though. That is, for example, why gasoline is $2/gallon more at the gas stations closest to the airport's rental car return facility in my neck of the woods. Hell, sometimes "the market" isn't even locational, but time-based; like how it's more expensive to fly if you buy your ticket less than a week before your trip or why hotel room rates skyrocket when a big convention is in town. There's n
Re: Replace "Algorithm" with "some guy" (Score:2)
This is why it's illegal for companies to ban employees from discussing salaries, and why California required companies to publish salary ranges. The market is the free-est, fairest, and most comp
Bullshit (Score:2)
They have no way to legitimately claim, or prove, that their software is helpful to renters or that it increases competition - which it definitely does not.
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I'm not sure of the details of the contracts. But I don't recall ever any of these stories alleging that RealPage actually sets the prices. It's always been presented as an analytics company that just gathers data and uses it to determine and recommend the optimal price a given market will bear, but with no actual authority or control over said prices. Many, MANY, business do this internally and charge different prices in different locations. It seems rather odd that outsourcing the task, versus hiring
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As I understand it though, landlords do not interact with each other at all in this case. They individually and independently buy data from a 3rd party: RealPage. So, to use your own analogy, this is more akin to a data broker scraping both Amazon and Walmart for the prices they charge for some widget or another, and a seller on eBay buying access to that data to determine the price to set for his version of the widget.
Or, to put it another way, if Craigslist has not implemented anti-scraping code to prev
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If you go back up in the comments, you will find someone who claims to have worked there explains how it works.
Says it all really (Score:3)
"It also said landlords accept RealPage's price recommendations for new leases less than 50 percent of the time"
I mean if their recommendations were actually accurate/good this couldn't be the case.
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It's most likely that they actually accept the recommendation but take into account the state of the property, slightly reducing for old dilapidated properties and increasing massively if it's newly rennovated and nice. RealPage likely deliberately doesn't include some features just so they can make this claim.
This could be weasel speak (Score:2)
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So for all the boomers who got into their houses (Score:2)
When people forced to rent are forced to pay large percentages, going up to 50 or 60% of their income, then they are forced to demand higher wages. In many cases this shows up in the form of increased minimum wage. What most of them can't do is just work harder because most of them are working as hard as they can already. The idea there's thousand
Re:So for all the boomers who got into their house (Score:4, Insightful)
In shorter terms, the more capital you own, the more immune you are to inflation.
In fact, inflation is good for them. As rent prices go up, and before inflationary pressures increase their own costs, landlords can reinvest that high profit into owning even more housing.
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All of these things are going to drive inflation. Because what's happening here is landlords are taking money out of the economy and giving nothing back. There's a little bit of downward pressure on discretionary spending but not enough to make up for the price of groceries shooting up.
This isn't true. Inflation is the "general rise of prices"... If only the real state and the job marker rise it's prices it's not inflationary... somewhere somebody else is going to spend less and equilibrate the equation. This doesn't mean there is there is no inflation in the US, but the real state market is not the cause of inflation.
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I quit buying a $5 coffee every day for a year and saved up $1825.
The average US home price is now $495,000.
The 20% down payment on half a mil now close to a hundred fucking thousand dollars.
So my latte savings isn't even 1/50 of the down payment.
Grandpa, run your mortgage prices through the inflation calculator and get back to me.
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The 20% is not a requirement. It is to avoid mortgage insurance.
Maybe that $1825 covers the mortgage insurance.
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What I'm saying is if you allow a bunch of rent seeking parasites to devour the lower class because you just barely made it into the middle class then it's going to affect you negatively.
You'd have a point if the reason for the huge rise in the cost of housing was some algorithm taking over the pricing of all rental units....but it clearly isn't because the price of buying a house has shot up as well. The clear and unambiguous reason for this is a combination of massive immigration and no increase at all in the rate of building houses. Canada has a current immigration rate of about 0.5 million people for a population of 39 million, which is about 2.5 times the rate in the early 2000's.
T
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The clear and unambiguous reason for this is a combination of massive immigration and no increase at all in the rate of building houses.
How is that possible? It seems like a large portion of immigrants are in the construction industry. You go to a build site of a new house and most working there are immigrants.
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How is that possible?
Simple: the government rapidly increases the number of legal immigrants and does nothing to stimulate a similar increase in the number of houses being built. This is despite the Canadian construction industry having a record number of workers. I've no idea what they are working on but, at least in Canada, it is apparently not new homes.
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What I don't get is when people rent, why don't they rent minimally? So many people rent large apartments.
Why not just rent a room in a house?
Why not get roommates? I guy I said that he had contributed enough to society that he deserved to live without room-mates.
Rent as low a quality of life as possible so that you can save as much as possible for a house.
Re: So for all the boomers who got into their hous (Score:4, Interesting)
In some markets, that's not really an option.
For example, by renting a large apt in NYC a person has a minimal commute, if they instead rented a small apt and saved for a house, they'd likely have an exponential increase in their daily commute from Long Island, NJ, CT, or even PA, where houses are more affordable...
Collective action IS collusion (Score:3)
Using a third party doesn't make it not collusion.
The third party is also a party to the collusion
It's disingenuous at best to say otherwise
I worked @ RealPage & QUIT!! (Score:5, Insightful)
I worked @ RealPage in the Fall of 2022 for about 3 months as a senior full stack developer.
It was a weird place.
They had all of these microservices, a whole lot of code, and it was very regimented and siloed, so that no one at all understood the full product or what we were actually doing. To me, it stunk of illegality or at least unethicalness.
So one day, while on a 1-on-1 call with my supervisor, the CTO, I asked all sorts of questions about, like, why we were given access to only some parts of what must be a much larger repo? Why hasn't anyone ever told me or other devs what the client is actually buying? Yeah, it seems to do with real estate, but what exactly?
To this point, he hemmed and hawed and I said that I felt very uncomfortalbe working on something so ... seemingly needlessly compartmentalized. So he finally showed me:
The goal of RealPage was to suggest to property managers what the people in each neighborhood could afford to pay.
"Oh, so you use AI and big data to profile people in aggregate to see how much big conglomerates can price gouge? Oh, now I see why you keep it quiet.... Your devs would quite possibly all revolt if they found out!!"
Immediately after that conversation, my manager and HR were on the line. They tried like crazy to get me to sign an NDA for $10,000+ and I told them that I was resigning then and there. I just couldn't stand helping make society worse in this way.
My slack access and email were cut during that conversation.
He asked me to not tell the other employees, but I did anyway, and several quit, too.
Very shady business model that's hurting millions around the nation. They claimed to have 80%+ of the big apartment complexes as clients, for instance.
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Did it ever recommend that landlords not put certain vacant units up for rent? The strategy being if you have 10 vacant units, instead of putting all 10 on the market at the same time, put only one. That seems harmless but when you have multiple apartment building owners doing that, what happens is that they can get a higher price per unit over time if there's a glut of people wanting to rent.
Re: I worked @ RealPage & QUIT!! (Score:2)
So? Why is a landlord required to flood the market with indented apartments, drive down rent prices and hurt their own bottom line.
Landlords buy and rent out properties to make a profit, it's not an act of social charity.
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Isn't commerce is a privilege not a right and can be subject to regulation. If commerce was a right, you wouldn't be able to tax or tariff anything. Two can play this game.
Re: I worked @ RealPage & QUIT!! (Score:2)
It also said landlords accept RealPage's price recommendations for new leases less than 50 percent of the time and that the software recommends competitive prices to help fill units.
Less than half the users go with the software's suggested rent.
The purpose of RealPage's software is to manage rental properties and maximize the owners profit... is that really "unethical"? Are the employees at RealPage truly as ignorant of their business model as the OP claims? Really? That's kinda hard to believe... I mean it's possible, but kinda hard to believe.
Re: I worked @ RealPage & QUIT!! (Score:2)
Once upon a time... (Score:3)
Landlords had to price their rentals themself, without any idea what others charged... Then the newspaper classified sections listed apartments, and landlords could see what others were charging and could use that information to price their rentals... Then realtors entered the rental market, and their knowledge of the real estate market influenced what landlords charged for their rentals... Then with the rise of the internet, landlords could research their competition and price their rentals based on 'comparable units'... Now landlords, tired of paying realtor commissions on their rentals are using RealPage's software.
At what point did this perfectly normal evolution of the market become "collusion"?
This reminds me of the "license plate readers are invading my privacy" argument. Police, for nearly 100 years used license plates to locate, for example, stolen cars, but they had to physically drive around town looking at each plate. Now they can install license plate readers at strategic points around town and on police cruisers to find stolen cars... Reading license plates didn't become bad just because it became automated.
Pricing apartment rent via automation doesn't make it bad...
Simple solution (Score:2)
Jeffrey Roper (Score:5, Interesting)
RealPage's principal scientist when this program was started was Jeffrey Roper. He previously worked for Alaska Airlines. He was involved with an airline trade group that was fixing prices by exchanging non-public pricing information. During the investigation Roper's computer was seized and he fled the country.
Aggregating data from landlords and renters (Score:3)
They're using the Internet's and modern computing's ability to aggregate data from landlords and renters, in order to maximize landlord profit, and thus their profit.
The landlord-renter negotiation is already hugely one-sided: the landlord has every piece of information about the renter and the renter has very little about the landlord. This company and their database and algorithms simply increase that asymmetrical information chasm.
It strikes me as a little like Napster. Seems really cool initially, as long as you ignore the crime. Collusion is the crime and the resulting de facto monopoly and monopolistic pricing. Think of a tree data structure: the landlords are nodes below the newly created root node (Realpage) which gets all the child node information and provides the child nodes with pricing information. The landlords are individual nodes but all connected to a parent node, which creates the monopoly.
Car dealers have theirs too, CDK Global, recently hit by a ransomware attack.
Re: Media needs to reduce use of word "algorithm" (Score:2)
Can a landlord look in the newspaper to see what others are getting? Is that illegal?
Can a landlord go online and see what others are getting for rent? Is that illegal?
How is this any different?
Landlords are NOT required to use the rent suggested by the software, in fact less than half of software users do use the software's suggested rent...