> The complaint, filed earlier today by Attorney General Brian Schwalb, focuses on the multifamily landlords' use of software from Texas-based firm RealPage, which suggests rental prices based on a pricing algorithm. Key to those models, according to the suit, is the data fed in from the landlords and the pressure RealPage puts on them to stick to the code-derived rental rates.
It's a complaint. Nothing was filed yet. And it looks like they used a pricing algo to suggest a price? Im suggested a price when I sell on eBay, or StubHub or Facebook marketplace, or pretty much anywhere. I don't know how they "pressured" landlords but maybe a box like "we suggest market price to maximize returns!" eBay similarly warns me when I stray too far away. The pricing algo is actually a fabulous service.
And if they're a property manager then their job is to find the market price and rent out apartments at the behest of landlords. I really don't see the technical issue here. You can say collude and conspire, but what does that mean in technical terms. And what does "being subject to" the algo mean? Exposed?
> If a subset of companies use the exact same algorithm for price discovery, is there a form of price-fixing? This is the key question being argued.
No it's not. You're missing a critical bit here. The argument is that there's actual enforcement of the price the software suggests, and at that point it really seems completely irrelevant whether the enforced price was determined by an algorithm or a person:
"The software company actively "polices" landlords to ensure that they comply with the rent cost it generates, the lawsuit alleges. Failure to impose the RealPage rents could lead to landlords being expelled from the organization, according to the suit."
> Is it collusion if everyone is shopping their competitors prices?
Not at all! Competitors are free to publish their prices, to whoever they want, for loads of reasons, but colluding to raise prices isn't allowed. Realpage advertised this as a pricing cartel as a service though.
Prices for rent used to be much more negotiable than they are today, in part because of Realpage. From personal experience, landlords before Realpage were more willing to take a lower offer on something that had been vacant a while. But maybe they should have kept it vacant if they knew they were already the best price for similar accomodations.
>and might I add, imagine this algorithm is possibly “the most perfect algorithm at generating positive rent growth” to which there is no improvements possible...
A perfect algorithm with global knowledge is what the act is trying to prevent, because tilts the market entirely in favor of supply against demand. Same effect as a monopoly, which is why it's illegal.
A lot of this stuff was hashed out in cases around a hundred years ago, by people who tried and failed similar hope-theres-a-loophole arguments, and there are plenty of loopholes they could've hid behind, but instead:
"According to the complaints, RealPage’s own marketing materials make clear that it “utilizes the competitive data” of competitors, to allow those competitors to “outperform the market,” As RealPage allegedly put it, it offered clients “the ability to ‘outsource daily pricing and ongoing revenue oversight’ to RealPage,” allowing RealPage to “set prices for its clients’ properties ‘as though we [RealPage] own[ed] them
ourselves.’”
>Is the claim that the secretive info being shared is the actual rents tenants are paying? Are companies and people not normally allowed to share that?
Companies and people generally do not share this information publicly and most companies consider it extremely proprietary.
So yes, that what's these lawsuits are about. All these companies share this extremely sensitive data (Vacancy data, actual rent and length of rental contract) with RealPage, Realpage algorithms use it to price rent.
> They are looking at what competitors are charging before setting their own prices. That should be illegal?
That practice isn't what's illegal. What people are having issues with is that RealPage which is used by a large number of landlords (from private landlords to megacorps), recommends prices to the landlords when it comes to marketing a unit. This data is pulled from other rentals on the market and what other RealPage users are charging. A majority of the time, landlords just use that number to advertise. That's why some apartment communities have prices that change daily, since RealPage changes their numbers daily. As such, this is a roundabout way of price fixing as RealPage is in a position that artificially raises rents across a wide location range.
This isn't a case of companies looking at what other companies charge for the same service. This is one company that's comparing their pricing against themselves. This results in cases such as a primarily affordable apartment community can see rents shoot up $300-$400/month all because a luxury apartment opened on the other side of town and both management companies just so happen to use RealPage.
It's removing relevant comparisons from the actual pricing schedule, which in some cases can be seen as price fixing as the prices no longer reflect the actual market.
Oh wow, you're absolutely right. Somehow I missed that from the OP:
> The software company actively "polices" landlords to ensure that they comply with the rent cost it generates, the lawsuit alleges. Failure to impose the RealPage rents could lead to landlords being expelled from the organization, according to the suit.
> pricing algorithms to adjust prices on vacant apartments in real time… The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices and decreasing the availability of affordable apartments.
Wait until she hears about hotels and flights.
> The software analyzes non-public data that RealPage gathers from its property management clients, including confidential information on the rents charged by competing property managers, data it also makes available to its subscribers in aggregated, anonymized form. The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices
This is identical to how employers share salary information.
Either this is nonsense grandstanding (most likely) or the beginning of a sea change in consumer protection. I won't hold my breath.
From the blog post: Algorithms that recommend prices to numerous competing landlords threaten to remove renters’ ability to vote with their feet and comparison-shop for the best apartment deal around.
From the brief: To participate in the service, landlords must share in “real-time” their “non-public,” “competitively sensitive” data, including actual rents paid, occupancy rates, and records of lease transactions. [Multifamily Compl. ¶¶ 227, 380.] RealPage then feeds “this data into a common algorithm.” [Student Compl. ¶ 5;] [Multifamily Compl. ¶ 380.] The common algorithm uses these common data for a single, common purpose: to generate “forward-looking, unit-specific pricing and supply recommendations” for all participating landlords. [Student Compl. ¶ 5.] To ensure that the landlords abide by these “recommendations,” RealPage puts significant “pressure” on them “to implement RealPage’s prices,” including by requiring clients to submit requests to deviate to the “corporate office” and tracking the “identity of the client’s staff that requested a deviation.” [Multifamily Compl. ¶¶ 17-20, 261-86.] As a result, landlords using RealPage adopt RealPage’s recommendations 80-90% of the time. [Id. ¶ 15.] The complaints allege that RealPage was clear about the purpose of its common pricing scheme: to increase prices above competitive levels through collaboration.
Doesn't sound like the natural ebb and flow of the market to me.
> How is it different from just eyeballing market price from looking at similar units, and renting yours out for +10-15% more?
Landlords don't always advertise, and they also negotiate rents. Knowing the actual market price isn't easy (and sometimes not possible), because that information isn't publicly available and certainly isn't real-time.
RealPage is getting private market information from landlords, and using it to coordinate rent prices, including coordinating actions to remove supply from the market to artificially increase prices. This removes competition from an otherwise competitive market. This is collusion via a middleman.
There were antitrust suits filed against RealPage after a ProPublica piece
> In one news release, Realpage offered its property management clients the ability to outsource daily rent-setting and revenue oversight. “We believe in overseeing properties as though we own them ourselves,” the company said in a presentation that plaintiffs’ lawyers referenced in the lawsuit.
> The lawsuit quoted one unnamed witness, a RealPage pricing advisor, saying that some pricing advisors told property management employees that they had to follow the software’s recommendations. A leasing manager at a RealPage client said, “I knew [RealPage’s prices] were way too high, but [RealPage] barely budged” when the manager asked to deviate from the suggested rent.
> An update to the software tracked not only clients’ acceptance rate, but also the identity of the landlords’ staff members who had requested a deviation from RealPage’s price, the lawsuit said. Compensation for some property management personnel was even tied to compliance with the company’s recommendations, it said.
So if this is true, this also means that managers are being compelled to adopt the recommendations more than as mere suggestions.
Can anyone explain why is the lawsuit against RealPage and not the landlords specifically? They are the ones hypothetically doing the price fixing.
Considering the following scenarios:
* A landlord/tenant publishes their rent online: not price fixing.
* A group of landlords/tenants publish their rents online: not price fixing.
* A group of landlords share their rents privately: maybe price fixing?
* A group of landlords share their rents to a 3rd party, which publicly shares aggregated data: doesn't look like price fixing to me.
* A group of landlords share their rents to a 3rd party, which privately shares aggregated data: maybe price fixing?
* A group of landlords share their rents to a 3rd party, which uses ML/AI to predict occupancy rates at a given price; and uses it to maximize expected profits to each individual: doesn't look like price fixing to me, maybe it is if we consider that it is using non-public data.
* A group of landlords share their rents to a 3rd party, which uses reinforcement learning to dictate the best price to set, considering that the same policy will be shared with other landlords: price fixing.
Considering the difference between the two last scenarios, is the lawmaker going to evaluate how sophisticated is the algorithm behind the scenes?
> [RealPage's] algorithm is based on pricing data from its own clients, prompting some experts to speculate that the company effectively provides a way for big landlords to collude and fix prices.
This seems like it would only be an effective form of collusion if everyone or almost everyone in the same area used, and therefore fed data into, RealPage. If it's only a small slice of a given city's rentals it seems like it would be much less effective.
Perhaps the real way to fix this is regulation requiring all landlords to publish their rent pricing data in an open and accessible way. I don't know if such data exists or not in the United States, or even here in Finland, but I would be absolutely fascinated to see it.
EDIT: Bloomberg Terminal users, does your magic know-everything machine have this kind of data?
The private data mentioned in the lawsuits is about how, daily, realpage-set prices (and probably YieldStar as well) contribute their prices to a shared database. I wouldn't say this is actually "private" data because they only do so after rents are set and after they've appeared publicly on the properties' leasing portals and/or websites. It's basically a way to avoid Realpage from having to scrape their own rent data from their own customers' websites nightly (and from having to do so multiple times for each property that is pulling comparison data to use for the upcoming nightly rent determination).
note that realpage isn't using same-day rent prices to enable undercutting or colluding on prices amongst different properties, so you won't find Property As 2br2ba unit costing the exact same amount as neighboring propertys 2br2ba unit on the basis of preventing price competition.
As I understand it, the DOJ's basis is that it's illegal to use an algorithm that is both deterministic and also is using said "comparison data" from properties that use the same algorithm. Is this really a sound legal strategy? Algorithms are only algorithms because they're deterministic; if they're not then you've made some form of a ML model.
This sounds like apartment communities could only use an algorithm to ingest comp prices and make rent decisions if they commissioned a new bespoke algorithm that can only ever be used by them (what happens if the algorithm supplier copies and pastes code? Or delivers basically the same product with only changes to a seed value?)
> Landlords adopt RealPage recommendations on pricing 80-90% of the time, which explicitly drives up revenue by holding apartments off the market. As the architect of RealPage once explained, “[i]f you have idiots undervaluing, it costs the whole system.” It’s not just an information-sharing and price recommendation engine. RealPage has ‘pricing advisors’ that monitor landlords and encourage them to accept suggested pricing, it works to get employees at landlord companies fired who try to move rents lower, and it even threatens to drop clients who don’t accept its high price recommendations. This one’s a very clear conspiracy. Allegedly.
This raid is potentially glorious. Faith in the system tentatively renewed.
I'll keep my fingers crossed for not only certain parties going to prison, but also certain parties being forced to compensate for the huge harm to entire markets and the people in them that they knowingly caused.
(IIUC, if a lot of owners collude to manipulate prices, then the rest will also tend go up, because they notice the new "market" price, and they see their costs are going up. And then this has other economic effects, including payroll and retention for small businesses. And presumably also the various costs to society of health and happiness problems, since the economic stresses can be pretty bad for some.)
The lawsuit alleges that it controls a decent percentage of the market:
> RealPage collects up-to-the-minute data on the historical and contemporaneous
pricing from participating Lessors, data that, according to RealPage, is updated
“every time [Lessors] make or change a [lease] renewal offer,” spanning over “16
million units,” which is a “very large chunk of the total inventory in the country.”
This is a 'complaint'. There is zero requirement to include all evidence that they intend to reference in court.
That being said, it absolutely is referenced:
> RealPage actively polices Defendants’ agreement to ensure compliance.
> This data includes the rents that Defendant Landlords actually charge, providing RealPage with a mechanism for assessing whether Landlords “cheat” on their agreement by deviating from the rent dictated by RealPage’s RM Software.
> Their agreement is reflected in existing documents, has been
publicly acknowledged by cartel members, and is closely policed to ensure compliance.
> Deviations from the RealPage-generated rent are referred to as “overrides.”
Consistent with their agreement to impose rents generated by RealPage RM Software nearly all the time, Defendants agreed to limit overrides. For example, a RealPage LRO training document states: “Overrides should be few and far between.” Similarly, internal RealPage LRO training documents teach cartel members’ regional managers to beware of “Override Overload” or “rogue” leasing agents who too frequently override the LRO-generated pricing.
> An internal presentation created by Defendant Greystar explicitly
acknowledges that RealPage RM Software users should each seek to accept at
least 95% of the RealPage-generated prices, emphasizing that “Discipline [o]f
using revenue management increases more consistent outcomes.”
> Former Greystar employees have similarly confirmed that negotiating rents other than those set by the RealPage RM Software was unacceptable.
> Even where Participating Landlords do not enable auto-accept, most landlords cannot, on their own, charge rents other than those generated by RealPage’s RM Software—
landlords can only “propose an override.” The landlord must then provide a written business justification for why they wish to depart from the RealPage-generated rent.
Sounds like it's very much in the lawsuit. I'm not sure how you come to any other conclusion. It's a core tenet across multiple pages of it. In your previous comment you try to imply it's just "encouraged". And now you're making statements that are demonstrably incorrect (and I found those examples with less than five minutes of skimming the court complaint, so it's hard to imagine how you missed them all).
The accusation is that RealPage allows landlords to indirectly coordinate and fix prices across the industry. If this is true, then it is monopolistic price-fixing rather than supply and demand.
Ironically, regarding property vacancy, an earlier ProPublica article about RealPage has this to say:
> RealPage discourages bargaining with renters and has even recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money.
The lawsuit accuses RealPages of not just being used for the collusion, but actually orchestrating the collusion. It claims RealPages went to the point of attempting to coordinate lease start/end timing across landlords to prevent oversupply, and having daily pricing calls with their customers where they pressure them not to deviate from the algorithmic suggested price. That's in addition to using non-public rental and pricing data from its customers to calculate the algorithmic price in the first place.
> The complaint, filed earlier today by Attorney General Brian Schwalb, focuses on the multifamily landlords' use of software from Texas-based firm RealPage, which suggests rental prices based on a pricing algorithm. Key to those models, according to the suit, is the data fed in from the landlords and the pressure RealPage puts on them to stick to the code-derived rental rates.
It's a complaint. Nothing was filed yet. And it looks like they used a pricing algo to suggest a price? Im suggested a price when I sell on eBay, or StubHub or Facebook marketplace, or pretty much anywhere. I don't know how they "pressured" landlords but maybe a box like "we suggest market price to maximize returns!" eBay similarly warns me when I stray too far away. The pricing algo is actually a fabulous service.
And if they're a property manager then their job is to find the market price and rent out apartments at the behest of landlords. I really don't see the technical issue here. You can say collude and conspire, but what does that mean in technical terms. And what does "being subject to" the algo mean? Exposed?
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