Being shocked by empty apartments on the rental market is like being shocked by stocked shelves in a grocery store in my view. Do you think a market without inventory is better somehow?
It's not "empty inventory" it's just inventory. Rental market deals in empty apartments, nobody rents apartments with tenants inside. If there had not been empty apartments nobody would be able to move and any freed apartment would be snatched at much higher price than you observe now. Even when the inventory simply drops (the number of empty rentals decreases but still above zero) you see things like dozens of people on the same showing, forced to apply immediately.
Most cities don't count apartments that are vacant less than x months as a vacancy, specifically because of what you're describing. Yes, apartments need to be empty, and folks move out and new folks move in, that usually happens within a couple months of the units being vacant. Some percentage of vacancy is also a healthy stat for a city, because it shows they're keeping up with growth.
The issue here is that there are units being held as vacant for long periods of time, in a saturated market, to drive prices up, and a central algorithm is being used by a large percentage of the market, that allows them to do this in a coordinated manner.
This is effectively textbook collusion, obfuscated by technology. People should be losing their real estate licenses over this, and honestly, folks should be reporting any company using this service to the real estate commission in their state for collusion, because this is normally something real estate commissions take seriously.
>The issue here is that there are units being held as vacant for long periods of time
Can you define the "long period" or point somewhere in the article or other source where this is described?
>This is effectively textbook collusion, obfuscated by technology.
I probably did not read the same text books you read. Do the house sellers who hire the same appraiser also collude in your text book? What about people who use Zillow's or Redfin estimates?
To give some context, I was a real estate agent in Louisiana, working as a property manager, for some time.
> Can you define the "long period" or point somewhere in the article or other source where this is described?
The article mentions that landlords are using the software to run at lower occupancy rates to increase revenue. One specific landlord was mentioning an occupancy rate as low as 95% on 50,000 units (which is quite low). Landlords don't base occupancy rates on short-term vacancies.
> I probably did not read the same text books you read.
The article describes a service that takes private pricing data from numerous competitors, then gives all the competitors pricing and occupancy recommendations as a means of maximizing revenue. There's a good quote in the article about replacing the word algorithm, with a "guy named Bob". If a person was doing this, it would obviously be collusion, because it's a practice that is already illegal, essentially everywhere.
In real estate school, they were pretty explicit about not even walking the edges of collusion; for instance, simply saying "we only price our commissions at 3%" in a room with other brokers could be considered collusion.
> Do the house sellers who hire the same appraiser also collude in your text book? What about people who use Zillow's or Redfin estimates?
An appraiser sets prices based on factors like recent sales in the neighborhood of similar properties and property sizes, age/condition of the house, etc. Everyone can use the same appraiser because that appraiser isn't doing any coordination across the sellers. Two different appraisers, for the most point, should be setting very similar prices.
It could very well be collusion is every broker was using Zillow or Redfins estimate's, especially if they were giving recommendations on holding properties off the market in a coordinated way to maximize profits.
According to this https://fred.stlouisfed.org/series/RRVRUSQ156N the rental occupancy rate has never been over 95% since 1960, which makes me doubt everything you say afterwards. At best you believe your local market is representative of the whole country. Also "collusion" as you were taught is wrong, there is literally no collusion here. Collusion requires agreement, only agreement here is between a market research firm and a landlord.
You're comparing the rental occupancy rate for the entire country to a specific market? That doesn't make any sense. SF (and another of other cities) is in a housing market crisis, whereas detroit (and another of other cities) has extremely high amounts of vacancy. Obviously you have to consider this market by market.
This product is being used to maximize revenue in specific markets, by telling landlords to hold apartments vacant by listing them at higher than market prices. By doing that across the market, they artificially increase scarcity, which forces people to rent those apartments at inflated prices. That's collusion by proxy, because you have a single actor that's coordinating actions.
It's collusion because all of these companies are sharing their private pricing data with a central entity, who's using that private data to provide coordinated actions.
Seeing how the market is not specified in the article it's rational to compare to the the national average. But if you have the data for the market where the unnamed company from the article operates I am all ears. Your claim was that 95% "is quite low" even though it's higher than the national average.
> By doing that across the market, they artificially increase scarcity, which forces people to rent those apartments at inflated prices.
Yes, this is how the product works, it tells the price that will maximize the revenue.
>That's collusion by proxy
There is no such thing. If the agreement on prices exists then it's just collusion, if it does not - there is no collusion. Price fixing, which I suppose you mean by collusion is outlawed. Following market trends is not. The agreement on prices is the key element, without it there is no collusion. Nobody is coordinating anything, there is no agreement to set prices according to the marketing data. This is why stock advisors, appraisers, reports and any other pricing sources are not "collusion by proxy" since they are missing the collusion per se.
> Seeing how the market is not specified in the article it's rational to compare to the the national average. But if you have the data for the market where the unnamed company from the article operates I am all ears. Your claim was that 95% "is quite low" even though it's higher than the national average.
The national average is going to be lower than cities with housing crisis, because the country is large, and it's skewed by areas that are effectively ghost towns. My friends in New Orleans have had a 100% occupancy rate since the last major hurricane.
> There is no such thing. If the agreement on prices exists then it's just collusion, if it does not - there is no collusion. Price fixing, which I suppose you mean by collusion is outlawed. Following market trends is not. The agreement on prices is the key element, without it there is no collusion. Nobody is coordinating anything, there is no agreement to set prices according to the marketing data. This is why stock advisors, appraisers, reports and any other pricing sources are not "collusion by proxy" since they are missing the collusion per se.
I'm assuming you don't have a real estate license, because there are specific national laws (and often stricter state-level laws) related to collusion, and they differ and are considerably stricter than price fixing laws.
>The national average is going to be lower than cities with housing crisis,
How do you know the unnamed company in the article is in a city witch such a crisis? To me it appears there was not enough demand so it had to discount its rents by a lot to get to the target 97%-98% occupancy and thus lost revenue.
And yes, I don't have a real estate license in Louisiana, so can you please name the specific laws you had in mind?
> To me it appears there was not enough demand so it had to discount its rents by a lot to get to the target 97%-98% occupancy and thus lost revenue.
This quote is specifically from a company that had 50k units, normally ran with 100% occupancy, did some trials with the pricing company, which showed they could increase revenue by running at an occupancy of 98%, and has now pushed that lower to 95%. By lowering their occupancy rate, they're increasing housing pressure, which forces renters to accept their higher rates.
> And yes, I don't have a real estate license in Louisiana, so can you please name the specific laws you had in mind?
You don't have one at all, or you'd know the laws. Based on your responses I can tell you didn't read the article, and aren't debating in good faith, so I don't plan on continuing this.
I see. You won't tell the laws that define "collusion by proxy", somehow I expected this. I'd imagine a real lawyer (or a hundred of them) and not a real estate agent from Louisiana and other redditros would be all over these deep-pocketed companies if they had been in such a text book violation.
