The same thing is happening with salaries. Most HR departments set salaries based on "market reference points" derived from data from salary survey companies like erieri.com. But the HR depts also send their salary data to the salary survey companies (that is how they get a lot of their data).
The result is all the companies in an industry are basically pooling their salary decisions and then carefully sticking close to what the others are paying. If the companies did this directly, it would 100% be wage-fixing. But somehow laundering it through an intermediate makes it legal.
> But somehow laundering it through an intermediate makes it legal.
It probably is illegal. This case with rents will be very interesting to watch.
In the insurance industry, a special law (McCarran-Ferguson Act) had to be passed to allow companies to pool loss data to set rates. Otherwise, it was seen as an anti-trust violation. The law was passed because the public interest in making sure insurance companies are solvent and can pay claims outweighed the anti-trust issue.
I think these tools are on very shaky legal ground.
Yeah, one of the kickers for me was this comment: "users of the software are encouraged to have daily calls with the company on pricing, and are strongly discouraged from deviating from the recommended pricing".
If this is just a tool, as the authors claim, to help estimate best prices, then it's just an estimate. But "strongly discouraging" any deviation from the model sounds very much like "because this number is what everyone else is relying on, too".
Isn't that because wage-fixing requires collusion? ie in a world where salary bands were required to be publicly available, company A and company B independently deciding they want to stick to around the median would not be collusion/wage-fixing. Under the same conditions, if company A reached out to company B and said "lets set salaries at the median" that would be wage-fixing. How they came to know what that median value is is irrelevant.
> Most HR departments set salaries based on "market reference points" derived from data from salary survey companies like erieri.com. But the HR depts also send their salary data to the salary survey companies (that is how they get a lot of their data).
I'm trying to think through this and wondering how companies should set salaries. I mean, I get your point about wage fixing, but I get my information about how much to ask for from shared storage that try to determine "market reference points". Is the idea that it should somehow be done in a vacuum? Seems like a chicken and the egg problem.
"Wage fixing occurs when companies in the same industry conspire or agree to suppress employee earnings below the the market rate."
According to "https://www.nka.com/practice-areas/employee-rights/wage-fixi...". So, as long as they are at market rate and not below market rate, it's not wage fixing? On the flip side it could be that the shared nature of the information makes it easier for companies to compete with eachother on salaries and raises rates.
I would say that it's not just that they send their salary/rent data and know salary/rent data from others. I think the fact that the price is determined by an algorithm is a key component.
To greater and lesser extents, we know what rents are and we know what salaries are. Companies and landlords might have slightly better or more complete information, but it's not like we're totally clueless. A key point of the RealPage algorithm isn't "this is what rent is in your area." The key point is "this is how much you can charge before you start losing renters to other landlords."
The problem is when RealPage becomes a market mover - a company that has so much market influence that it doesn't just participate in the market, but exerts control over the market. If every landlord used RealPage and every landlord obeyed RealPage's suggested pricing, it wouldn't be about telling landlords the market price or even predicting how much they could charge before losing renters to other landlords. It would be about predicting how much they could charge before people exited the housing market (eg. by moving away form the city). Of course, if you're doing that in all the cities, then there isn't even other cities that people can move to.
Let's say that RealPage is a simple ML program or even a genetic algorithm. It makes some random moves and starts learning "if I do X with rent, Y happens." "Y" might be the landlord losing 1% of their tenants, but with rents going up 10% they're making more money than they're losing. That's "fine" for some definition of fine that accepts money-maximizing capitalist competition as fine (I'm not really interested in debating the housing market in this comment).
Now, the issue is that RealPage's algorithm will quickly learn that it can raise rents much higher if it controls the market in a city or neighborhood. If they tell one landlord raises rent by 30%, that landlord is likely going to lose most of their tenants to other landlords. If they tell every landlord to raise rent by 30%, then tenants are no longer in a competitive market where they can rent from someone else. Essentially, the landlords have formed a cartel.
Housing activists don't object to open data about what rents are. In fact, housing activists generally support requiring landlords to register rents with the city. Labor activists don't object to open salary data. In fact, labor activists want open salary data because we know that leads to more negotiating power for workers. The issue with RealPage isn't just that it's supplying and collecting data. It's that it is setting prices that, in some markets, a majority of landlords are following. That means that it's no longer a competitive market and (intentionally or not) they've formed a cartel where the algorithm is basically learning that it has the pricing power of a cartel.
It's one thing to say "a software engineer at level X makes $Y-Z." It's another thing if 75% of the companies hiring software engineers used the same SalaryAlgorithm which told them "you can lower your engineer salaries by 15% (because we're telling everyone to lower salaries by 15% and we control 75% of the market)." There's actually been a lot of research more recently on monopsony and oligopsony (https://en.wikipedia.org/wiki/Monopsony). Basically, it's the opposite side of monopoly and oligopoly. With a monopoly, you have one company selling something. With monopsony, you have one company buying something. Often this can be companies hiring people (buying labor) and having an impact on wages. If there's only one company hiring software engineers, they're going to control the wages for software engineers. If there's thousands of companies hiring software engineers, they don't have much control - unless they all agree to use the same algorithm for setting salaries and that algorithm quickly learns that it has monopsony power.
I think a key part of an algorithm like RealPage's effectiveness can be that it can achieve monopoly/oligopoly power and then learn how much it can charge based on that power - rather than learning how much it can charge based on market rates in a competitive market where landlords aren't colluding (even if the collusion is unintentional). I'm not even suggesting that RealPage's intent was to form a cartel, but if their algorithm is even the tiniest bit smart, it's going to learn pretty quickly that it can rase rents higher when it has monopoly/oligopoly power.
This is the tip of the iceberg and has huge implications – for corporate power, competition, inflation, consumer spending power, quality of life.
Monopolies and cartels are ubiquitous in the American business landscape. They aren’t highly visible, as they operate in the operational layers between stages of industry: rental unit pricing (as highlighted in this story), niche goods distribution, other services. They aren’t the classic top-down monopolies observers expect to see, yet they have the same impacts of exploiting their peripheries, eliminating competition, crippling innovation, and inducing inflation.
I believe eliminating cartels and monopolies is the single greatest economic opportunity presented to the US.
Cartel busting is about the only way to fix the enormity of government payments for Medicaid and Medicare. If not, then the federal spending will collapse something.
Sometimes I feel like propublica is the only meaningful journalism going on. I listen to several podcasts and it feels like about 1/3 of them are re-telling the story of a propublica article.
Yes, that discussion was based off Propublicas article reporting about the problem. The following days the lawsuit was filed which is the propublica is reporting on here.
On some reflection, I don’t understand how this app ever makes it around those regulations in a form where it’s largest users can factor in advertised and actual rent prices to their prices, especially in a world of consolidation, where these companies strive to own or manage most properties in big cities.
It's one of those things that's such an obviously bad idea that it should be illegal regardless of the consequences. That said, I'm pretty dubious that this sort of sharing has had much of an impact. Prices at big apartment complexes aren't exactly secret. You lose some fidelity due to negotiated discounts/concessions and you lose exact occupancy information. But the publicly available information is good enough to use as comps.
one bigger opinion I have is I really hope the engineers and people at this company get screwed royally by their product in the coming years. Since they're doing an excellent job of screwing people.
Indeed, RealPage is an acquisitive beast. Their Wikipedia page[0], as I write this, is largely a list of companies they've acquired.
I know a lot of HN posters live in hope of developing something that will be acquired by a FAANG, but corporate acquisitions are usually bad for everyone but the person running the company being acquired.
Corporations being this brazen are not going to go away by one lawsuit. These companies are smart enough to protect their interests even if you take down the company. They'll just rebrand. People with money rarely see any real consequences. Just a small slap on the wrist and they just get smarter and more creative in ways to get away with this stuff.
When finding a new apartment a few years ago I scraped a few sites. The variance in price is pretty interesting, ie. certain days of the week were better to press "Apply" on the rental form.
There is no strict need for this software to be anti competitive, now that prices are online they can do plenty of experimentation day to day on their own prices.
I also think the claim that they have some secret source of data from negotiated rents is not realistic, large companies don't really negotiate on rent.
However its bad news for the company that the lead developers of their two big software platforms appear to have gone on record in a pretty negative way.
Probably they got to greedy and have exposed themselves to anti trust by commingling data.
The title "rent-seeking" is deceptive. I'd call it "clickbait" but my preferred term "illegal collusion" also draws clicks and is more accurate.
Sharing your own negotiated prices may or may not be legal, but it's often bad manners at the very least and damages your business relationships.
My submission today "Culture at Google: Part One, the Movies" deliberately does not say how much I paid for PPRs, because I was asked not to tell other distributors that.
It’s also not so much about RealPage, but the consolidation that has occurred in rental property ownership and management over the years.
Now take what RealPage is doing with apartments and imagine if every major airline used the same revenue management solution (most use their own which are proprietary) to set airline fares. I hope RealPage (and these investor-owned apartment owners) pay dearly for this. Imagine what the size of a class action suit would look like.
> uses aggregated market data from a variety of sources in a legally compliant manner
That will be interesting. If they are thinking that "legally compliant manner" is rooted in nothing more than having permission to the data (for instance, because users of their software sign off on it in the licensing agreement), they may be in for a surprise.
If all the landlords in an area use this and discover that the real market rate for rent is double, what is different from them doing this independent of each other and independent of this software? Does this not simply enable price discovery to occur at a faster pace?
[+] [-] advisedwang|3 years ago|reply
The result is all the companies in an industry are basically pooling their salary decisions and then carefully sticking close to what the others are paying. If the companies did this directly, it would 100% be wage-fixing. But somehow laundering it through an intermediate makes it legal.
[+] [-] pevey|3 years ago|reply
It probably is illegal. This case with rents will be very interesting to watch.
In the insurance industry, a special law (McCarran-Ferguson Act) had to be passed to allow companies to pool loss data to set rates. Otherwise, it was seen as an anti-trust violation. The law was passed because the public interest in making sure insurance companies are solvent and can pay claims outweighed the anti-trust issue.
I think these tools are on very shaky legal ground.
[+] [-] FireBeyond|3 years ago|reply
If this is just a tool, as the authors claim, to help estimate best prices, then it's just an estimate. But "strongly discouraging" any deviation from the model sounds very much like "because this number is what everyone else is relying on, too".
[+] [-] tqi|3 years ago|reply
[+] [-] mikkergp|3 years ago|reply
I'm trying to think through this and wondering how companies should set salaries. I mean, I get your point about wage fixing, but I get my information about how much to ask for from shared storage that try to determine "market reference points". Is the idea that it should somehow be done in a vacuum? Seems like a chicken and the egg problem.
"Wage fixing occurs when companies in the same industry conspire or agree to suppress employee earnings below the the market rate."
According to "https://www.nka.com/practice-areas/employee-rights/wage-fixi...". So, as long as they are at market rate and not below market rate, it's not wage fixing? On the flip side it could be that the shared nature of the information makes it easier for companies to compete with eachother on salaries and raises rates.
[+] [-] preston4tw|3 years ago|reply
[+] [-] CPLX|3 years ago|reply
[+] [-] mdasen|3 years ago|reply
To greater and lesser extents, we know what rents are and we know what salaries are. Companies and landlords might have slightly better or more complete information, but it's not like we're totally clueless. A key point of the RealPage algorithm isn't "this is what rent is in your area." The key point is "this is how much you can charge before you start losing renters to other landlords."
The problem is when RealPage becomes a market mover - a company that has so much market influence that it doesn't just participate in the market, but exerts control over the market. If every landlord used RealPage and every landlord obeyed RealPage's suggested pricing, it wouldn't be about telling landlords the market price or even predicting how much they could charge before losing renters to other landlords. It would be about predicting how much they could charge before people exited the housing market (eg. by moving away form the city). Of course, if you're doing that in all the cities, then there isn't even other cities that people can move to.
Let's say that RealPage is a simple ML program or even a genetic algorithm. It makes some random moves and starts learning "if I do X with rent, Y happens." "Y" might be the landlord losing 1% of their tenants, but with rents going up 10% they're making more money than they're losing. That's "fine" for some definition of fine that accepts money-maximizing capitalist competition as fine (I'm not really interested in debating the housing market in this comment).
Now, the issue is that RealPage's algorithm will quickly learn that it can raise rents much higher if it controls the market in a city or neighborhood. If they tell one landlord raises rent by 30%, that landlord is likely going to lose most of their tenants to other landlords. If they tell every landlord to raise rent by 30%, then tenants are no longer in a competitive market where they can rent from someone else. Essentially, the landlords have formed a cartel.
Housing activists don't object to open data about what rents are. In fact, housing activists generally support requiring landlords to register rents with the city. Labor activists don't object to open salary data. In fact, labor activists want open salary data because we know that leads to more negotiating power for workers. The issue with RealPage isn't just that it's supplying and collecting data. It's that it is setting prices that, in some markets, a majority of landlords are following. That means that it's no longer a competitive market and (intentionally or not) they've formed a cartel where the algorithm is basically learning that it has the pricing power of a cartel.
It's one thing to say "a software engineer at level X makes $Y-Z." It's another thing if 75% of the companies hiring software engineers used the same SalaryAlgorithm which told them "you can lower your engineer salaries by 15% (because we're telling everyone to lower salaries by 15% and we control 75% of the market)." There's actually been a lot of research more recently on monopsony and oligopsony (https://en.wikipedia.org/wiki/Monopsony). Basically, it's the opposite side of monopoly and oligopoly. With a monopoly, you have one company selling something. With monopsony, you have one company buying something. Often this can be companies hiring people (buying labor) and having an impact on wages. If there's only one company hiring software engineers, they're going to control the wages for software engineers. If there's thousands of companies hiring software engineers, they don't have much control - unless they all agree to use the same algorithm for setting salaries and that algorithm quickly learns that it has monopsony power.
I think a key part of an algorithm like RealPage's effectiveness can be that it can achieve monopoly/oligopoly power and then learn how much it can charge based on that power - rather than learning how much it can charge based on market rates in a competitive market where landlords aren't colluding (even if the collusion is unintentional). I'm not even suggesting that RealPage's intent was to form a cartel, but if their algorithm is even the tiniest bit smart, it's going to learn pretty quickly that it can rase rents higher when it has monopoly/oligopoly power.
[+] [-] arthurofbabylon|3 years ago|reply
Monopolies and cartels are ubiquitous in the American business landscape. They aren’t highly visible, as they operate in the operational layers between stages of industry: rental unit pricing (as highlighted in this story), niche goods distribution, other services. They aren’t the classic top-down monopolies observers expect to see, yet they have the same impacts of exploiting their peripheries, eliminating competition, crippling innovation, and inducing inflation.
I believe eliminating cartels and monopolies is the single greatest economic opportunity presented to the US.
[+] [-] landemva|3 years ago|reply
[+] [-] advisedwang|3 years ago|reply
[+] [-] boringg|3 years ago|reply
[+] [-] dang|3 years ago|reply
Rent going up? One company’s algorithm could be why - https://news.ycombinator.com/item?id=33224502 - Oct 2022 (279 comments)
I think there were other threads also?
[+] [-] takoid|3 years ago|reply
[+] [-] carride|3 years ago|reply
[+] [-] prpl|3 years ago|reply
[+] [-] treis|3 years ago|reply
[+] [-] dd82|3 years ago|reply
[+] [-] buscoquadnary|3 years ago|reply
[+] [-] pwinnski|3 years ago|reply
I know a lot of HN posters live in hope of developing something that will be acquired by a FAANG, but corporate acquisitions are usually bad for everyone but the person running the company being acquired.
0. https://en.wikipedia.org/wiki/RealPage
[+] [-] such12|3 years ago|reply
[deleted]
[+] [-] encryptluks2|3 years ago|reply
[+] [-] cavisne|3 years ago|reply
There is no strict need for this software to be anti competitive, now that prices are online they can do plenty of experimentation day to day on their own prices.
I also think the claim that they have some secret source of data from negotiated rents is not realistic, large companies don't really negotiate on rent.
However its bad news for the company that the lead developers of their two big software platforms appear to have gone on record in a pretty negative way.
Probably they got to greedy and have exposed themselves to anti trust by commingling data.
[+] [-] AlbertCory|3 years ago|reply
Sharing your own negotiated prices may or may not be legal, but it's often bad manners at the very least and damages your business relationships.
My submission today "Culture at Google: Part One, the Movies" deliberately does not say how much I paid for PPRs, because I was asked not to tell other distributors that.
[+] [-] braingenious|3 years ago|reply
[+] [-] ranrotx|3 years ago|reply
Now take what RealPage is doing with apartments and imagine if every major airline used the same revenue management solution (most use their own which are proprietary) to set airline fares. I hope RealPage (and these investor-owned apartment owners) pay dearly for this. Imagine what the size of a class action suit would look like.
[+] [-] kazinator|3 years ago|reply
That will be interesting. If they are thinking that "legally compliant manner" is rooted in nothing more than having permission to the data (for instance, because users of their software sign off on it in the licensing agreement), they may be in for a surprise.
[+] [-] xtiansimon|3 years ago|reply
I was looking at NYC apartment prices in 2021 and I still get price estimate emails on properties I looked at almost two years ago.
Im thinking if you’re an independent landlord, this feedback loop is driving your notions of “value”.
A passive version of the OP?
[+] [-] ZoomerCretin|3 years ago|reply
[+] [-] evancox100|3 years ago|reply
[+] [-] emptyparadise|3 years ago|reply
[+] [-] constantcrying|3 years ago|reply
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