RealPage, Collusion, and Rents: Part 3

Just one more RealPage post, and I promise I’ll be done… I think.

I have a visual that I think might help bring home the points I have been making about it. It is simply the population of San Francisco and Phoenix from 1969 to 2022.

If Phoenix had clamped down on housing supply like San Francisco and the closed access cities do, so that it would only have 2 or 3 million residents today, it would be much more expensive. Maybe not exactly as expensive as San Francisco, but most of the way there. That is cumulatively a lot of supply.

One clue about that which you can see even in this simple visual is that after the mortgage crackdown in 2008 sharply cut down the growth rate of single-family home construction in Phoenix, Phoenix did start getting more expensive in the same ways that the closed access cities have become expensive.

After just 16 years of slowing growth to San Francisco levels, Phoenix housing costs have become a lot more San Francisco-like. In Figure 2, the yellow plots are price/income ratios across Phoenix in 2002. The red plots are Phoenix in 2024. The black plots are San Francisco in 2024.

Figure 2

I have added a third line to Figure 1 - Phoenix with 2% more vacant units. (And, since most units are owned, 2% total vacancies requires more like 6% additional rental vacancies.)

For RealPage collusion to be meaningful, RealPage has to be able to coerce an entire market of landlords to hold units vacant in order to drive up rents. There is no evidence that any metro area has vacancy rates that have increased by anything close to 6%. I’m not sure if there is clear evidence of persistently higher vacancies at all. Vacancies across the country are very low.

Then, they would have to limit new entrants. One question to ask yourself is what are the constraints that led Phoenix to follow the path of that red line in Figure 1? If RealPage had managed to elevate total vacancies in Phoenix by 2% for decades, like the orange line implies, would Phoenix population have followed the orange line? Or, since landlords would be making higher profits, would a few more developments have been proposed, so that the population would have still risen to the red line over the long-term?

Wouldn’t the long-term outcome of the collusion that is being imagined be that Phoenix would be at the red line today and landlords would just be sitting on a bunch more vacant units?

Have any RealPage critics thought that through?

But, the main point of this chart is that even if I’m being obtuse, who cares?

What if everything the RealPage critics charge is true and landlords really could reduce the rented housing supply permanently by 2%? Who cares?

What should we think of people who say that zoning and land use regulations are important, but that the market has its own problems and we need to address things like RealPage?

This is the intellectual equivalent of Haitians eating cats. It is irrelevant. It is motivated by prejudicial thinking. Prejudicial thinking means ignoring our symbiotic relationships with the “other”, amplifying their wrongs, and imagining wrongs that aren’t real or important.

In housing, this is especially important, because housing really is purely dependent on capital. Capital gets turned into walls and roofs and refrigerators and heaters and we get shelter. It is pure symbiosis. Prejudicial opposition to that symbiosis is a key reason we have a housing crisis.

It doesn’t matter if a Haitian might have eaten a cat. It doesn’t matter if a RealPage consultant strong-armed someone into changing their rent. Someone who is centering these claims in a conversation about migration or housing costs is volunteering to exit the club of serious discussants.

We want a big tent. We need a big tent. The tent is getting bigger. Progress is in reach. But, if you were interviewing an applicant for a new position at an immigrant support center, and they said it is important to get to the bottom of this cat-eating thing, you’d probably take a pass.

On the other hand, if they said, “You know, I thought the cat-eating thing was important, and I even called the authorities when my cat went missing. But, then I found the cat, and I realized that I had been terribly mistaken. I apologized to my Haitian neighbors.” That might be a person you would especially think about hiring. They had worked through their issues and come out on the other side.

It’s probably smart to take a similar approach with RealPage critics, people who want to ban Wall Street investors from single-family housing, and various other similar issues. It’s ok to be wrong. It’s even ok to be prejudiced, as long as you can adjust upon learning new facts.

But if prejudice is strong enough to lead to implausibilities, it is frequently strong enough to prevent those adjustments.