There was a Propublica exposé on RealPage, which produces software and consulting services for property managers. Following that exposé , some states have filed lawsuits against RealPage charging collusion. RealPage aims to help landlords set rents to maximize earnings. Reasonable enough. The claim is that when RealPage can gain enough market share in an area, they can strong-arm landlords into setting rents based on their inside information, and so the pricing ends up basically being monopolistic.
I would say the harmful effects of it would be in the high cost supply constrained coastal cities where there are not enough high end housing units because of supply constraints. Then providing landlords with rent information pushes them to shift significant numbers of units from below median in the market to above median cost, likely by making relatively cheap cosmetic upgrades to the units. Then the middle income renters are forced to shift into further down market units- displacing lower income renters into precarious situations, further out of the area or entirely out of the metro. Its basically that some set of existing tenants have been getting a consumer surplus in their housing through getting smaller than market level rent increases and the coordination into increased information to landlords is convincing them that they can capture that from them. I think coordinating information to take away a consumer surplus of people who manage to find a little bit of one in the current market seems to be the model for a lot of informational market power right now.
It would be interesting if municipal planning departments were listed as codefendants. I’m not sure the case would win, since there isn’t coordination between realpage and the cities, but it would be interesting to see the cross examination.
I'm confused as to why a landlord would have to buy a software service like RealPage when a few minutes of searching on the internet can yield good data on market rents for a particular geographic location. A multifamily property owner in a competitive market has a compelling incentive to keep occupancy rates as high as possible for as long as possible. They have to be tactical about how much they jack up monthly rents, and in this respect I think there's a larger story about how large unit buildings will command higher rents than small unit buildings.
This supports the casual observation, and my own personal experience before I was a homeowner, that renting a unit in a duplex/triplex is going to cheaper than a large scale building. The larger building can command higher rents because it is professionally managed, has more amenities, and is probably newer. That last factor is probably the biggest factor in the price discrepancy because the past few decades of multifamily construction has skewed towards large building complexes.
The price discrepancy could be seen as an example of successful filtering and diversity in housing choice. After all, newer, nicer stuff should cost more than older stuff. However, I think that the legacy stock of small unit rentals has enjoyed more price appreciation than it deserves because in many urban areas these dwellings are the beneficiaries of zoning policies that have restricted demand. For example, my neighborhood is arbitrarily zoned single family, but there are several duplexes that were built prior that zoning designation.
Via a private message, someone made a good point to me about what extra value the information aggregator could provide, and it relates to the point you make above about keeping existing tenants. Long-term tenants tend to have below market rents, and there isn't public information about what the re-lease rates are at other buildings. There could be a lot of value in learning how hard rents can be pushed on existing tenants. And it would only be available through a service like this.
Hurdles in development are a necessary but not sufficient input. And even if there were a context that was sufficient to create measurable consumer harm, the claims of the critics are ludicrously inflated compared to any plausible scale.
I would say the harmful effects of it would be in the high cost supply constrained coastal cities where there are not enough high end housing units because of supply constraints. Then providing landlords with rent information pushes them to shift significant numbers of units from below median in the market to above median cost, likely by making relatively cheap cosmetic upgrades to the units. Then the middle income renters are forced to shift into further down market units- displacing lower income renters into precarious situations, further out of the area or entirely out of the metro. Its basically that some set of existing tenants have been getting a consumer surplus in their housing through getting smaller than market level rent increases and the coordination into increased information to landlords is convincing them that they can capture that from them. I think coordinating information to take away a consumer surplus of people who manage to find a little bit of one in the current market seems to be the model for a lot of informational market power right now.
It would be interesting if municipal planning departments were listed as codefendants. I’m not sure the case would win, since there isn’t coordination between realpage and the cities, but it would be interesting to see the cross examination.
Of course, I largely agree with this post.
But there is also a market argument that the Realpage would not be able to successfully sell product unless it worked.
But, as usual, the real solution is about 10 or 20 million more housing units in the US.
BTW, 10 million units at $500k each is $5 trillion.
Sounds like a big number, but US GDP in 2023 was $27.4 trillion.
The government spends $1.4 trillion a year on DoD, VA and pro-rated interest on the national debt.
Moreover, the private sector would build the housing, if allowed.
It could work just by facilitating better information about market conditions. That could make everyone better off.
I'm confused as to why a landlord would have to buy a software service like RealPage when a few minutes of searching on the internet can yield good data on market rents for a particular geographic location. A multifamily property owner in a competitive market has a compelling incentive to keep occupancy rates as high as possible for as long as possible. They have to be tactical about how much they jack up monthly rents, and in this respect I think there's a larger story about how large unit buildings will command higher rents than small unit buildings.
Can you expand on the last sentence?
Hopefully, this link works---and I should emphasize that I'm not an authority on this; just another member of the peanut gallery:
https://multifamily.fanniemae.com/news-insights/multifamily-market-commentary/differences-identifying-units-small-multifamily#:~:text=For%20example%2C%20according%20to%20CoStar,50%2B%2Dunit%20multifamily%20property.
This supports the casual observation, and my own personal experience before I was a homeowner, that renting a unit in a duplex/triplex is going to cheaper than a large scale building. The larger building can command higher rents because it is professionally managed, has more amenities, and is probably newer. That last factor is probably the biggest factor in the price discrepancy because the past few decades of multifamily construction has skewed towards large building complexes.
The price discrepancy could be seen as an example of successful filtering and diversity in housing choice. After all, newer, nicer stuff should cost more than older stuff. However, I think that the legacy stock of small unit rentals has enjoyed more price appreciation than it deserves because in many urban areas these dwellings are the beneficiaries of zoning policies that have restricted demand. For example, my neighborhood is arbitrarily zoned single family, but there are several duplexes that were built prior that zoning designation.
Gottcha. That makes sense.
Via a private message, someone made a good point to me about what extra value the information aggregator could provide, and it relates to the point you make above about keeping existing tenants. Long-term tenants tend to have below market rents, and there isn't public information about what the re-lease rates are at other buildings. There could be a lot of value in learning how hard rents can be pushed on existing tenants. And it would only be available through a service like this.
Based on the sample calculation, is the claim that Realpage is only harmful to tenants when paired with unnecessary hurdles in development?
Hurdles in development are a necessary but not sufficient input. And even if there were a context that was sufficient to create measurable consumer harm, the claims of the critics are ludicrously inflated compared to any plausible scale.