[bbatsell]

RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions.

In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money on the table like that. If you had trouble filling, you'd look at the market and adjust downwards, or offer better amenities, or do whatever you wanted to attract customers. The tension between demand and supply leads to market equilibrium.

RealPage tells its clients that if they all work together to set their prices higher than market equilibrium, hold out for far longer than they normally would want or what a free market would lead to, then the simple inelasticity of housing demand — everyone needs a home! — means that customers will eventually have to give in to the higher price in order to live their lives, and landlords will rake in the profits over time.

They use the data and actions of their clients working in concert in order to manipulate a fair market into a deeply unfair one which does not properly adjust to market forces.

[legitster]

Again, I have experience in this market so I have first hand experience.

I understand the cartel allegations here, but I think people are vastly underselling the competitive forces at play. If you are not filling your unit immediately, you are losing thousands of dollars a month.

Cartels break down because of the incentive to undercut (prisoner's dilemma). But in this case, it would be very, very profitable to undercut RealPage's prices and get your units filled before them. So their compliance and enforcement mechanisms of RealPage would have to be extremely robust to get corporations to willingly lose tens or hundreds of thousands of dollars a month to collectively collude on prices.

[bluGill]

> If you are not filling your unit immediately, you are losing thousands of dollars a month.

This is false. If you have 100 units with monthly rents at: 100x$900 = $90000, 90x$1000 = $90000. 85x$1100= $93500. Of course we have no idea how many people will decide to not rent from you at different rates, but it should be obvious that the numbers can work out to it being better to not rent a few units if the price goes higher by enough as a result.

You are correct that a cartel has incentive to defect, but is it enough? You are correct that this is prisoner's dilemma, but it is a multiple round game which has very different incentives from a single round. You are better off in a single round defecting, but you are better off in repeated rounds if everyone plays with the cartel and so they are not defecting. (or at least not too much)

[ericd]

It’s enough if there’s enough inventory. The only reason it functions is because there’s not enough inventory in many of these markets.

[pessimizer]

> 85x$1100= $93500

And don't forget that you get to write off 15 empty units at the presumption of a $1100/mo rate. Or Airbnb them.

[mjcl]

I worked for a public REIT that started using YieldStar when I worked there. Once they changed to YieldStar, all pricing came out of YieldStar. Rental quotes for prospects were only generated from YieldStar. Any deviation from the YS price had to be approved by the regional VP and they were not common.

They did this because RP was able to demonstrate that accepting a bit more vacancy in the very near term meant higher rents (thus higher renewals) which more than paid for the additional vacancy.

[redserk]

How are the forces being undersold here? A large-scale property management company can drastically influence the market without needing to fully capture it or even hold a majority.

Let's say of a given market, 30% of all units are owned by a large-scale property management company using this software.

If the prices of the 30% of those properties was artificially kept high, it would push renters to look at the 70% of other landlords whose prices were kept low as a result of not using this software, causing a demand on that part of the market.

As demand rises in the 70% of open-market-priced apartments, I would expect these property owners to see that there's a bump in demand and would understandably see this as an opportunity to nudge prices up a bit.

If your property only received 10 potential tenant candidates a month a year ago, and you're now seeing 14-15, you might be leaving money on the table.

Removing the cartel claim for a moment:

Say I'm at a farmers market with 4 produce stands. If one stand hikes their prices 40% for whatever reason, presumably people would start to consider visiting the other 3 produce stands.

Why wouldn't the other stands consider raising their prices with the increased attention?

[alexpetralia]

What about the counter incentive, that lowering rents lowers valuations, which affects creditworthiness and financing by lenders?

[kelnos]

> running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate

In my view, holding units vacant intentionally in order to increase profit should be illegal. Vacancy taxes don't go far enough; landlords who do this should be forced to sell any units they've decided to keep vacant, or see their properties seized.

Optimizing profit around providing people shelter (or avoiding doing so) is evil.

[bluGill]

That is very easy to cheat though. Two obvious ones: a different unit is held open every month; or these units are closed for remodeling. Until you get to long term 40% vacancy it is really hard to tell - and be careful not to kill rural small towns that no longer have demand and so apartments that will never be full anymore get torn down thus harming the few renters who remain (since it isn't worth replacing the building at current rents and many cannot afford the rent that a new apartment would need just to be worth building)

[anticensor]

Allow up to 1 apartment or 3 separate units of house ownership per person. And only allow 1 unit vacant per apartment after the initial year after the construction, or multiple units up to 3 months per 5 years (must be simultaneous in all affected units with a tolerance of 15 days from either side to the simultaneity, no tolerance to the per-unit duration, or should be considered intentional vacancy) for maintenance and remodelling.