This sounds like price fixing as a service, but I wonder if the law is prepared to handle it. The FTC guidance on price fixing[1] only discusses "agreement among competitors", and never mentions each party outsourcing pricing to the same service.

If the competitors never meet or agree on anything, is it still illegal?

1: https://www.ftc.gov/advice-guidance/competition-guidance/gui...

If the competitors never meet or agree on anything, is it still illegal?

No idea how the laws were written, but the vast majority were conceived before modern big data systems were possible, and even today most regulators are unprepared for arguments like this (from the article):

Using software like YieldStar is “taking what we used to do manually on a yellow pad and calling people on the phone and putting it on a codified system where you take the errors out of the pricing,” he said.

Modern big data and ML capabilities mean that not only is the human removed from the details of the process, but even understanding the mechanics and relative weight of different inputs becomes all but impossible. Large-scale human-based processes can still feel opaque and arbitrary from the outside, but at least there are entry points for human empathy and (more importantly) accountability.

As we saw in the 2008 financial crisis, it's a very dangerous state of affairs when the risks and rewards of financial innovation are decoupled across different parties by means of opaque and unintelligible instruments. Computers are not the same as paper.

Modern big data and ML capabilities

But for the most part this stuff doesn't work. And I think in this specific case if there were really some secret sauce they'd make a lot more money as property flippers. Buy underperforming property for cheap, apply secret magic, and sell much better performing property for much more would make you way more money than selling a SAAS.

Wow, this is a brazen price collusion. No doubt about it. Using private data to fix prices and asking landlords to keep units vacant rather than decrease rents.

I'm not sure it's so clear. "Using private data" to set prices is hardly nefarious on its own, even if the result is higher prices. After all, "price stickiness" is a well known phenomena in the economics literature (and it can lead to sub-optimal allocation of resources). Maybe this is just a way to make prices less sticky.

On the other hand, if the system recommends keeping units vacant, that does start to suggest that it is enabling landowners to take advantage of monopolistic pricing power. Yet higher vacancy rates could actually be socially optimal as well. A similar phenomena occurs in the movie theater business. Theater owners often price tickets such that the "vacancy" rates (empty seats) are quite high. However, a law that required pricing tickets low enough to fill all seats would reduce the return on equity in the industry so much that investment in the theater industry would plummet, vastly reducing the number of theater seats available available to fill consumer demand in the medium to long term.

Different companies using the same AI for pricing support purposes could easily tip into illegal practices if there is a feedback loop from company to model. That’s just plain old collusion via a middleman.

Lo and behold:

“To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge.”

Dark times if the FTC isn’t picking this up.

Different companies using the same AI for pricing support purposes could easily tip into illegal practices if there is a feedback loop from company to model.

While there are anti-competitive concerns with this kind of system, one of the points I was trying to make is that a problem requires more than there be simply a 'feedback loop'.

Even in a market with 'perfect' competition, there can be feedback loops: e.g., an individual farmer might price their grain by checking the current market price which is tracked by a third party, and that third party determines the 'current market price' by querying the prices set by all farmers. The reason this isn't necessarily anti-competitive and can be compatible with 'perfect' competition is due to the other characteristics of the market (all participants are price takers, etc), not due to a lack of coordination between producing firms and market analytics firms.

You can't reasonably compare a housing vacancy tax with a hyperbolic straw man argument of a theater. It's not a similar phenomena at all, because it doesn't happen.

It's just information

It's up to the landlord to negotiate based on his individual situation (condition of the unit, demographics, furniture, etc)

Not different from a company asking for "market data" regarding salaries and use that to _guide_ their salary offers to new candidates

In the end the company will adjust their recommendation based on results/feedback from candidates (some companies could be popular/well liked and get away with lower compensation, and vice versa)

Ah yes the efficient market hypothesis in the form of data is why we can all join together and raise rent at 2-3X rate of inflation. Renters don't need half of their income anyways; the landlord can spend it much more efficiently on more investment property.

It’s even worse than that. In an unregulated market, you can always just outbid someone else for a rental. But in a regulated market (with rent control or caps on rents), you can’t do that, and if supply doesn’t match demand, you just go homeless. A socialized market without landlords resembles the latter much more than the former, and having gone through the latter before, I don’t want to live in such a city again without some sort of guaranteed housing from whoever is making me move there.

"You can always outbid someone else for a rental" is both not true and misses the problem that regulation aims to solve.

You can only outbid someone if you have more money than them. The lower on the income scale you are, the less this is an option, until it just stops bring an option at all!

Not to mention, it is drastically unfair and inhumane to consign people to live in the streets simply because they are poor, or simply poorer than the next. Rent control gives a measure of dignity to the poor, and ensures that -- at least a little bit -- when times get hard, we all suffer, the rich renters and the landlords too, not just the poor renters.

In an unregulated market, you can always just outbid someone else for a rental

Until you have to actually pay the rent you bid.

if supply doesn’t match demand, you just go homeless

This is true in both situations. Only in the second case instead of whatever rich asshole wants to move there getting the rental, the people who have lived there for decades already do.

Yes. The second case makes rentals illiquid to the benefit of current residents. But then, why would anyone dare move to a city like that? Again, that’s what I experienced (the inability to find housing) and that’s what I don’t want to experience again.

Now take those decisions en masse: you want a city with a healthy economy, but the city is now stuck since it’s labor resources become illiquid along with its rental market. Now, some people want that, but HN readers (I think?) will be biased towards vibrancy.

Rent increase has been one of the biggest contributor to core inflation [0]. That has caused fed to raised interest rate at a rapid clip and cause the market crash. So is an algorithm responsible for the blood on wall st?

[0] https://www.corelogic.com/intelligence/the-role-of-rent-in-i...

The cause of inflation is excess money created by the Fed (i.e. things like the $2 trillion "stimulus" package).

The rest is the Law of Supply & Demand.

cause of inflation is excess money created by the Fed (i.e. things like the $2 trillion "stimulus" package)

You’re mixing up fiscal and monetary policy. Congress and the Fed.

The Fed creates the money that Congress wants to spend.

https://fred.stlouisfed.org/series/CP

Increased profits gaming the public impression of inflation play a huge role. See the FRED chart above. Profits increased 1 trillion since 2020, thats something like 3300 dollars per capita.

This reminds me of management consulting.

The consultants come in, recommend you fire 10% of your workforce, and when you pull the trigger you say, sorry McKinsey made me do it! Likewise, the recommendations made by the software are non-binding, but if pushed you say “well the algorithm said so…”

In either case, it’s the c-suite/property manager making the call. But it seems that we like a measure of distance between ourselves and unpleasant decisions. The algorithm/well-groomed 20-somethings provide a kind of plausible deniability.

The answer is, of course, a ton more housing.

In, fire 30% of the workforce, new logo, boom! Out. You are now a fully trained management consultant.

There is still the question which 30% are to be fired.

Start with whoever nobody likes. You can probably find the least-liked 30% of the company by asking around. The big upside is you will get less grumbling for firing them! Everyone wins!

'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.”'

Yikes!

Yeah many of the quotes in this article are straight out of the psychopath textbook. These are the worst kind of people, and unfortunately capitalism breeds them. It’s a system where ethics is a weakness.

It’s a system where relentless money printing cripples it by forcing that perspective. You need to gamble in order to keep your shirt, or you need to raise prices.

Simple solution is not to print money. Capitalism is not the problem.

I totally agree. Apple makes $300 billion in revenue a year, they are barely keeping their shirt!

Apple’s not a single dude working for $40 an hour into his broken savings account last time I checked.

Downvote it all you want, money printing is the issue - not “capitalism”. Sound money eliminates this problem.

You are totally right. Companies would never do stuff like using handouts on stock buybacks instead of workers right? Right?

Re-wording so it doesn’t sound like I’m trolling.

Commodity and housing prices have had steep price increases well before central banks printed money excessively.

Please don't post ideological flamewar comments to HN. It leads to flamewar hell, an information-free entropic state that we're trying to avoid here.

https://news.ycombinator.com/newsguidelines.html

It's unfortunate that you don't apply this standard evenly. There are regular posters of long standing who are equally ideologically driven and engage in flamewars on the regular (including in this discussion) and you never say a word to them.

Links? How am I supposed to respond to a drive-by accusation without specifics?

What I can tell you is that the answer almost certainly boils down to:

(1) we can't moderate what we don't see, so yes - the standards get applied inconsistently, and

(2) Passionate ideologues of every flavor are convinced that we secretly let the other side off easier. The actual dynamics are random but everybody overinterprets the randomness—always in the same direction: the mods are against me. The mods are not against you.

A few days ago, someone posted an article about Work Number and how it lets basically any corp pull your current salary.

At the time, I didn't see the harm in allowing it, since I didn't see a situation where this could be used against me.

After reading this article, I froze my data. I believe landlords should price rentals based on the value of their property, not the value of its tenants.

Can you give a link to how to freeze it?

Local metro put in a light rail line years ago through an area with the expectation that it would re-invigorate those neighborhoods and cause more housing to be built. For years, there was very little movement; existing rents and land values along the line were too low for anyone to bother building additional dense housing. This failure, among others, became a talking point among those who have tried to stall building additional lines.

Now, with the metro in an acute housing crunch, rents have gone up enough that investors are finally building more housing along the light rail line. What are they building? Small, chic apartments geared towards young people. It's not really the sort of thing that fosters strong communities, as anyone who wants to start a family is unlikely to stay there long term.

There's really only two outcomes I see: housing prices stabilize at marginally affordable at best, or the "character" they are trying to go for disappears not long after the housing bubble pops, and the area becomes blighted.

All of this is to say that there are market-driven price floors on housing that aren't easy to shift. The "just build housing" mantra might be over-estimating the extent to which people are willing to accept prices going down. There's better ways to make money elsewhere for the people you expect to do the building and management after a certain point.

It seems absurd to me that they'd judge the success of public transit as when the property values go up, rather than whether people are riding it and using it. We should build public transit because it's an improvement on quality of life for the community, not because people who don't live there will see a return on investment.

Housing prices will always be a bubble, as long as they're so detached and distant from the communities they're trying to build.

The people who ride the lines were already getting from point A to point B using other means (cars, busses, taxis), so ridership isn't really a useful metric. Pretty much all of the lines that are being built are being sold as ways to improve the economy along the line, as people are pulled out of cars and off the freeway (i.e. greater visibility of local stores and housing options to commuters).

There is a way to look at it and that is time saved.

Seattle traffic is so horrendous it does legitimately save time (or, if not saving time, take a consistent amount of time.)

OP here. In this particular case, for this particular line, traveling by car is roughly between a third and half the time it takes by light rail.

Most of the other lines that I know of are similar or slightly better, but there's a bit of a spread. I don't know of any that are actually faster.

This is a metro that wishes it was a coastal style metro, but is not on the west or northeast coasts.

Young people need places to live too. What's wrong with some developers building housing that appeal to that group? As long as they're building more than there was previously, it means less competition for the other housing for those who don't like that style of building.

The problem isn't that developers are building units that appeal only to young people, the problem is when they're exclusively building those units.

If developers aren't building housing for families higher on the SES ladder, that's generally a result of regulatory issues.

It’s complex. Usually the max price people are willing to pay is mortgage they may get from a bank. So developers who want to push margin can build smaller apartments and still sell for the same price. With fancy marketing how tiny apartments and DINK is cool.

We have same issue in my city. New apartments are 40-50sqm 2 rooms (1 bedroom + kitchen-living room) or 60-70sqm 3 rooms (2 bedrooms + kitchen-living room ) at best. If you want family-sized housing, house in suburbia is pretty much the only option.

Detached homes are better for families in many ways, second would be townhomes then row homes and finally apartments.

Sadly many apartments are not built to withstand a screaming child in a neighboring unit.

When the children are older those things don’t matter quite as much, but by that time people often can afford to move to more space.

Even though most apartments are not built to withstand a screaming child in the neighboring unit, it's not actually that hard to do and it is relatively cheap. Just needs double-drywall and a little caulk.

I'm now picturing moving into an apartment and surreptitiously installing an extra layer of drywall. Will the landlord notice the rooms are all 2" smaller?

I still think that if you build a ton of housing, prices go down. But I've been told by commenters on here that you could build and build and build until your city is stuffed to the gills with empty housing - empty housing that does nothing but drain the owners' bank accounts with property taxes - and still, somehow, prices would relentlessly go up.

Supposedly, the owners of empty properties would rather "charge" a zillion dollars for their "luxury condos" and never actually profit from their property in any way, than ever allow the "value" to go down.

It's a baffling mentality. Housing alone is thought to fly free of supply and demand.

For the past few months I've been in a somewhat unusual housing situation. My wife is a medical resident in NYC, and the hospital system she works for is quite large and owns a lot of NYC property. They offer their employees subsidized housing at greatly reduced rates (meaning, an 1100 sq. ft. Manhattan apartment for $2300 a month). It has a "company town" feel, but it has been great for us, and the incentives seem like they're aligned in this case - employers have an incentive against being extractive because it reduces their employees' effective compensation. The residency program is 7 years which means we're stuck here anyway, and we don't have to worry too much about about her being fired or wanting to find a new job. In a competitive labor market like tech / finance / medicine it seems like employer-subsidized housing isn't a terrible idea, and is an alternative to just relocating corporate offices to a lower CoL area.

it seems like employer-subsidized housing isn't a terrible idea, and is an alternative to just relocating corporate offices to a lower CoL area.

Would this be in a way similar to how we've tied health care to employer-based insurance? If so, I'm not sure I'd want to be in a position where my employer subsidizing my housing makes it difficult to leave said employer for better opportunities or, god forbid, you lose your job and then home subsidy.

This whole discussion seems to miss the point that sellers always want to sell for as much as they can, and buyers always want to pay as little as they can. If the price goes too high, buyer's won't buy. You could get the same effect by having an auction every month for all the units that would be available in the next month - the price would still rise, but then you could blame the other buyers for "overbidding"

The optimal price for a seller is always "whatever the market will bear" - which we don't like the sound of it's a big "evil" corporation. But if any of us as individuals were selling a car for example, and some software would help us maximize the sale price, we would gladly use it - I don't see how the seller has a moral duty to take less money, same as the buyer has no moral duty to pay more

That only works if the buyer has the option to not buy ;)

Which is the case because there is not enough housing being built. That’s the real issue.

Thing is, we are talking about housing here. A basic necessity for everyone. I can live without a car, I can live without that expensive new_shiny_toy_of_the_month but housing is something that's vital, it has the ability to impact so many aspects of my life.

So the whole debate here, as far as I understand is, how ethical is all this. Is it ethical to squeeze every last cent out of a person looking to house themselves and their family?

What’s unethical is not building enough housing to affordable house everyone.

Having thought about it a little more, I think we don't like the idea of it because "shelter" is a basic human necessity, not an optional purchase. But a lot of the problem of unaffordable housing has been created by our own policies in the US, this article is a good summary of the issue:

'"Zoning is not a good institution gone bad. … On the contrary, zoning is a mechanism of exclusion designed to inflate property values, slow the pace of new development, segregate cities by race and class, and enshrine the detached single‐ family house as the exclusive urban ideal.” So writes M. Nolan Gray in Arbitrary Lines: How Zoning Broke the American City and How to Fix It.'

https://www.cato.org/regulation/fall-2022/case-abolishing-zo...

Even if you exclude zoning from the equation entirely and look at the raw material and labor costs associated with building it’s usually exceeding most definitions of “affordable”. Density is often lauded as a solution, but building vertically is more expensive than horizontally. It only helps spread land costs across more square footage. The costs of going vertical usually outpaces the savings of diluted land cost. So there’s really no solution that’s sustainable. The result being all affordable housing is a shell game of subsidies.

Some of this is our own doing as well as we continue to up the requirements of building standards/codes. Some make more sense than others, but in general we don’t design building codes with costs in mind and I feel that’s a pretty large recipe for disaster.

People really need to be asking themselves, “Why isn’t new housing being built?” and focus on removing the barriers to building new housing.

Pricing algorithms wouldn’t be such an issue if it were easy to add new supply.

Largely it's because the existing residents don't want people moving in. They liked how the neighborhood was before and they want it to remain static.

To this end, you get zoning rules, ever tightening building codes, impact fees, taxes, public hearings, and just straight up prohibitions on building.

Because we have an overabundance of housing for one. Massive portions of our housing supply are sucked up as STRs and and second and third houses due to a decade of free money.

On top of that we have all time record numbers of houses set to be completed over the next few months which are still being snapped up by investors.

We have a shortage of available housing. Not a shortage of housing (there are individual markets where this isn't true and there are actually shortages of physical units). Fortunately, this is to some degree in the process of correcting itself but I doubt the place we get to is going to be a solution that very many people are happy with either.

Because we have an overabundance of housing for one.

I've seen this canard so many times it physically hurts me.

I don't know where you found this so it's hard to provide specific debunking so I'll just go over all of them.

1) The houses aren't where people actually want to live. There is a lot of vacant housing in dying rural towns, mining sites, or the middle of nowhere. So unless you have a plan to get people to move to Buffalo-Butte then available housing there may as well not exist.

2) The most of the "vacant" homes aren't actually vacant. Depending on how badly the stats are gathered they will include a lot of garbage. Let's look at the list of things that considered vacant:

  - Houses on the market for rent/sale
  - Houses that have been rented/sold but not yet moved into
  - Houses that unfit for human habitation
  - Houses undergoing significant renovations
  - Houses that are used seasonally

That's right, if your house burns down the still-smouldering rubble is considered vacant.

There is just not enough housing where people want to live. Objections like this only get brought up when someone is about a half-step away from proposition house rationing. Not for them though, other people should have their housing rationed.

“The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,” said Kortney Balas, director of revenue management at JVM Realty"

What she really means, is she would have never imagined sucking every penny out of you, until she got a hold of their software. They get filthy rich, while you need a place to live, and they generate excess profits on false supply and demand models.

Where I live, we have 60% occupancy, but the area is priced beyond anything reasonable. $2500 a month for a studio is nuts. Now we're getting a renters tax from the city. Joy.

Honestly Georgism looks like a perfect fit here. "Market" rent going through the roof like you say, while occupancy stays low? Enjoy paying 1000$+ every month on a vacant flat you're making no money off. I.e.: double-dip pressure for prices to fall and/or occupancy to rise.

This is mostly a distraction from the underlying issue. The algorithm helps sellers to maximize prices given the supply & demand so, yes, this probably is responsible for a few percentage points of increase in price, in the same way that price comparison websites are responsible for a small decrease in the price of car rentals.

But the underlying problem here is the supply & demand! Rentals are competitive, an algorithm can't force people to pay more than an comparable rental property is charging.

It's the lack of housing supply in areas like SF is responsible for rents being a multiple of what they could be.

Developers want to build apartments, but are prevented from doing so by local regulations. So we need to change those regulations or, as is increasingly happening in the last couple of California's legislative sessions, take control away from local authorities (e.g. SF Board of Supervisors).

We could also just not live in San Francisco. That's a better option for many.

And yet people love it and want to call it home, and are willing to make sacrifices to do so. I know I have here in the Seattle area. Mind ya own business!

I think what they’re really saying is that maybe not every person who wants to live in SF, for example, can. There’s some upper limit on how many people can live there and if more people want to live there than can prices will go up.

So maybe not everyone who wants to live there gets to.

In the past this would cause other places to become “more San Francisco-like” (arguably Seattle itself has changed since the 80s and perhaps in this direction). Why that doesn’t occur could be interesting for discussion.

I’m not very familiar with SF and the Bay Area, but from what I have read about it my impression is that real estate in communities surrounding San Francisco and the Bay Area in general have absolutely been affected by the real estate situation in SF and become more San Francisco-like in terms of housing prices.

Again, not from out that familiar with the area so maybe I’m off the mark here.

I very much agree with you that the lack of supply is a major problem, but the article is making a case here that what the algorithm is doing is tantamount to price-fixing / collusion. Even in markets where supply is much easier to come by than housing and does not have the entrenched political dysfunction restricting supply - such as RAM chips and canned tuna - price-fixing is a problem.

There's an analogy in the article to airplane seat pricing. The solution there was to tell the airlines they couldn't collude with each other, not to say "The real problem is the lack of flight supply."

You say that the underlying problem is a limited supply but why stop there? Why is there a limited supply?

How long will looser regulations help until we're back to the same problem?

Perhaps we should dig deeper.

Why have we organized our society in a way that encourages and almost enforces high population density?

The fact is that our current way of living is unsustainable. The housing situation is just one symptom of that.

Carbon emissions from a city resident are much lower than those from a suburb or rural resident.

Unless your proposed plan is like living off grid or something, making it easy for people to move to cities seems logical.

This is something I do not get. In my opinion renting a flat should be a more efficient form of living than owning a house and yet economically(&long-term) renting is often the worse option.

If you fully account for everything, renting doesn’t always lose - it’s just we’ve had absurd appreciation for so long.

Once you account for maintenance items owning becomes decently more expensive than a simple “mortgage + utilities + insurance + taxes” calculation shows. A $10k furnace every 25 years adds something like $40 a month and that’s only one of the many wear items there are.

There are other non-tangible benefits to ownership, of course.

A $10k furnace every 25 years adds something like $40 a month and that’s only one of the many wear items there are.

Right, but remember that if you are a renter, the landlord is passing those $40 to you bundled in the rent (along with all other future maintenance projections). There's no free ride, the renter is paying for all of it plus profit margin to the landlord.

You can sometimes get lucky as a renter by finding a small-time incompetent landlord who doesn't price these future maintanence costs into the rent, but that's not the norm.

The reality is in many cases the 'profit' margin is negative! There's many many stories of owners that quit the situation in disgust and fear of how bad it is financially, due to running costs. A bad year of maintenance, a bad tenant, can cause big losses in a business where margins are usually slim for the first decade of ownership.

If an investment house was a business, it often takes a decade to see substantial returns, sometimes after many years of hard slog and even losses. Would you accept that from the businesses that hacker news dreams of?

I don't really understand how renting could ever be more efficient. Landlords wouldn't rent out houses as a profession if they couldn't make money doing it. That money comes from renters paying more than the cost of home ownership by definition.

Density is better for the environment as others mentioned. It is the opposite of enforced, currently mostly prevented.

Answering your question with another question. Why stop there? What you are ultimately arguing for is population-growth control. Turns out very few people are interested in the government deciding how many children they can have.

The US population that has lived here 3 generations or more is shrinking, and thus trend also applies to Europe and Japan. Even China is looking at a future population decrease. Turns out these forced population decreases are not necessary.

I mostly agree, but they're actively pushing rental property owners to let units sit empty for extended periods of time while they wait for higher prices. There are a shocking number of high end apartments in cities like SF and NYC that are sitting empty while everyone else is struggling to find an affordable place to live.

This is where I think inflation and higher rates will be good for the US.

The ridiculously low cost of holding assets are making it too cheap to hold and do nothing. Tax policy is a big part of this, but won’t change for many years.

Inflation doesn't help. Higher rates lower inflation, making housing more affordable for wage earners.

They sit empty because an empty apartment is still going up in value.

If you rent it out, there will be wear and tear (ie. after 5 years it'll need a full refurb), and you run the risk of having tenants stuck in your property if laws change and suddenly you aren't allowed to evict them.

Often the capital appreciation is so much greater in value than the rental income (after management, maintenance, etc) that it isn't worth risking the capital income for a tiny bit of rental income.

Right. In other words, the notion that developing more residential properties will bring prices down is nonsense.

What? If there was enough supply this wouldn't happen.

The supply is being restricted, even among existing buildings. It's trivially true that more buildings will reduce the price, but you'd need to build many more than would be otherwise necessary to bring a significant price decrease because they will continue to restrict the supply by letting existing units sit vacant.

In other words, building more properties isn't the main problem here.

Being shocked by empty apartments on the rental market is like being shocked by stocked shelves in a grocery store in my view. Do you think a market without inventory is better somehow?

No I think empty inventory is deplorable when so many are homeless or being price gouged on money increasingly needed for food and meds.

It's not "empty inventory" it's just inventory. Rental market deals in empty apartments, nobody rents apartments with tenants inside. If there had not been empty apartments nobody would be able to move and any freed apartment would be snatched at much higher price than you observe now. Even when the inventory simply drops (the number of empty rentals decreases but still above zero) you see things like dozens of people on the same showing, forced to apply immediately.

Most cities don't count apartments that are vacant less than x months as a vacancy, specifically because of what you're describing. Yes, apartments need to be empty, and folks move out and new folks move in, that usually happens within a couple months of the units being vacant. Some percentage of vacancy is also a healthy stat for a city, because it shows they're keeping up with growth.

The issue here is that there are units being held as vacant for long periods of time, in a saturated market, to drive prices up, and a central algorithm is being used by a large percentage of the market, that allows them to do this in a coordinated manner.

This is effectively textbook collusion, obfuscated by technology. People should be losing their real estate licenses over this, and honestly, folks should be reporting any company using this service to the real estate commission in their state for collusion, because this is normally something real estate commissions take seriously.

The issue here is that there are units being held as vacant for long periods of time

Can you define the "long period" or point somewhere in the article or other source where this is described?

This is effectively textbook collusion, obfuscated by technology.

I probably did not read the same text books you read. Do the house sellers who hire the same appraiser also collude in your text book? What about people who use Zillow's or Redfin estimates?

To give some context, I was a real estate agent in Louisiana, working as a property manager, for some time.

Can you define the "long period" or point somewhere in the article or other source where this is described?

The article mentions that landlords are using the software to run at lower occupancy rates to increase revenue. One specific landlord was mentioning an occupancy rate as low as 95% on 50,000 units (which is quite low). Landlords don't base occupancy rates on short-term vacancies.

I probably did not read the same text books you read.

The article describes a service that takes private pricing data from numerous competitors, then gives all the competitors pricing and occupancy recommendations as a means of maximizing revenue. There's a good quote in the article about replacing the word algorithm, with a "guy named Bob". If a person was doing this, it would obviously be collusion, because it's a practice that is already illegal, essentially everywhere.

In real estate school, they were pretty explicit about not even walking the edges of collusion; for instance, simply saying "we only price our commissions at 3%" in a room with other brokers could be considered collusion.

Do the house sellers who hire the same appraiser also collude in your text book? What about people who use Zillow's or Redfin estimates?

An appraiser sets prices based on factors like recent sales in the neighborhood of similar properties and property sizes, age/condition of the house, etc. Everyone can use the same appraiser because that appraiser isn't doing any coordination across the sellers. Two different appraisers, for the most point, should be setting very similar prices.

It could very well be collusion is every broker was using Zillow or Redfins estimate's, especially if they were giving recommendations on holding properties off the market in a coordinated way to maximize profits.

But the underlying problem here is the supply & demand!

This is the answer to most pop-Econ articles. It’s amazing how hard people want to believe that something else is to blame or that traditional economics doesn’t apply for some reason. Algorithms are a popular outrage-bait right now, so I’m not too surprised to see “the algorithm” blamed for high rents now, too.

The problem isn't "the algorithm," the article is exceedingly clear that the problem is "the company" and "the captured market" but mostly collusion by proxy.

But in this case, it's also the algorithm -- the article has multiple quotes where "empathy" is seen as a problem and that getting humans out of the loop is a boon to profit. The algorithm itself isn't the problem, it's the bloody-minded profit-seeking where capitalists leverage trust in the algorithm to extract maximum rents by leaving properties vacant in the midst of a housing crunch.

Leaving properties vacant is an absolute killer to revenue. I’m reading a lot of people in this discussion cite that property managers are comfortable with vacant units because of all the extra money they’re making off of raising the rents, but you’d need to raise them an incredible amount to justify even a single month of vacancy. Normally 5% is reasonable, but if that number slides it really kills profits.

I guess what I’m saying is that the incentives are aligned here: property managers want to see units occupied, and so does everyone else.

Will they lower prices until 100% occupancy? No, there needs to be some unoccupied units or there would be no liquidity in the market (if there are no houses to rent and you want to move to a city, how could you move?).

Algorithms are a popular outrage-bait right now

Oh yes. Media often lament people radicalizing online supposedly because of them. But nobody is forced to follow recommendations, which are moreover labelled as such. People stay logged-in and indulge on them, and that's it.

That same reasoning would seem to apply to heroin, wouldn't it?

given the supply & demand

Not if the company keeps apartments empty as mentioned in the article. With such an arrangement between landlords you can increase rent not matter the supply&demand.

There are high costs to an empty apartment. The bank doesn't stop demanding payment if the apartment is empty. Same with property taxes, heating, insurance, groundskeeping, etc. You can even find that the maintenance costs increase as problems that would have been seen and fixed (particularly leaks) are missed.

I believe SF would need way more central planning and not less if we want more housing supply. The transportation issue in SF is crazy at the moment and parking is expensive in both time and money.

A city needs to upgrade multiple infrastructural elements simultaneously if it wants to make a successful leap into higher densities. In a democratic culture this means getting enough parties on board to accept a big jump in taxes for huge civic works projects like subways. To make all of this coherent this will take a massive and sustained political momentum which can exercise eminent domain in a very big way.

We don’t need more parking. It’s a waste of space and very expensive compared to more public transportation.

By all means allow people to build parking if they want to, but there’s no need for parking minimums.

I don’t see how more central planning could help. Our central planners love to block housing unless it meets 100 different conflicting requirements they make up on the spot. Just let people build!

The supply&demand issue does not turn what this company is doing into a "distraction", quite the opposite. Their "algorithm" has an outsize influence on the prices precisely because of the underlying housing crisis.

I put algorithm in quotes, because it's clearly just a facade in front of good ol' fashioned price collusion.

As the example in the article points out, replace the word "algorithm" with "a guy named Bob" and suddenly it doesn't sound so innocent to say: The companies controlling 90% of apartments in a neighborhood give all their data to Bob, and then Bob tells each one what to price their apartments. It's price collusion by proxy, pure and simple.

We shouldn't just ignore it because it's not the biggest cause of the price increases. Yes, we absolutely need to tackle the housing supply problem, but at the same time we need to stop companies like this from exploiting the crisis and driving prices up even further.

Ending the crisis by creating housing supply is the way to stop exploiting the crisis.

If you stop "this one company" you'll just have someone else making profits and still have people homeless.

Not if the RICO act was used against them, and all rental properties are transferred to the renter in payment for fraud, conspiracy, interstate fraud, etc

Do you honestly think any other property owner would touch companies like this if this one popped like that?

I understand your frustrations. But nothing here is anywhere close to a RICO violation.

https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corru...

The “it’s all just supply and demand” argument is overly simplistic and strikes me as coming from people who have taken first-year Econ, if that, and literally nothing else.

Does supply and demand affect housing prices? Yes, and the fact that supply has been constrained is affecting prices.

Is it the only factor? Probably not.

Even basic economics classes will teach that there are several ways that supply and demand breaks down.

For one, if there are imbalanced implications for both the supply and demand parties. For a landlord, rent is a purely economic transaction. Not taking a tenant means losing money. For a renter, not having a place to live is far more damaging. You lose shelter, safety, social standing, etc. The article touches on leaving an apartment empty for a couple months to find a tenant that will pay what you’re asking. But would anyone really go homeless for a couple months to save on rent? Not only that, but peoples lives revolves around where they live, and it’s not easy for a lot of people just to pick up and move to a different market.

Another way supply and demand might break down is if there is price collusion between parties on the supply side. This is relevant especially in this case because if there is a single party setting prices (eg the algorithm) and there is a constrained enough market, then you can in fact force people more than what typical supply and demand would imply.

Have you ever looked at how long it takes to get a building permit in one of those high-rent areas? Years, if you get it. And millions of dollars in plans, approvals and preparations. God forbid if you must involve some union people.

We’ve outlawed construction. Any other factor besides this is far far behind.

Definitely not a decade and a half of virtually free money and endless liquidity that encouraged people to chases returns outside of stocks and bonds.

No, it's those blasted algorithms.