I work in this industry. The biggest problem with the software is it gave the management companies instant access to everyone else’s current prices. The industry has used “market surveys” for years but you had to actually call around and gather those prices yourself. It’s a very time consuming process so many only did their surveys sporadically.
With the software you had instant access to current price data and everyone pretty much raised their prices to match the market average. Then the newer/fancier properties saw the new higher average and thought “We’re a better property so we can raise our prices above the competition.” Which then led to a higher average that the rest then met again. Rinse and repeat and you have a de facto price fixing cartel.
This is why ‘competition lowers prices’ is a load of bullshit.
Ya’ll ever seen Walgreens and CVS? Same prices, right next to each other.
What about 2 gas station on opposite sides of the street, charging the exact same price for their fuel?
It’s a gentleman’s agreement at best, and a cartel at worst. Either way, no business is going to start an ‘undercut war’ because they don’t want their opponents to do the same thing.
Here’s another fine example: Nvidia and AMD. AMD releases worse GPUs, then just piggybacks off of Nvidia’s ridiculous prices.
It’s all a game to funnel as much money as possible to as few people as possible.
While true, there are some markets where these properties are fighting for a very finite supply of tenants. If they see they are lagging behind in their leasing, they really don’t have any other choice than to lower their prices to make sure they don’t have any vacant units. The industry term is called “vacancy loss” and it’s the one thing the upper management money men actually fear. A unit without someone inside it is literally bleeding money from them so they’ll do nearly anything to fill it.
Hopefully soon they won’t be able to share their prices as easily and they’ll have to fight for their lives by lowering prices to fill vacancies before another property snaps them up.
You’re right, except in 99.9% of these situations they don’t ACTUALLY lower prices. They just offer a “signing bonus” like 1 month free rent, then charge just as much as everyone else for the other 11 months.
That signing bonus doesn’t appear in this tool, so prices don’t actually go down.
I had one landlord offer me $200 off my security deposit if I would clean the two-foot-high mound of actual dogshit from the kitchen before moving in. Like, not even a break on the actual rent, just a lowering of the deposit and she thought I’d be too stupid to know the difference. TBF she probably never returned anybody’s deposit so in a sense she really would have been saving me money.
It’s the reason so many large corporations a talking about RTO, office real estate prices are set to plummet if everyone’s keeping to WFH.
Sadly, that’s only tangentially related to housing (although I believe to have read something about new subsidies for landlords converting office space into appartments).
“It’s a gentleman’s agreement at best, and a cartel at worst. Either way, no business is going to start an ‘undercut war’ because they don’t want their opponents to do the same thing.”
Play any MMO and you’ll see the fallout from that. When it doesn’t actually matter in the real world and people go do that everything plummets in value to near 0 and makes it not even worth your time to attempt even in a damn video game. They’ll never drop prices to compete in reality because of that reality.
Of course not 100%, but it’s supporting what you said because it’s a facet of human nature and how people act. Not sure what your issue is with me agreeing with you?
I’ve been out of it the industry for over 10 years, but we always just looked at online rental ads to set our prices. I don’t see how comparing prices to the average and/or your competitors is a “cartel” or “collusion”.
No, that’s normal and how it should operate. The problem arises when everyone is using the same software suite so everyone has immediate access to current prices, and the software essentially tells you what you should price your units at to maximize your income.
Maybe cartel was the wrong word as it wasn’t an intentional agreement between companies, just an outcome of the system and accelerated by instant access to information. A runaway feedback loop may be more appropriate.
It’s a more efficient use of time, I get that, but you are still operating month to month, on vacancies, and year to year on contracts. The end result each month is going to remain the same.
Of note, RealPage also advised on leaving units vacant to artificially reduce supply. It did this across entire metro areas. This is very much illegal collusion.
Besides being a stupid business model, what is illegal about hiring a consultant to advise you how to run your business? There can’t be a law saying all landlords MUST lease out all their properties is there?
There isn’t a vacancy law in the US yet afaik. But businesses talking to each other specifically to manipulate the market is very illegal. And that’s what RealPage’s entire business model is, pay to share information with your competition and everyone gets to raise rent together.
I work in this industry. The biggest problem with the software is it gave the management companies instant access to everyone else’s current prices. The industry has used “market surveys” for years but you had to actually call around and gather those prices yourself. It’s a very time consuming process so many only did their surveys sporadically.
With the software you had instant access to current price data and everyone pretty much raised their prices to match the market average. Then the newer/fancier properties saw the new higher average and thought “We’re a better property so we can raise our prices above the competition.” Which then led to a higher average that the rest then met again. Rinse and repeat and you have a de facto price fixing cartel.
This is why ‘competition lowers prices’ is a load of bullshit.
Ya’ll ever seen Walgreens and CVS? Same prices, right next to each other.
What about 2 gas station on opposite sides of the street, charging the exact same price for their fuel?
It’s a gentleman’s agreement at best, and a cartel at worst. Either way, no business is going to start an ‘undercut war’ because they don’t want their opponents to do the same thing.
Here’s another fine example: Nvidia and AMD. AMD releases worse GPUs, then just piggybacks off of Nvidia’s ridiculous prices.
It’s all a game to funnel as much money as possible to as few people as possible.
competition only lowers prices if supply isn’t limited sadly. And due to how the housing system works, that would virtually never happen.
It could. If something causes housing to be less in demand. Like negative population growth.
A duopoly is not a competitive market. It’s only when you have lots of suppliers and lots of purchasers that a market is actually competitive.
While true, there are some markets where these properties are fighting for a very finite supply of tenants. If they see they are lagging behind in their leasing, they really don’t have any other choice than to lower their prices to make sure they don’t have any vacant units. The industry term is called “vacancy loss” and it’s the one thing the upper management money men actually fear. A unit without someone inside it is literally bleeding money from them so they’ll do nearly anything to fill it.
Hopefully soon they won’t be able to share their prices as easily and they’ll have to fight for their lives by lowering prices to fill vacancies before another property snaps them up.
You’re right, except in 99.9% of these situations they don’t ACTUALLY lower prices. They just offer a “signing bonus” like 1 month free rent, then charge just as much as everyone else for the other 11 months.
That signing bonus doesn’t appear in this tool, so prices don’t actually go down.
I had one landlord offer me $200 off my security deposit if I would clean the two-foot-high mound of actual dogshit from the kitchen before moving in. Like, not even a break on the actual rent, just a lowering of the deposit and she thought I’d be too stupid to know the difference. TBF she probably never returned anybody’s deposit so in a sense she really would have been saving me money.
True, but these aren’t usually the markets in major cities. It’s why rent is actually affordable outside of them.
Office buildings would like a word with you.
It’s the reason so many large corporations a talking about RTO, office real estate prices are set to plummet if everyone’s keeping to WFH.
Sadly, that’s only tangentially related to housing (although I believe to have read something about new subsidies for landlords converting office space into appartments).
“It’s a gentleman’s agreement at best, and a cartel at worst. Either way, no business is going to start an ‘undercut war’ because they don’t want their opponents to do the same thing.”
Play any MMO and you’ll see the fallout from that. When it doesn’t actually matter in the real world and people go do that everything plummets in value to near 0 and makes it not even worth your time to attempt even in a damn video game. They’ll never drop prices to compete in reality because of that reality.
Lol. Here we go with the analogies again.
Do you think your MMO analogy is a 1:1 representation of the real world?
Of course not 100%, but it’s supporting what you said because it’s a facet of human nature and how people act. Not sure what your issue is with me agreeing with you?
I’ve been out of it the industry for over 10 years, but we always just looked at online rental ads to set our prices. I don’t see how comparing prices to the average and/or your competitors is a “cartel” or “collusion”.
No, that’s normal and how it should operate. The problem arises when everyone is using the same software suite so everyone has immediate access to current prices, and the software essentially tells you what you should price your units at to maximize your income.
Maybe cartel was the wrong word as it wasn’t an intentional agreement between companies, just an outcome of the system and accelerated by instant access to information. A runaway feedback loop may be more appropriate.
It’s a more efficient use of time, I get that, but you are still operating month to month, on vacancies, and year to year on contracts. The end result each month is going to remain the same.
Of note, RealPage also advised on leaving units vacant to artificially reduce supply. It did this across entire metro areas. This is very much illegal collusion.
Besides being a stupid business model, what is illegal about hiring a consultant to advise you how to run your business? There can’t be a law saying all landlords MUST lease out all their properties is there?
There isn’t a vacancy law in the US yet afaik. But businesses talking to each other specifically to manipulate the market is very illegal. And that’s what RealPage’s entire business model is, pay to share information with your competition and everyone gets to raise rent together.
What laws have they violated, and why haven’t the plaintiffs referenced it?
They have. That’s the entire thing is about.