The algorithm used to raise our rent
October 17, 2022 5:01 PM Subscribe
On a summer day last year, a group of real estate tech executives gathered at a conference hall in Nashville to boast about one of their company’s signature products: software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants.
“Never before have we seen these numbers,” said Jay Parsons, a vice president of RealPage, as conventiongoers wandered by. Apartment rents had recently shot up by as much as 14.5%, he said in a video touting the company’s services. Turning to his colleague, Parsons asked: What role had the software played?
Drama over rising rent costs — now a key driver of inflation — has been increasingly public. The year before the pandemic, roughly 46% of renters in the U.S. spent more than 30% of their income on rent and therefore met the definition of cost-burdened, Harvard University’s Joint Center for Housing Studies found.
They've realized that there is no "market" if every landlord agrees that the value of the apartment is irrelevant and the goal is to extract as much from tenants as possible, ideally leaving them slightly less than nothing at the end of every single month.
posted by 1adam12 at 5:09 PM on October 17, 2022 [14 favorites]
posted by 1adam12 at 5:09 PM on October 17, 2022 [14 favorites]
I'm interested in the contemporary behavior of rich people that keep rental homes near their homes and rent them out only to police officers.
It seems that many counties in US states have tax records such as title and deed on real estate property in the public record.
And many police are hesitant to buy property because then their home addresses would be easily found by ... uh ... the guys that don't need no fucking badges ?
So to avoid that some wealthy people keep rental properties near their residences to rent to cops. And I have long assumed that that rental is at a steep discount.
Which is why I tend to call all this shit neofeudalism.
I wonder if this tool can be flipped over to show such behaviors.
posted by NoThisIsPatrick at 5:17 PM on October 17, 2022 [7 favorites]
It seems that many counties in US states have tax records such as title and deed on real estate property in the public record.
And many police are hesitant to buy property because then their home addresses would be easily found by ... uh ... the guys that don't need no fucking badges ?
So to avoid that some wealthy people keep rental properties near their residences to rent to cops. And I have long assumed that that rental is at a steep discount.
Which is why I tend to call all this shit neofeudalism.
I wonder if this tool can be flipped over to show such behaviors.
posted by NoThisIsPatrick at 5:17 PM on October 17, 2022 [7 favorites]
We shouldn't let capitalism turn housing into the unfettered mess that we've already let medical care become (in the US).
posted by meowzilla at 5:19 PM on October 17, 2022 [4 favorites]
posted by meowzilla at 5:19 PM on October 17, 2022 [4 favorites]
it’s incredible how all you have to do is make the computer use “an algorithm “ to spit out a number and suddenly it gives you permission to do something that you know is obviously wrong. sorry but the computer says your rent is going up 20%. the computer doesn’t lie! the next holocaust will happen because it says here in your file that you’re marked for extermination. nothing we can do, it’s what the computer says
posted by dis_integration at 5:36 PM on October 17, 2022 [59 favorites]
posted by dis_integration at 5:36 PM on October 17, 2022 [59 favorites]
Drama over rising rent costs — now a key driver of inflation — has been increasingly public.
"Drama"? How about "concerns", "controversy", "outrage" even? Increasing fear over whether you can afford your present home, or if you'll be able to find another one if you can't, and what rather dire impacts it can and will have upon you and those you love is surely something completely different from throwing a self-centered tizzy over trivialities. So "drama" can fuck right off.
posted by hangashore at 5:43 PM on October 17, 2022 [24 favorites]
"Drama"? How about "concerns", "controversy", "outrage" even? Increasing fear over whether you can afford your present home, or if you'll be able to find another one if you can't, and what rather dire impacts it can and will have upon you and those you love is surely something completely different from throwing a self-centered tizzy over trivialities. So "drama" can fuck right off.
posted by hangashore at 5:43 PM on October 17, 2022 [24 favorites]
Here in Bizarro land, my rent dropped 500 bucks in Feb of 2020. Regrettably I didn't start tracking vacancies in the complex until October, so I don't have data on vacancy at the time of renewal, but I imagine it must have been even worse, and especially bad over summer when the SV interns all got told to work from home (or just not hired at all). And rent's still not back to 2019 levels, thankfully.
But it is absolutely true that property management does not computer. I've had times where, despite having autopay enabled, they failed to pay themselves for the shared utilities and building services (trash, water, "billing fees", etc.), and ended up only paying themselves contractual rent. The complex I was in before that didn't accept online payments at all! It's a little confusing that RealPage is such a dominant player though; is the property management market too small to support two bidders, or is there some PE "acquire the competition and hope SEC doesn't notice" dynamic at play?
posted by pwnguin at 5:49 PM on October 17, 2022 [1 favorite]
But it is absolutely true that property management does not computer. I've had times where, despite having autopay enabled, they failed to pay themselves for the shared utilities and building services (trash, water, "billing fees", etc.), and ended up only paying themselves contractual rent. The complex I was in before that didn't accept online payments at all! It's a little confusing that RealPage is such a dominant player though; is the property management market too small to support two bidders, or is there some PE "acquire the competition and hope SEC doesn't notice" dynamic at play?
posted by pwnguin at 5:49 PM on October 17, 2022 [1 favorite]
it’s incredible how all you have to do is make the computer use “an algorithm “ to spit out a number and suddenly it gives you permission to do something that you know is obviously wrong.
Wait, it gets better. If you make your computer use "machine learning," you get both the buzzwordiness of using AI, AND when you train your algorithm on the existing dataset (which is to say, "all available data from history") and it learns to be openly discriminatory against women/minorities/anyone-not-affluent-and-white, you can claim that your computer program is totally incapable of bias because it is an emotionless machine.
posted by Mayor West at 5:51 PM on October 17, 2022 [31 favorites]
Wait, it gets better. If you make your computer use "machine learning," you get both the buzzwordiness of using AI, AND when you train your algorithm on the existing dataset (which is to say, "all available data from history") and it learns to be openly discriminatory against women/minorities/anyone-not-affluent-and-white, you can claim that your computer program is totally incapable of bias because it is an emotionless machine.
posted by Mayor West at 5:51 PM on October 17, 2022 [31 favorites]
And I should add to my previous ("drama") comment that the article is definitely worth a read. I was annoyed by the bright sunny glee of the algorithm pushers for pricing people out of the market just because they can. But there are a number of countering opinions from affected tenants presented, and overall it's worthwhile to be forewarned when landlords start pushing rent increases with the usual tried-and-not-so-true often-bullshit excuses (rising energy costs, maintenance concerns, supply chain issues, the gravitational effect of the planet Jupiter...).
posted by hangashore at 6:18 PM on October 17, 2022 [2 favorites]
posted by hangashore at 6:18 PM on October 17, 2022 [2 favorites]
This turns my stomach: I couldn’t finish it. Just a few years ago the Ontario government ended rent control for new buildings and it’s horrific.
posted by Singout at 6:19 PM on October 17, 2022 [6 favorites]
posted by Singout at 6:19 PM on October 17, 2022 [6 favorites]
I'm working in affordable housing now and this reporting has filled in some gaps in my mind for the imbalance between supply and demand.
Unfortunately, the collusion to drive down supply among property managers is only possible because the collusion among homeowners to do the same.
But it got baked into the system a hundred years ago. Now, we're starting to understand a little better. Change is possible and the more the system bends under the weight of this junk, the sooner it will give way to what comes next.
Were all ready seeing quality of life distinctions between cities that are changing zoning, and ones that are not. That's going to keep going, until other smart places catch up.
posted by rebent at 6:22 PM on October 17, 2022 [7 favorites]
Unfortunately, the collusion to drive down supply among property managers is only possible because the collusion among homeowners to do the same.
But it got baked into the system a hundred years ago. Now, we're starting to understand a little better. Change is possible and the more the system bends under the weight of this junk, the sooner it will give way to what comes next.
Were all ready seeing quality of life distinctions between cities that are changing zoning, and ones that are not. That's going to keep going, until other smart places catch up.
posted by rebent at 6:22 PM on October 17, 2022 [7 favorites]
@pwnguin You have the right instincts there — the article reports that RealPage acquired its main competitor a few years ago:
posted by dreamyshade at 6:42 PM on October 17, 2022 [2 favorites]
Despite differences in the software’s design, RealPage acquired LRO in 2017 after months of scrutiny by the antitrust division of the justice department. Federal regulators review mergers above a certain size — right now, it is transactions valued at $101 million — and typically allow them to proceed after only a preliminary review. But some are flagged for a more extensive look. The government can challenge a merger in court if it believes it could substantially harm competition.This article also filled in a few gaps for me. My city downtown has a lot of luxury apartment buildings that are very expensive and have a lot of empty units. It's not just a strategy — it's a strategy that investors can bet on, it's easy to implement and maintain, and it's implicitly coordinated across companies.
RealPage’s purchase of LRO received such a second look, but the DOJ allowed it to proceed in late 2017. The department did not respond to requests for comment.
The approval allowed RealPage to acquire its only significant competitor, Roper said, adding, “I was surprised the DOJ let that go through.”
posted by dreamyshade at 6:42 PM on October 17, 2022 [2 favorites]
I'm also wondering how much AirBnb effects the market. If an apartment rents for $1000/mo., but the owner can get $120/night as a vacation rental, then they only need 9 rental nights to break even and it sits empty 21 days/month.
Every 3 AirBnbs would then be taking 2 rentals off the market.
posted by CheeseDigestsAll at 7:18 PM on October 17, 2022 [7 favorites]
Every 3 AirBnbs would then be taking 2 rentals off the market.
posted by CheeseDigestsAll at 7:18 PM on October 17, 2022 [7 favorites]
I’m working on a new algorithm to determine when a guillotine is needed.
How soon is now?
posted by mephron at 7:20 PM on October 17, 2022 [3 favorites]
How soon is now?
posted by mephron at 7:20 PM on October 17, 2022 [3 favorites]
It kind of sounds like the landlords are colluding and price-fixing.
posted by amtho at 7:22 PM on October 17, 2022 [27 favorites]
posted by amtho at 7:22 PM on October 17, 2022 [27 favorites]
to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors chargeThe arc of history is long, and it always bends towards fucking cartels.
From a planner's point of view these kinds of stories are absolute evidence of the falsity of the myths held by landlords (and homeowners) that rents are related to land values, the sale prices of housing, or land taxes. No. They track wages, and rise according to tenants' ability to pay.
posted by Fiasco da Gama at 7:28 PM on October 17, 2022 [25 favorites]
Collective action works! Ugh.
posted by amtho at 7:29 PM on October 17, 2022 [1 favorite]
posted by amtho at 7:29 PM on October 17, 2022 [1 favorite]
I did like the “a guy named Bob” substitution, though
posted by scruss at 7:39 PM on October 17, 2022 [4 favorites]
posted by scruss at 7:39 PM on October 17, 2022 [4 favorites]
When we set out to use software to automate or optimize difficult or unpleasant tasks, it was with the false assumption that doing so might alleviate some small level of human suffering. Automated high efficiency rent-seeking might make things easier for the king but the task of inflicting misery is more suitable for elimination or obviating than it is for optimization.
posted by majick at 7:53 PM on October 17, 2022 [3 favorites]
posted by majick at 7:53 PM on October 17, 2022 [3 favorites]
They mentioned price fixing in the article, and I'm damned if I can figure out how it's not price fixing to have data from multiple competitors (who presumably don't publish all of their rates) fed into your own pricing scheme.
Must be because it's algorithm instead of people meeting in a smoke-filled room.
posted by Ickster at 8:08 PM on October 17, 2022 [7 favorites]
Must be because it's algorithm instead of people meeting in a smoke-filled room.
posted by Ickster at 8:08 PM on October 17, 2022 [7 favorites]
It's the same dodge Facebook, Google, Apple, etc. use. "We aren't *selling your data*, we're just selling conclusions *drawn from* your data"
posted by CrystalDave at 8:19 PM on October 17, 2022 [3 favorites]
posted by CrystalDave at 8:19 PM on October 17, 2022 [3 favorites]
They've realized that there is no "market" if every landlord agrees that the value of the apartment is irrelevant and the goal is to extract as much from tenants as possible, ideally leaving them slightly less than nothing at the end of every single month.
I'm pretty sure even neo-classical economists like Adam Smith realized this. It's even worse when the same "landlord"/corporation owns almost everything in a given area, which is increasingly the case where i live. I can see these trends play out just by looking at advertised rents for equivalent apartments in my building versus what I get charged for a renewal.
I get the feeling that these landlords are moving to a model similar to cable, power, and cell phone companies. Lure people in with low indtroductory rates then slowly raise them year over year with the idea being that people either won't realize or won't go to the trouble to change. It's even harder with real estate because moving is way more difficult than switching cable or power companies. Plus, like I said, sometimes the same real estate company owns everything in a given area.
That's one reason I'm highly skeptical of the simplistic "YIMBY" solutions to the housing crisis.
posted by eagles123 at 8:54 PM on October 17, 2022 [5 favorites]
On the ballot this election cycle we have a city rent control measure. Activists have been working hard to get it on the ballot for years and it's finally here.
You should see the howling in the anti-ads. All nebulous "panels unanswerable to anyone", "burden on mom & pop landlords" (not in this measure, there's a size restriction) or my favorite - targeted towards me - "it'll reduce the value of the house/condo you own".
Suck it - large time landlords are scum - corporate landlords are worse. These guys? I don't know how low the scale currently goes, but drop them through the floor.
posted by drewbage1847 at 9:03 PM on October 17, 2022 [11 favorites]
You should see the howling in the anti-ads. All nebulous "panels unanswerable to anyone", "burden on mom & pop landlords" (not in this measure, there's a size restriction) or my favorite - targeted towards me - "it'll reduce the value of the house/condo you own".
Suck it - large time landlords are scum - corporate landlords are worse. These guys? I don't know how low the scale currently goes, but drop them through the floor.
posted by drewbage1847 at 9:03 PM on October 17, 2022 [11 favorites]
Under our current capitalist system, owning property is the best way to create "wealth".
We are in our third house here in Seattle. When we sold our first two houses, we made more money, instantly, than we both made at our jobs in a year and a half. It's insane. And if you are an "investor", you can buy things, if they don't sell, you can still rent them for a profit. Or tear them down and build 4 tall "houses" on the lot, and sell each for more than you paid for the property.
Seems crazy, and is making our city a nightmare of identical, tall, skinny "houses". But, it works, and there is money to be made, so I assume it will continue. Not sure how to stop it. Or if it should be stopped, TBH. We all seem to want population density, to take advantage of transit and existing infrastructure. But it ruins the character of neighborhoods, and takes money out of the community as a whole, and gives it to a handful of "investors" and "realtors".
posted by Windopaene at 9:11 PM on October 17, 2022 [8 favorites]
We are in our third house here in Seattle. When we sold our first two houses, we made more money, instantly, than we both made at our jobs in a year and a half. It's insane. And if you are an "investor", you can buy things, if they don't sell, you can still rent them for a profit. Or tear them down and build 4 tall "houses" on the lot, and sell each for more than you paid for the property.
Seems crazy, and is making our city a nightmare of identical, tall, skinny "houses". But, it works, and there is money to be made, so I assume it will continue. Not sure how to stop it. Or if it should be stopped, TBH. We all seem to want population density, to take advantage of transit and existing infrastructure. But it ruins the character of neighborhoods, and takes money out of the community as a whole, and gives it to a handful of "investors" and "realtors".
posted by Windopaene at 9:11 PM on October 17, 2022 [8 favorites]
“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.”
A succinct distillation of the MBA-ization of American business.
posted by Warren Terra at 10:12 PM on October 17, 2022 [26 favorites]
A succinct distillation of the MBA-ization of American business.
posted by Warren Terra at 10:12 PM on October 17, 2022 [26 favorites]
Shame nobody listened to Thomas Spence 250 years ago. How many times have we looped through this exact problem since 1775? Can we try Spence's plan this time instead of having a massive war? It barely needs updating.
posted by forbiddencabinet at 11:02 PM on October 17, 2022 [2 favorites]
posted by forbiddencabinet at 11:02 PM on October 17, 2022 [2 favorites]
> Were all ready seeing quality of life distinctions between cities that are changing zoning, and ones that are not. That's going to keep going, until other smart places catch up.
How Houston Moved 25,000 People From the Streets Into Homes of Their Own [ungated] - "The nation's fourth-largest city hasn't solved homelessness, but its remarkable progress can suggest a way forward."
posted by kliuless at 12:34 AM on October 18, 2022 [4 favorites]
How Houston Moved 25,000 People From the Streets Into Homes of Their Own [ungated] - "The nation's fourth-largest city hasn't solved homelessness, but its remarkable progress can suggest a way forward."
posted by kliuless at 12:34 AM on October 18, 2022 [4 favorites]
Today's news today from Dublin:
A winter eviction ban is expected to be approved at Cabinet this morning . . .
Housing minster Darragh O'Brien is "acutely aware" that if the measures "are not calibrated properly", they could have "unintended consequences of leading to further flight of private landlords which we have seen since 2016".
"a guy named Bob" advises that the consequent loss of rented accommodation can be made good by government.
BobTheAlgorithm
posted by BobTheScientist at 3:40 AM on October 18, 2022 [1 favorite]
A winter eviction ban is expected to be approved at Cabinet this morning . . .
Housing minster Darragh O'Brien is "acutely aware" that if the measures "are not calibrated properly", they could have "unintended consequences of leading to further flight of private landlords which we have seen since 2016".
"a guy named Bob" advises that the consequent loss of rented accommodation can be made good by government.
BobTheAlgorithm
posted by BobTheScientist at 3:40 AM on October 18, 2022 [1 favorite]
We all seem to want population density, to take advantage of transit and existing infrastructure.
Tightly-packed (multistorey? - even more wasted space if so, four houses means four staircases, a block of four flats only loses for space to one) detached houses is about the least space efficient way to get there.
posted by Dysk at 3:56 AM on October 18, 2022
Tightly-packed (multistorey? - even more wasted space if so, four houses means four staircases, a block of four flats only loses for space to one) detached houses is about the least space efficient way to get there.
posted by Dysk at 3:56 AM on October 18, 2022
One thing the algorithm does is intentionally restrict supply. It's not unlike the intentional brownouts that Enron caused in 2000 to drive up electricity prices and maximize their revenue.
posted by clawsoon at 4:05 AM on October 18, 2022 [5 favorites]
posted by clawsoon at 4:05 AM on October 18, 2022 [5 favorites]
@dysk - agreed. I was in census data yesterday, and in my state Michigan there are fewer attached single family houses... Than mobile homes. We have a huge barrier to overcome but making it possible to infill and upzone is key.
posted by rebent at 5:02 AM on October 18, 2022 [2 favorites]
posted by rebent at 5:02 AM on October 18, 2022 [2 favorites]
rising energy costs, maintenance concerns, supply chain issues, the gravitational effect of the planet Jupiter
It annoys the fuck out of me that we accept shit like this as a rational reason for costs changing. I assume most of us have taken at least intro to macro econ and have learned about the basics of supply and demand (maybe even did a silly group experiment with half the class as buyers and half as sellers).
The price is where the aggregate demand curve hits the aggregate supply curve. Cost DO NOT factor into the demand curve. I don't give a shit what it costs you to produce your thing if I even know so that's not something that goes into my calculus when I buy the thing, only the cost of competitor and substitution products.
Where the cost is a factor is in the quantity supplied. Firms tend to produce at the lowest marginal cost of production. That is, they make as many they can as efficiently as they can. So costs going up might influence how many of a thing that gets produced.
Landlords don't produce housing, they're only renting housing that already exists and won't build more in an attempt to lower their production costs. It's all fucking bullshit. The rent is going up because you or someone else is willing to pay that price. There is no other reason. Anything else is either them lying to you or them lying to themselves.
On top of that, I think we would do well to remember that, this is capitalism. You don't owe other firms in the market an explanation. You don't have to provide a rationale for your demands. If you're making an offer or demand and you're asked for a rationalization, "Because that is the price I'm willing to pay, will you accept that offer yes or no?" is a perfectly valid reason. Sometimes a good story can definitely help your case but you're not at all obligated to tell them anything at all.
posted by VTX at 6:45 AM on October 18, 2022 [5 favorites]
It annoys the fuck out of me that we accept shit like this as a rational reason for costs changing. I assume most of us have taken at least intro to macro econ and have learned about the basics of supply and demand (maybe even did a silly group experiment with half the class as buyers and half as sellers).
The price is where the aggregate demand curve hits the aggregate supply curve. Cost DO NOT factor into the demand curve. I don't give a shit what it costs you to produce your thing if I even know so that's not something that goes into my calculus when I buy the thing, only the cost of competitor and substitution products.
Where the cost is a factor is in the quantity supplied. Firms tend to produce at the lowest marginal cost of production. That is, they make as many they can as efficiently as they can. So costs going up might influence how many of a thing that gets produced.
Landlords don't produce housing, they're only renting housing that already exists and won't build more in an attempt to lower their production costs. It's all fucking bullshit. The rent is going up because you or someone else is willing to pay that price. There is no other reason. Anything else is either them lying to you or them lying to themselves.
On top of that, I think we would do well to remember that, this is capitalism. You don't owe other firms in the market an explanation. You don't have to provide a rationale for your demands. If you're making an offer or demand and you're asked for a rationalization, "Because that is the price I'm willing to pay, will you accept that offer yes or no?" is a perfectly valid reason. Sometimes a good story can definitely help your case but you're not at all obligated to tell them anything at all.
posted by VTX at 6:45 AM on October 18, 2022 [5 favorites]
VTX: Firms tend to produce at the lowest marginal cost of production. That is, they make as many they can as efficiently as they can.
I could be misremembering, but I seem to recall reading a bunch of empirical work a few years back which found that this is always true in theory but rarely-if-ever true in practise.
The rent is going up because you or someone else is willing to pay that price. There is no other reason. Anything else is either them lying to you or them lying to themselves.
And also because we feel we don't have any alternatives to housing being controlled by price-based markets.
The price I paid to take my daughter to the doctor last time (free) was the same as the time before (also free). That's because for healthcare, at least here in the civilized world, we've set up an alternative to market control for the specific case of healthcare. Doing so for housing is also an option.
posted by clawsoon at 7:08 AM on October 18, 2022 [8 favorites]
I could be misremembering, but I seem to recall reading a bunch of empirical work a few years back which found that this is always true in theory but rarely-if-ever true in practise.
The rent is going up because you or someone else is willing to pay that price. There is no other reason. Anything else is either them lying to you or them lying to themselves.
And also because we feel we don't have any alternatives to housing being controlled by price-based markets.
The price I paid to take my daughter to the doctor last time (free) was the same as the time before (also free). That's because for healthcare, at least here in the civilized world, we've set up an alternative to market control for the specific case of healthcare. Doing so for housing is also an option.
posted by clawsoon at 7:08 AM on October 18, 2022 [8 favorites]
a bunch of empirical work a few years back which found that this is always true in theory but rarely-if-ever true in practise.
It's probably not that it's "not true" just that the effect is buried along with a bunch of other confounding variables. If it were true all the time, overtime simply wouldn't exist as firms would choose to simply produce less. But then part of your brand's value as a retail store (for example) is that you have helpful sales associates available. So you might decide to pay employees overtime to just stand around because on the whole, that will be more profitable.
But the point remains that the costs of production do not influence MY price calculus as a buyer. The price is the price because that's what they'll pay, the rest is a smoke screen.
posted by VTX at 7:27 AM on October 18, 2022
It's probably not that it's "not true" just that the effect is buried along with a bunch of other confounding variables. If it were true all the time, overtime simply wouldn't exist as firms would choose to simply produce less. But then part of your brand's value as a retail store (for example) is that you have helpful sales associates available. So you might decide to pay employees overtime to just stand around because on the whole, that will be more profitable.
But the point remains that the costs of production do not influence MY price calculus as a buyer. The price is the price because that's what they'll pay, the rest is a smoke screen.
posted by VTX at 7:27 AM on October 18, 2022
Why write this article, and lead with some anecdotes about 'people leaving the city' when right towards the end is the real culprit:
"Though soaring rent is giving the industry a “black eye,” Campo said, the culprit is a lot of demand and not enough supply — not revenue management software. The software just helps managers react to trends faster, he said."
We are getting this with used cars right now too due to tamps in supply. Is Kelly Blue Book or the endless number of other apps that are used to determine used car price also causing the problem, or simply reacting to it?
posted by The_Vegetables at 7:46 AM on October 18, 2022 [2 favorites]
"Though soaring rent is giving the industry a “black eye,” Campo said, the culprit is a lot of demand and not enough supply — not revenue management software. The software just helps managers react to trends faster, he said."
We are getting this with used cars right now too due to tamps in supply. Is Kelly Blue Book or the endless number of other apps that are used to determine used car price also causing the problem, or simply reacting to it?
posted by The_Vegetables at 7:46 AM on October 18, 2022 [2 favorites]
VTX: But the point remains that the costs of production do not influence MY price calculus as a buyer. The price is the price because that's what they'll pay, the rest is a smoke screen.
IIRC, real-world prices tend to be very sticky around full cost+markup. Economists keep telling companies that they're doing it wrong and should be using marginal factors to set prices, and companies keep using full cost+markup anyway.
Some of the literature suggests that this is because buyers do, in fact, take cost of production into account, and if they see sellers doing something other than full cost+markup they punish them.
posted by clawsoon at 7:47 AM on October 18, 2022 [2 favorites]
IIRC, real-world prices tend to be very sticky around full cost+markup. Economists keep telling companies that they're doing it wrong and should be using marginal factors to set prices, and companies keep using full cost+markup anyway.
Some of the literature suggests that this is because buyers do, in fact, take cost of production into account, and if they see sellers doing something other than full cost+markup they punish them.
posted by clawsoon at 7:47 AM on October 18, 2022 [2 favorites]
The_Vegetablesthe real culprit... a lot of demand and not enough supply
Keep in mind that the software is also consistently recommending reducing the supply by 10-20% in order to maximize profit. So in this case, no, the software isn't merely reporting the problem, it's also helping to create it.
posted by clawsoon at 7:49 AM on October 18, 2022 [15 favorites]
Keep in mind that the software is also consistently recommending reducing the supply by 10-20% in order to maximize profit. So in this case, no, the software isn't merely reporting the problem, it's also helping to create it.
posted by clawsoon at 7:49 AM on October 18, 2022 [15 favorites]
I assume most of us have taken at least intro to macro econ
1) Why on Earth would you assume this? ???
posted by amtho at 10:15 AM on October 18, 2022 [5 favorites]
1) Why on Earth would you assume this? ???
posted by amtho at 10:15 AM on October 18, 2022 [5 favorites]
most of us have taken at least intro to macro econ
I'm guessing the most popular pathway into taking such a class (US-based assumptions) would be a business degree, economics degrees being not even a rounding error by comparison. Some quick googling around, maybe 3% of the US might have some form of business degree? This doesn't account for people who didn't complete a degree, or switched degrees after taking a class like that; but it's probably somewhere around the ballpark.
posted by CrystalDave at 10:31 AM on October 18, 2022
I'm guessing the most popular pathway into taking such a class (US-based assumptions) would be a business degree, economics degrees being not even a rounding error by comparison. Some quick googling around, maybe 3% of the US might have some form of business degree? This doesn't account for people who didn't complete a degree, or switched degrees after taking a class like that; but it's probably somewhere around the ballpark.
posted by CrystalDave at 10:31 AM on October 18, 2022
Um...I had it in high school, also in college and then a bunch more but basic supply and demand was a high school class for me way back in 1998.
I guess it's not as common as that would suggest. Now I'm sad.
posted by VTX at 11:08 AM on October 18, 2022 [3 favorites]
I guess it's not as common as that would suggest. Now I'm sad.
posted by VTX at 11:08 AM on October 18, 2022 [3 favorites]
I assume most of us have taken at least intro to macro econ
I mean...what?? And I even did, but that was a class I didn't care about in the slightest, taken well over two decades ago. I literally only remember the name of the class, at this point.
posted by We put our faith in Blast Hardcheese at 11:35 AM on October 18, 2022
I mean...what?? And I even did, but that was a class I didn't care about in the slightest, taken well over two decades ago. I literally only remember the name of the class, at this point.
posted by We put our faith in Blast Hardcheese at 11:35 AM on October 18, 2022
I assume most of us have taken at least intro to macro econ
Nope. Five academic degrees and never had a Econ class. Math, Electrical Eng(2), Computer Science, and Physics. No econ class in any of it. From the fantasies I've heard about in the field, don't really want to.
posted by aleph at 11:49 AM on October 18, 2022 [1 favorite]
Guys, this is a total derail. Suffice to say that I have PLENTY of reason to believe that an intro level econ class, which ALL of my high school class took, to be very common. Enough with the pile on already.
Can we talk about the rent now?
posted by VTX at 11:52 AM on October 18, 2022
Can we talk about the rent now?
posted by VTX at 11:52 AM on October 18, 2022
Can we talk about the rent now?
Sure. What you learned in your intro to macro course about how rent prices are set is probably mostly wrong. ;-)
(If you're interested, I could dig up some of my old references. I don't know if any of them focus on rent specifically, but they do focus on price-setting behaviour in general.)
posted by clawsoon at 12:01 PM on October 18, 2022 [1 favorite]
Sure. What you learned in your intro to macro course about how rent prices are set is probably mostly wrong. ;-)
(If you're interested, I could dig up some of my old references. I don't know if any of them focus on rent specifically, but they do focus on price-setting behaviour in general.)
posted by clawsoon at 12:01 PM on October 18, 2022 [1 favorite]
The missing phrase we’re looking for here is “inelastic demand”, even making the exceedingly generous assumption that orthodox capitalist intro (i.e. highly simplified) macroeconomics theory has some accuracy or bearing on this topic.
posted by eviemath at 12:07 PM on October 18, 2022 [2 favorites]
posted by eviemath at 12:07 PM on October 18, 2022 [2 favorites]
The whole reason behavioral econ is so powerful is that it explains why economic theories just don't work when you look at results.
But: where in heck did you go to high school? Econ wasn't offered to most students in Douglasville, GA when I grew up there.
posted by amtho at 12:28 PM on October 18, 2022
But: where in heck did you go to high school? Econ wasn't offered to most students in Douglasville, GA when I grew up there.
posted by amtho at 12:28 PM on October 18, 2022
“We said there’s way too much empathy going on here,”
This right here, detective. This is the murder weapon. This is the poison that killed human civilization.
That this isn’t just saying the quiet part out loud but bordering on normalized pushes me ever closer to buying into my mom’s pet hypothesis that we are literally in the early stages of another human speciation event. The last few did not end well for many.
posted by majick at 1:27 PM on October 18, 2022 [4 favorites]
This right here, detective. This is the murder weapon. This is the poison that killed human civilization.
That this isn’t just saying the quiet part out loud but bordering on normalized pushes me ever closer to buying into my mom’s pet hypothesis that we are literally in the early stages of another human speciation event. The last few did not end well for many.
posted by majick at 1:27 PM on October 18, 2022 [4 favorites]
majick : my mom’s pet hypothesis that we are literally in the early stages of another human speciation event.
We have incredibly low levels of DNA variability, which makes this unlikely. Australia was isolated from the rest of the world for ~50,000 years, and they're still 99.9% genetically identical to the rest of us. (Just like the rest of us are 99.9% identical to the rest of us.) And of the 0.1% variability, 95% of the genetic differences between an Aborigine and their neighbour are from the same pool as the differences between you and your neighbour - even our differences are part of the same worldwide genetic soup. There's not much raw material for speciation to work with.
posted by clawsoon at 2:34 PM on October 18, 2022 [2 favorites]
We have incredibly low levels of DNA variability, which makes this unlikely. Australia was isolated from the rest of the world for ~50,000 years, and they're still 99.9% genetically identical to the rest of us. (Just like the rest of us are 99.9% identical to the rest of us.) And of the 0.1% variability, 95% of the genetic differences between an Aborigine and their neighbour are from the same pool as the differences between you and your neighbour - even our differences are part of the same worldwide genetic soup. There's not much raw material for speciation to work with.
posted by clawsoon at 2:34 PM on October 18, 2022 [2 favorites]
IIRC, real-world prices tend to be very sticky around full cost+markup. Economists keep telling companies that they're doing it wrong and should be using marginal factors to set prices, and companies keep using full cost+markup anyway.
Some of the literature suggests that this is because buyers do, in fact, take cost of production into account, and if they see sellers doing something other than full cost+markup they punish them.
An alternative (arguably simpler) theory is that there is downward pressure to reach equilibrium near cost+markup due to competition. I.e., if you're charging significantly more than cost+markup, what's to stop a competitor from offering the same thing at a price closer to cost+markup?
Obviously this is overly simplified, and there are reasons why a race to reduce margins between competitors doesn't occur in plenty of cases. But with landlords and rent, I think it's important to take a clear-eyed view that in aggregate, landlords will try to charge as much as they can get away with, and ultimately the only factor that exerts any downward pressure on pricing is competition from other options (i.e., offerings from other landlords).
That's why YIMBY folks (like myself -- not trying to hide my agenda here) are so adamant at finding solutions to allow increasing supply, e.g. through changes to zoning and regulations. It's not the whole solution, but it's a necessary part of any real solution.
posted by Expecto Cilantro at 2:48 PM on October 18, 2022 [1 favorite]
Some of the literature suggests that this is because buyers do, in fact, take cost of production into account, and if they see sellers doing something other than full cost+markup they punish them.
An alternative (arguably simpler) theory is that there is downward pressure to reach equilibrium near cost+markup due to competition. I.e., if you're charging significantly more than cost+markup, what's to stop a competitor from offering the same thing at a price closer to cost+markup?
Obviously this is overly simplified, and there are reasons why a race to reduce margins between competitors doesn't occur in plenty of cases. But with landlords and rent, I think it's important to take a clear-eyed view that in aggregate, landlords will try to charge as much as they can get away with, and ultimately the only factor that exerts any downward pressure on pricing is competition from other options (i.e., offerings from other landlords).
That's why YIMBY folks (like myself -- not trying to hide my agenda here) are so adamant at finding solutions to allow increasing supply, e.g. through changes to zoning and regulations. It's not the whole solution, but it's a necessary part of any real solution.
posted by Expecto Cilantro at 2:48 PM on October 18, 2022 [1 favorite]
I think that empowering renters so they have more power and therefore more effects on the market would create a bit of a virtuous cycle.
If it's easier to move because you can get the cost of hiring a moving company subsidized, renters are provided cheap/free legal council to help and represent folks in any legal proceedings or disputes, and that kind of thing.
I can't guess at how disruptive it would be to the house market. It should make buying housing cheaper too since that's the main alternative. But whether it would cause a bunch of crashes and volatility until things stabilized or if it would just slow the climb of prices until renting caught up. But long term it should make housing of all kinds more affordable and accessible.
posted by VTX at 7:09 AM on October 19, 2022
If it's easier to move because you can get the cost of hiring a moving company subsidized, renters are provided cheap/free legal council to help and represent folks in any legal proceedings or disputes, and that kind of thing.
I can't guess at how disruptive it would be to the house market. It should make buying housing cheaper too since that's the main alternative. But whether it would cause a bunch of crashes and volatility until things stabilized or if it would just slow the climb of prices until renting caught up. But long term it should make housing of all kinds more affordable and accessible.
posted by VTX at 7:09 AM on October 19, 2022
Yeah I just checked the apartment complex I moved from in April. $1740 for a one bedroom and $2400 for a 2 bedroom. I never paid more than $1550 when I lived there in a 1 bed. hell I currently pay $1725 for a 2 bedroom condo. Funny they also are still lying about utilities being included. They converted the electricity to tenant pays right as I was leaving, and the gas and water bills were next up. It's why I moved, I knew they wouldn't lower my rent after the conversion, little did i know they'd actually increase it so much.
And this isn't even a new building. They're garden style built in the 40s and 50s, have shared laundry in some buildings and no crap, 4 small dumpsters for over 12 buildings.
posted by 922257033c4a0f3cecdbd819a46d626999d1af4a at 6:00 PM on October 20, 2022
And this isn't even a new building. They're garden style built in the 40s and 50s, have shared laundry in some buildings and no crap, 4 small dumpsters for over 12 buildings.
posted by 922257033c4a0f3cecdbd819a46d626999d1af4a at 6:00 PM on October 20, 2022
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.
I appreciate the writer including that definition of algorithm. It's a word that gets used in all sorts of ways, many of them odd.
posted by The corpse in the library at 3:42 PM on October 22, 2022
I appreciate the writer including that definition of algorithm. It's a word that gets used in all sorts of ways, many of them odd.
posted by The corpse in the library at 3:42 PM on October 22, 2022
Company that makes rent-setting software for landlords sued for collusion - "RealPage worked with some of the nation's largest landlords to raise rents, says lawsuit."
posted by kliuless at 7:42 PM on October 25, 2022 [4 favorites]
posted by kliuless at 7:42 PM on October 25, 2022 [4 favorites]
I really hope the lawsuit results in a map showing where each of the conglomerate properties are
posted by rebent at 4:53 AM on October 27, 2022 [2 favorites]
posted by rebent at 4:53 AM on October 27, 2022 [2 favorites]
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