Feds, US states sue RealPage for building rent-hiking software for landlords The Justice Department and the Attorneys General of eight states in the US on Friday filed a civil antitrust complaint against real estate service firm RealPage for providing landlords with software that maximizes rent at the expense of renters. That lawsuit [PDF] claims RealPage has unlawfully limited competition among …
Yeah a real estate guy believing a system that allows landlords to collude and screw tenants is fine is hardly surprising. But that's the sort of thing we'd see from another Trump administration, because he doesn't give a shit about the average person.
How a billionaire who inherited $400 million from his father (and would be worth nearly $30 billion today if instead of all his failed business ventures simply invested it all in an S&P 500 index fund) and who had every advantage in life managed to convince all the poor and middle class red hat wearers that he's a victim, and that he's on their side will be something studied by psychologists for decades! The rich people who support him, their motives are obvious. But people making $25K a year are fooled into voting against their interests, I guess by making them fear faceless immigrants taking what little they have more than having the orange dude doing it to them while they cheer for him.
Just watched It's quieter in the Twilight [IMDB]. Most of the people keeping the Voyagers, "humankind's greatest exploration," alive came to the US as immigrants 50 or more years ago.
I'd love to see any methodologically-sound study showing any significant number of voters, of whatever position, make decisions based on "common sense" (insofar as such a thing exists).
I have little sympathy for Trump supporters, but I don't believe they're qualitatively different from other voters in how they make that decision. The vast majority of voters appear to be motivated by ideology and group affiliations. It's not rational to expect otherwise.
people making $25K a year are fooled into voting against their interests
Against their financial interests, sure. But for their ideological interests, for most of them; and that often counts a great deal more.
There are any number of studies, interviews, and analyses of various cohorts of Trump supporters already available. It's really not a mystery. The most common theme is regressivist ideological advocacy, whether that's couched as a desire to return to some imaginary era of personal liberty or "responsibility" or some other (generally ill-conceived and inarticulate) behavioral touchstone, or simply "owning the Libs".
And the force of the latter should not be discounted; there's a prominent feeling, particularly outside urban areas, that people with so-called "traditional" values have been systematically denigrated during and after the "Culture Wars", creating an adversarial relationship which now trumps (if you'll excuse the term) rational considerations for many voters. They'll happily accept a Pyrrhic victory over a defeat; burning it all down is preferable to "losing".
In other cases — and this frequently comes up in interviews with "not natural" Trump supporters, such as middle-class urban women — we see appeals to ideological beliefs like corporatism: "America is better off being run by a successful businessman". (Which, yes, rather overlooks Trump's questionable "success" in business, or the fact that what success he's had stems in large part from fraud and cheating his creditors; though I suppose that's a path to success, if you get away with it.) That claim never seems to be supported in any fashion by those invoking it; it's purely a received belief. How quickly we forget Hoover (who was both a successful businessman and a successful government administrator — the "Great Humanitarian" who oversaw post-WWI relief efforts). Or that Trump is "strong" and that this will in some way improve US foreign policy. (So many people do love a bully.)
We do not lack empirical evidence to show that people generally do not vote in their rational, personal self-interest. Few people seem to make any attempt at rational calculation at all. And, really, why should they? There are good arguments for accepting short-term costs in favor of longer-term ideological success.
Basically impossible to enforce. Even if some of the domestic-rental-real-estate management companies (and I agree, they're a nasty bunch, to a first approximation) were forced out of business, it would be nearly impossible to prosecute any individuals for this. Even if prosecutors could convince a court to pierce the corporate veil — something they are very reluctant to do, since that's the whole point of a corporation — the officers could claim they have indemnity from RealPage, or they reasonably accepted RealPage's assurances of legality. For a bench trial that's a strong defense; for a jury trial it'd get muddled in complex legal questions and the outcome would quite likely depend on the judge's instructions anyway.
So the management company disbands and the same people reform under a new corporate identity, and snap up the properties as they're sold, and it's back to business as usual.
It's not like there are progressive management companies, or kindly individual landlords with a twinkle in their eye and friendly word for every tenant, champing at the bit to buy rental property and offer it at non-collusive prices.
Housing is a mess in the US. RealPage is not helping the situation, and I'd be happy to see them stomped by the Feds or the States. But it's not going to help much. Greatly increasing the supply (by construction and fixing zoning laws and so on), in places where people need or want to live, and greatly reducing short-term rentals through regulation — those steps might help. I'm dubious about the possible effects of more-radical approaches, such as Georgian taxation, but in practice those don't have a snowball's chance in Hell of being instituted anyway.
"Landlords using this software should be prosecuted, too, because they are participating in this price-fixing collusion, and unjustly profiting from it."
It's not price fixing unless it's connecting landlords together and they have agreements in place to rent according to a fixed schedule or consult to set rates when they have units to let.
One of the things an estate agent will do when they have a client selling a property is to look up what sold prices have been recently, what similar listings are asking and how brisk the market it. There's definitely some nuance to pricing a home, but many consumer facing real estate sites will show a pricing estimate. Don't I just wish I could sell mine for what their estimate is which goes to show that it isn't a perfect calculation.
If this software is going online and looking up the rents asked for similar flats in the area, that's just automating the process of what a human would do. Good landlords are looking for solid long term tenants rather than eeking out every coin from every tenant. The cost to refresh a unit that's been nested in can be enormous which leads to a long interval before the property will be a break even once again. If an area is nearly full up, rents will rise in classic supply/demand fashion and software could spot a death of offerings in an area and suggest an increased rent. Again, that's just automating something that's already done. I've worked with somebody that had several investment homes in our city and learned how much it costs to paint, replace flooring, window coverings and appliances. He wasn't bashful about telling me what his costs were and the added time to get back to earning a profit there was for every month a property was sitting vacant. It's not just a couple. He would have been over the moon if he could have asked for a lot more rent, but there's cap on what people can/will pay. His biggest problem was out-sourcing the tenant screening and getting dodgy renters that tore the places up. If somebody looks like they have an issue with meth, just running a check to see if they've been evicted recently doesn't mean much. A single mom with three kids, one a pregnant teen, that works cleaning hotel rooms might not be a good risk for a home that's been completely redone. She wasn't a good risk and the home had to be redone again with a best case breakeven time of 16 months. It also isn't pleasant to have to evict somebody with a kid that has a newborn. She lost her job at the hotel shortly after taking possession and public assistance wasn't enough to cover all of the bills for her and 4 kids.
Tech is an enabler/magnifier of both good and bad. I can use my pickup truck to help a friend move house, to deliver Meals-On-Wheels, to yank an ATM off its mounting and steal it, and to plough down a crowd of people supporting a politician I hate.
It all depends on the wielder.
(And while we're doing prosecutions, let's nail the programmers, upward-chain-of-managers-and-executives, and the Board of Directors [if they knew about this] for criminal conspiracy.)
(Usual Ken White disclaimer applies: Some state RICO laws are looser than the Federal one, as we saw recently with Georgia, and might be more accommodating. But to a first approximation, no, whatever the situation, RICO does not apply.)
For those who don't want to read this classic post (and you really should, if you're ever tempted to utter the acronym "RICO"), here's the key excerpt:
To win, a plaintiff would have to prove (1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity called "predicate acts," (5) causing injury to the plaintiff’s "business or property."Each of those terms means something complicated — each term is a gateway to a whole bunch of other issues.
And the key part of that is the last sentence. RICO is just an extra-complicated version of existing laws. Prosecutors and civil plaintiffs are much, much better off bringing charges or litigation under those existing laws.
One landlord views it as colluding (price fixing). Quote is from US Justice Department and 8 States lawsuit https://www.justice.gov/opa/media/1364976/dl?inline
"Discussing a different RealPage product, another landlord said: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing.""
Another also viewed it as price fixing even though he believed it would hard to argue there was. Quote is from Propublica's article and who's investigation lead to the Federal Trade Commision investigating RealPage. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent
"The CEO of one of YieldStar’s earliest users, Ric Campo of Camden Property Trust, told ProPublica that the apartment market in his company’s home city alone is so big and diverse that “it would be hard to argue there was some kind of price fixing.”"
That’s classic price fixing.
Ah, and that's classic "admitting to knowingly committing a crime". Love it when people do that on the record. I can hear this guy's lawyer facepalm from here.
The Campo quote is a little less egregious, but again really not something you want on the record. "Oh yeah? Prove it!" is not a terrific defense.
As someone further up mentioned, technology is magnifying the effect. A landlord looking through the classifieds to get an idea of *advertised* average pricing in the area is product research. A computer scraping the actual rental values from other landlords over vast swathes of territory is when it becomes "collusion", even if, from the point of view of a individual landlord, it may be unintentional. It also results in rents being algorithmically pushed up a notch here and there, which leads to positive feedback and rapid increases.
It's why we have much stronger privacy laws these days (in some places!). Pre-internet, one had to do actual, often uneconomic leg-work to collect data on people. When you can collect data on millions of people with the push of a button, it becomes a problem that needs regulating.
If we are going after the software guys, let’s go a bit deeper and get the guys that are causing housing to go thru the roof.
The government prints massive amounts of money causing inflation. Supply and demand, more you have the less demand and value.
Anyone that has retirement cash knows it is becoming worthless, so they buy property. Less supply, price goes up.
Massive inflation, so the feds try to tame it by increasing interest rates with the idea that if you don’t have money you can’t buy it and therefore less demand. Basically crash the economy.
It works but you are out of a job, have to rent because you can’t afford to buy while the ones that started the process, benefitted from the money machine on the front and the increase on interest on the back side.
Here is an upcoming example: One of the candidates is promising to give $25k for first time home buyers. Obvious vote buying but all it will do is increase the price of a home by $25k or more.
Again, less supply, more costlier, and guess who will benefit the most?
> $25k for first time home buyers
That's the important part, so, how does a seller "know" the buyer is 1st time ? That's not a known quantity and the 25k isn't for everyone. Upping the price by 25k to capture that is not a guarantee that the seller will get 25k, more likely being over 25k will just cause the house to languish on the market.
how does a seller "know" the buyer is 1st time?
A more complex scheme which involves loan guarantees, and related schemes by housing developers such as part-ownership certainly seem to have increased prices rather than easing the process of getting on the housing ladder in the UK, see for example this Financial Times article from 2022 which quotes a House of Lords report which suggests that investing the money used for the scheme in to actually building houses - increased supply leading to less inflation pressure - would have had a much greater effect. For the UK scheme I believe the seller has to be involved in the process of getting the subsidy so there is full knowledge.
A slightly different scheme in the UK is the so-called "Lifetime" ISA. For those not from these parts, an Independent Savings Account is a tax-free savings vehicle into which a taxpayer can invest up to £20,000 per year. The "Lifetime" ISA is slightly different in that it is specifically aimed at first time buyers between 18 and 40 years old saving for a deposit. It has a lower investment limit of £4,000 per year but includes an additional bonus from the government of 25% per year (capped at £1,000 so it isn't as generous as it sounds) so if you save £4,000 for three years at 3% (just as an example) you should get somewhere around £16,000 out which could provide a >10% deposit in some of the lower-priced areas of the country.
Two problems. Firstly, none of the "big" ISA providers are selling Lifetime ISAs any more and secondly it's entirely possible the new Labour government will make changes (or even scrap) this Conservative initiative at the next budget.
There is a strong argument in the UK that the thing which really rocket-boosted house prices (both rental and purchase) was the "right to buy" scheme of the Thatcher government. Up until then a lot of rental accommodation was built and operated by local authorities which had no incentive to price-gouge. RTB gave long-term tenants the right to buy their homes at vast discounts over what would be "market value" (and determining market value was exceptionally difficult for housing stock which had never previously come on the open market). Many of these people sold at market value within a few years (and there's a whole other story about the poor folk who bought ex council houses without full knowledge) but the thing which really made the difference was that the councils were forbidden from using the proceeds of the sales to build more council housing for rent - and that's leaving aside the fact that the discounts were so huge that they would not have been able to afford 1:1 replacements anyway.
In comparison a simplistic $25k to put towards your first house is definitely a recipe for disaster - after the first batch of people have got on to the scheme early anyway.
M.
"One of the candidates is promising to give $25k for first time home buyers. Obvious vote buying but all it will do is increase the price of a home by $25k or more."
Maybe, but it's easy to see if a home is being marketed for $25k over the "comps" in the area. Financing often comes after negotiations too so a vendor wouldn't know that somebody is getting a first-time buyer grant. Why would the vendor drop a price for a first time buyer if they can get the going rate? If I bought another home and saw a vendor offering a discount for anything, I'd beat them up on price so I'd get the reduction regardless whether I qualified or not. It might not work if one military vet was keen on passing along a good deal to a fellow vet. There's very few allowable ways to discount a property to a subset of everybody with the money. For leasing, there can be qualification requirements that would apply to everybody since the landlord is taking on the risk of being paid. Banks will do the same thing before they will finance somebody to buy a home. A bank may take a dim view of "unlawful detainer" (evictions).
Just a reminder... The Federal Trade Commission defines price-fixing as "an agreement (written, verbal or inferred from conduct) among competitors to raise, lower, maintain, or stabilize prices or price levels. Generally, the antitrust laws require that each company establish prices and other competitive terms on its own, without agreeing with a competitor. When purchasers make choices about what producs and services to buy, they expect that the price has been determined on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices."
"Often"???? Why else would they do that?
In any case, it seems there was a time when the rent was agreed upon by the landlord and the prospective renter, similar to the way the purchase price of a house is still done. As I point out above, the fact that HUD sets specific rent rates that it will subsidize for Section 8 housing, may have given rise to the practice of setting a non-negotiable "market" rate for rentals... which of course isn't "market" at all, especially since supply can be manipulated !
Price fixing CAN result in (temporary) lower prices - say if several smaller players want to take out the big dog in the industry, for instance in a situation where the dominant company has taken some sort of financial hit or disaster. Hit em while they're down and feast on the bones.
"It also results in rents being algorithmically pushed up a notch here and there, which leads to positive feedback and rapid increases."
Maybe. People who would blindly follow the software's suggestions are the same people that would use AI without any knowledge of how the answer was derived. It's too easy to price yourself out of the market and with homes that might be financed, a vacancy takes a lot of time to recoup. It's very important to know the local market down to the block. The city I live in has neighborhoods that will top out very low and others that can command much higher rates and it's not that large of a city (by population). The wrench in the gears is public housing assistance (section 8) will often pay high rents if the landlord will accept the vouchers and get their property qualified. Section 8 drives up rents since landlord know that the people that qualify often don't do any upkeep and when they move out, the property will need extensive renovation and pest abatement.
If somebody blindly follows what the software is telling them, they'll not do well. There's no point in government getting involved unless there is a very clear cut case of landlords getting together to fix pricing. Just automating market research is a tool. I keep track of what my competitors charge. I have to know the going rates or I'm cheating myself and since I keep track of my costs, I know when somebody is charging far too less and shouldn't be a worry since they'll learn that soon enough. It would be handy to have some software or a web site that would do the work for me. One of the things I look for is where my competition is charging a lot of money. I've done well to actively market in those areas with pricing that very nice for me and undercuts the hell out of them for a given level of quality and service.
Rental interest should be regulated and capped. The interest percentage may change to regulate supply. The change should be inflexible and slow to allow long term investment planning.
Why should it be any different than savers screwed by low central bank's interest, for example. Real estate is a limited commodity, so regulate it. Radically even real estate capital gains should be capped.
I bet, this will also prevent real estate bubbles. Future generations will thank you.
This issue has been known for some time, yet until recently it apparently has sunk beneath the waves of complacency and “business as usual.” In February, 2024 Senator Peter Welch (D-Vt.) and Senator Ron Wyden (D-Ore.) introduced a bill, “Preventing Algorithmic Facilitation of Rental Housing Cartels” that would “prohibit digital price-fixing by landlords.” Rep. Becca Balint (D-Vt.) and Rep. Jesús “Chuy” Garcia (D-Ill.) sponsored a House bill of the same name.
An in-depth probe by Pro Publica (posted Oct. 15, 2022), showed the algorithm is not nearly as objective at setting rental rates as its originators claim. Pro Publica investigated RealPage out of Texas, which “provides property management software, data analytics, and services to efficiently manage rental properties and real estate,” according to RealPage.com.
As a society, we risk being lulled into an unquestioning faith in technology to “make life easier” by providing shortcuts. But Pro Publica also found that RealPage in fact gathers rent data from “clients, including private information on what nearby competitors charge.” Pro Publica’s inside sources said that the algorithm gets around the “temptation” to negotiate rental rates with tenants. One of the architects of the software, Jeffrey Roper, told Pro Publica, “There’s way too much empathy going on here. This is one of the reasons we wanted to get the pricing off-site. … If you have idiots undervaluing, it costs the whole system.”
Amid the urgency to provide “affordable” housing, the LIHTC (Low Income Housing Tax Credit) has become very attractive to affordable-housing investors. It’s troubling to learn from RealPage’s website that RealPage Compliance Services provides services for affordable housing programs, including the LIHTC (Low Income Housing Tax Credit).
Novogradac, a resource center for tax credit information and affordable housing, explains that “The LIHTC gives investors a dollar-for-dollar reduction in their federal tax liability in exchange for providing financing to develop affordable rental housing.” (Novoco.com)
That is a large carrot, and big tax windfall, in return for a promise to keep rents in those projects “permanently affordable.” And if it sounds too good to be true, it is.
Moreover, as Shelterforce explains, the LIHTC agreements don’t go on forever. The affordability requirement is for the project itself – not the renter – and ends in Year 30. This means that buildings built with the LIHTC in the mid-1990s are about to convert back to market rates. In this climate of extreme rent inflation, the future does not look good for preserving affordable housing. (Shelterforce: Essential Reporting on Affordable Housing, #135, May/June 2004)
.
Manipulating rental rates can influence not only open market rates but also the landscape for affordable housing. The federal government sets what it calls Fair Market Rent. But there is nothing inherently fair to the renter about “fair market rent.”
“[Fair Market Rents], regularly published by HUD, represent the cost to rent a moderately-priced dwelling unit in the local housing market,” explains Huduser.gov. HUD defines fair market rents as “an estimate of the amount of money that would cover gross rents (rent and utility expenses) on 40 percent of the rental housing units in an area.”
But HUD’s “fair market rent” figures are derived from several sources, which all come down to the projected market rent for a given area. … as well as median income figures.
Announcing the 2024 increase of 12% in fair market rents, a Q&A page acknowledges that HUD relies on the real estate industry to provide the most up-to-date data, while analyzing (already outdated) 5-year results from the American Community Survey conducted by the U.S. Census Bureau. In ACS, households are contacted directly for information. But HUD also consults private sector rental data from multiple sources into the FMR calculation process in limited and statistically valid situations where private sector rental data have demonstrated that they more accurately estimate changes in rental markets.”
HUD also consults Moody’s Analytics, CoStar Group “average effective rent,” CoreLogic, Apartment List rent estimates, and Zillow. In this writer’s opinion, RealPage and Zillow have a vested interest in increasing rents, as they both serve landlords and real estate managers. HUD claims that it must raise the fair market rent to more closely compete with market rents, in order to overcome landlords’ reluctance to accept Section 8’s traditionally lower rates. (hud.gov/sites/dfiles/PA/documents/FMR_FAQs.pdf)
One dataset that factors into the HUD “fair market rent” calculation is median income, since the benchmark for affordability is 30% of income, set by Congress in the 1980s. [huduser.gov/portal/datasets/fmr/fmr2024/FY2024_FMR_Schedule.pdf] lists “fair market rents” for metropolitan and non-metropolitan areas, county by county, from Alabama to the Virgin Islands.
In Vermont, for example, now in the top 5 states for cost of living, HUD gives the current household median income for the state of Vermont as $102,300. This [huduser.gov/portal/datasets/il/il24/FY24-Median-Attachment-State-Medians.pdf]
Vermont Housing Finance Agency (VHFA) publishes a rubric that shows the metro median income is $118,900, inflated by the concentration of high-earning professionals in the greater Burlington area. A household earning 100% of median income, or $83,300, would pay a maximum gross rent of $2,677 for a 2-bedroom apartment. [housingdata.org/documents/purchase-price-and-rent-affordability.pdf]
The non-metro median household income is $95,000. The rent on a two-bedroom unit for a 100% non-metro median income of $95,000 is $2,302. On the low end of the spectrum, a household of one with an income of $21,500 (30% of median) can “afford” a maximum gross rent of $576 for a 1-bedroom apartment, while a renter with an income of $35,850 (50% of median) can “afford” $960 for the same apartment.
While the site cautions that the data have “no statutory enforcement power,” and the “fair market rent” sets a ceiling for the Section 8 program, the rubric more than suggests a baseline for market-rate rents in general. A look around the state of Vermont shows rent “ceilings” that are already beyond the reach of the ordinary Vermonter. And as median household incomes rise, inflated by Vermont’s campaign to attract more earners in the $200,000 range, so do HUD’s “fair market rents” based on median household income.
Investors have learned ways to game the rental housing supply, and government plays into their hands by pegging “fair market rents” to market rents reported by the industry itself.
When players such as RealPage gather data on prevailing rents in an area, they are also tapping the blanket rental rates set by HUD as their baseline. If HUD’s “fair market rent” stands for 40% of rental rates gathered county by county across the nation, and if those rates being charged in real time by landlords through their property managers are converted into software that investors can utilize sight-unseen, the tail is wagging the dog.
As much as I"m not a fan of Nutjob Trump, I don"t think that"d have any bearing on a DOJ antitrust decision. That antitrust decision (not stopping two companies from merging) has zero bearing on the legality of the service they are providing. They would literally be deciding on if the merger of these two companies unduly reduced competition in the market they are in.
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