DOJ sues realpage for algorithmic pricing scheme that harms renters

I have similar feelings about Airbnb. I think they caused a good deal of harm, but I’m more kind to the argument they are allowing market forces to act. People are priced out by mid-level wealth holders in nice locations who rent out to tourists; homes young families could have enjoyed. Airbnb could be a net harm on society ~30 years from now. Still too early to tell imo

This meant the specialists were on a ladder with often lower pay than a standard SWE, and I couldn’t shift the bureaucracy enough to change that. People left for all sorts of reasons but a big part was being able to get 2x-4x the total compensation at other companies.

PS: I can’t wait to delete the ActiveBuilding by RealPage app.

I think the “private prices” + “autoaccept” + “compliance” is the key misbehavior that gets RealPage into legal trouble.

If competitors want to converge on prices in a legal manner, they have to do out in the open via “price signaling” via public posting of prices. That’s how it’s legally possible for competitors in other industries to do it:

– gas stations looking at each others signs of prices and quickly adjusting to match;

– e-auctions like Ebay/Reverb showing a seller what the previous range of sold prices were;

– Kelly “Blue Book” showing current used car market prices

– Zillow publicly showing rental rates, etc.

Neither the platform nor the sellers in those examples get in trouble for “price fixing”.

In contrast, the privately shared pricing with compliance monitoring by the platform is too coordinated to avoid legal scrutiny.

The FTC does not consider this type of open signaling to be price fixing:

> Q: Our company monitors competitors’ ads, and we sometimes offer to match special discounts or sales incentives for consumers. Is this a problem?

> A: No. Matching competitors’ pricing may be good business, and occurs often in highly competitive markets. Each company is free to set its own prices, and it may charge the same price as its competitors as long as the decision was not based on any agreement or coordination with a competitor.

Source:
https://www.ftc.gov/advice-guidance/competition-guidance/gui…

Using your gas station example, a gas station isn’t going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they’d lose sales and make less money. Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don’t have a choice.

– they could also see their competitor raise their price to from $4.00 to $4.15 (for whatever reason) and decide that they can raise their price as well without losing customers.

But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal “price signaling” via publicized fares(1) in the global reservations system.

Competitors can converge on a higher price instead of a lower price. It’s not just one direction. They just need to do it via public price signaling to stay out of legal trouble.

In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99.

(1) https://www.google.com/search?q=It+is+now+common+for+an+airl….

I don’t understand what you’re saying. Are you saying that companies are colluding, but not really because the prices are public? Most prices are public, just walk into any supermarket or open Amazon.com and you’ll see public prices. If a company bases their price on a competitor’s price, that’s not collusion, that’s just a pricing strategy. If a company is able to price a product above their competitors and still succeed (e.g. by investing more in marketing), that’s legal too.

> In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99.

Streaming is not an example of a healthy market IMO. I don’t know the economics of it all, but I know all the streaming services need to pay the same record labels. Whatever is going on there, it’s weird that they all cost the same. I currently pay $10.99/month for Tidal, which is the same exact price as most other services. I wouldn’t be surprised if there was collusion going on there, maybe even something like RealPage behind the scenes. There’s also the factor of Apple and Google’s monopolies over apps, and I wonder if undercutting Apple/Youtube is bad for business.

> But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal “price signaling” via publicized fares(1) in the global reservations system.

The link you posted seems to be a google search page? Not sure what you meant by that.

Yes, but it also runs counter to the idea that free markets tend to drive prices down through competition. In reality, 1 of 2 things happens:

a) companies try to differentiate their products enough to not be direct competitors (e.g. exclusive content on streaming platforms, or platform lock-in), and both/all charge more

b) one company buys the other to kill their competition

No one actually lowers their prices to compete anymore, because we abandoned enforcing anti-trust and anti-monopoly laws decades ago.

If I need to make a left turn across traffic or go around the block I’m not topping off at a station just for 5 cents/gal. (Tho, I might make a mental note & use that station when I’m coming down the other way, when it’s easy to in & out.)

Los Angeles in particular is crazy. We have the equivalent to micro-climates with fuel prices. Stations a half mile apart can be 30¢ different. Stations a town apart can be 70–80¢ different.

And there are a couple of stations in Beverly Hills adjacent that are ~$2.50 more than the going rate (no surprise there, tho).

What RealPage does is distinct because it assures prices are always above and by orders of magnitude what they should be. It also achieves that through private communication which I think is generally accepted as a problem.

“Skimmers” (drastically lower-priced diesel stations) are a real threat to larger chain stations. They don’t put them out of business entirely for a number of reasons, but one is because gas stations ultimately sell more than gas/diesel (e.g. a clean bathroom is often worth a few extra cents per gallon for me, but there’s a lot more than that too). Also any given station can’t sell an infinite amount of fuel. Beyond tank capacity, wait times are a real impact on sales volume, and so if a station offers a price too low (even if still profitable), it is just leaving money on the table.

So not to say collusion doesn’t happen, but one can also arrive at similar pricing with a commodity like gas without it. Especially since fuel margins are typically low.

the only question is how much profit to put on top and even then they have to be careful as if they go too low their competetors won’t follow and then they have to pay extra for an unscheuled delivery just to fill their tank.

i’m reasonable certian that small stations are illegally colluding in some cases.

So it could be argued it’s not

“private prices” + “autoaccept” + “compliance”

But rather

“public prices” + “autoaccept” + “compliance”

Still problematic behavior (and probably add “private knowledge of inventory forecast” on top of that), but I’d argue price signaling of the available inventory isn’t the main issue.

RealPage though has information on how many apartments are empty and uses that in algorithms even though it isn’t public information.

The list price is different than the final accepted monthly rate\term for the renter. Realpage is getting the actual rental information.

In addition, the occupancy of the building is also not public data.

I added “private prices” as one of the factors because the official DOJ wording in the complaint mentions “nonpublic/confidential/sensitive” prices in 3 different places:

>The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates

>“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents.

>Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. *

I think they’re talking about more sensitive internal numbers. What are the costs and margins on the unit? How quickly are units moving at a certain price? What’s the turnover at particular prices?

I think the core mechanics bear some similarities to insider trading, with a third party “washing” the non-public information.

Yeah that’s my understanding of it too “competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms”.

I.e. realPage has an oracle view of all the lease ending times etc, so it knows for instance, this next July there’s going to be very few availability, so boost all the rents by X%

I guess there’s a “private price” if the apartment complex share what, after all negotiations, the renter ended up signing for. It can be more than what was on the public website, if they ended up signing for a shorter lease, or less if the apartment ended up needing to throw in “first month free” etc.

There’s also private price of lease renewals done before the unit is put for rent on the website.

Another example would be stock trading apps, especially ones that give you forecasts and estimates as to when to buy and sell.

However, it seems this is a more of a hybrid situation. A big part of the complaint is just all these incriminating emails and documents where RealPage appears to be coaching landlords to avoid lowering rents or giving concessions, independent of the software.

At the same time, there was an algorithmic component, which the customers appreciated: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing…”

In the complaint there was a mention of “compliance” which could get into that piece though.

Real estate supply isn’t very elastic, and demand already outpaces supply. Your units will likely get rented, as long as you aren’t in the top 0.1% of prices.

Therefore your incentive is to maximize profit per unit since you can’t move more units. Your incentive is to also join in on price fixing, because it’s the only way to make more money.

Supply outpacing demand would cause this to dissolve, as landlords actually have to compete for tenants and the highest priced landlords have empty apartments.

In general as a large landlord should have around 10% of units not rented, if you have more than that rented you should raise your rates until people go elsewhere thus bringing you down to 10%, while if you have less than 10% lower your rates until people start renting from you. Different landlords have different numbers, but 10% is a good starting place. 100 units at $900/month = 90,000, 90 units at $1000/month = $90,000, but you have a few units free in case someone desperate is willing to pay $1100/month (and of course you can remodel one of those empty units thus making it more desirable)

It’s one thing if the software is helping landlords jack up prices to the market rate. It’s quite another to convince them to collude against their best interests.

However I would guess you will never have an email from an airline CEO that says “I really like this product…That’s classic price fixing”

On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year.

FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental properties weren’t competing against one another. When to me, there are simply no spare apartments, I’ve seen some complexes down to 1-2 units by the end of July.

Lots of systems using competitors data and algorithms to price items, so was it simply the fact that too many people used RealPage, what if nearby properties didn’t use RealPage and the rents went up anyway?

I am not sure if this is price fixing, I don’t know any landlords that use it, every home I’ve rented was with someone who owned 1-2 extra properties and just used Zillow or Craigslist.

That being said, I price my rental properties against what similar square footage gets at nearby apartments… Sooo if they are going up my rent is going up as well, and I bet most landlords do this.

So we’ve ended up accidentally price fixing the market I guess? I think it really depends on the internal communication and what they sold to landlords.

Housing demand is more elastic than you suspect. People have income on a curve, and at a certain point of price/quality will move further out and commute or move to a lower cost of living city entirely.

This doesn’t describe the major renter class who has few workable options to choose from. They take whatever they can get.

Once they manage a place to live, they’re likely trapped there because they don’t have a wad of cash on hand (required to move).

That’s average renter difficulty. It can get far worse.

In 2021, the few rentals available here got 400 applications/day. We beat out 50 applicants for one that was advertised for 2 hours (offered 6mos up front).

We beat long odds and barely avoided homelessness (even tho we had good employment history + money in the bank).

Many, many others were less lucky. Every rent-by-the-week hotel filled up, typically with people exhausting their savings.

Nobody is happy about it or thinks it’s a good idea, but living further out is not perceived as a legitimate option because of the fear of being severed either socially or career-wise.

Whether that’s a rational fear or not, it’s a reality that allows housing prices to outpace wage gains every year. As somebody who used to think housing demand is fairly elastic: housing demand is much less elastic than you’d suspect.

Part of the problem is that the lower end of potential inventory (pod apartments/SRO/etc) are essentially illegal in this country. So the barriers to entry make it seem much more inelastic.

The other thing is that normally there is an advantage to breaking the collusion which is what generally prevents them. AFAIK the software is capable of punishing people who break from the suggested price so this pushes the cost of maintaining the collusion onto the participants who have to put up with vacancies for longer than they would otherwise.

So in my view you can have an implicit collusion, or a collusion in effect even without an explicit collusion and with most of the participants not participating in it.

I also think this is one of the most important points of contention of our time. Our ponzi economy requires extracting monopolistic rents which is absolutely crushing the middle class and younger people. When I last visited SF downtown was a ghost town with many of the businesses that survived Covid being driven out by high rents – it appears that rental collusion has already been more damaging than a global pandemic.

And you’re sure the building is actually occupied and the units haven’t been strategically taken off the market?

> I am not sure if this is price fixing,

It is on RealPage’s part. It’s their stated _intention_. Whether cases should open against landlords who used it, I agree, I’m not sure, but it _is_ clear that RealPage broke the law here.

> I think it really depends on the internal communication and what they sold to landlords.

The real question is “does realpage charge landlords for it’s service?”

Contrast this with a cartel that includes a significant number of landlords in your city (i.e. way more than just a couple of your buddies) that (1) shares non public info such as current occupancy rates, current lease terms and durations, etc., (2) sets prices as a bloc, and (3) enforces compliance on pricing targets.

It’s qualitatively different from how you described your situation.

> That being said, I price my rental properties against what similar square footage gets at nearby apartments… Sooo if they are going up my rent is going up as well, and I bet most landlords do this.

This is essentially what RealPage does. It just automates calculating “what similar square footage gets at nearby apartments”. It probably does other stuff like puts a premium on corner units or those with south facing windows.

As to what an “ethical and not terrible for society” profit margin would be is above my pay grade, but I would estimate 15%. It also probably depends on how easily you can make money on the stock market as well.

Now, government just has to get out of the way and let housing be built.

So to keep their customers happy, RealPage will configure it to keep increasing prices, and it’s not really in any landlords’ interest to disagree.

I live in a building managed by a group that uses RealPage. They keep increasing prices and say “Computer says this is $X, can’t do anything, sorry”.

> RealPage-defined submarkets identified in Appendix A are relevant markets in which the agreements between RealPage and AIRM and YieldStar users to
align pricing has harmed, or is likely to harm, competition and thus renters. In each of these markets, the penetration rate for at least (i) AIRM and YieldStar, or (ii) AIRM, YieldStar, and OneSite ranges from at or around 29% to more than 60%.10

> Discussing a different RealPage product, another landlord said: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing . . . .”

> In fact, as RealPage’s Vice President of Revenue Management Advisory Services described, “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down”

> Its executives are blunt: They want landlords to “avoid the race to the bottom in down markets.” Sometimes RealPage is even more direct, acknowledging that its software is aimed at “driving every possible opportunity to increase price”

The fact that providing people with housing is even seen as an “industry” is a big sign of what is wrong with the world right now.

It is essential to living a decent life.

It should not be a driver of lining the pockets of people who are already rich.

If it’s proven that landlords colluded to fix prices, that should be addressed. But the reality is, prices are only going up in a select few metros. And it’s because lots of people want to live in those areas, which leads to rising demand which has not been satisfied by new housing construction. People desperately want to believe that there’s a silver bullet that will bring prices down without actually addressing the mismatch between supply and demand.

Not sure what “price controls” you’re talking about, but the reason it’s expensive to build in SF (which reduces the appeal for builders) is zoning, the byzantine planning process, the ability of local residents to effectively block or delay projects, and weaponized environmental review.

> Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return?

Building housing doesn’t need to be an investment opportunity. In a better world, I’m sure there would be plenty of people who would be happy to build housing with only enough profit to pay employees a comfortable wage. These sorts of people don’t have the ability to break into the industry, though.

Again, if housing isn’t an investment opportunity, then why would anyone build new housing? Sometimes people get together and build co-ops. But those are rare, and it’s only available to people with a lot of capital on-hand. Plus, it runs the risk of the project going over-budget.

Cali also has prop 13 i.e. rent control on real estate taxes. So if I bought my house in 1955, I might pay $100/year in property tax, the guy who just bought a completely identical house next door this year might pay $15,000 a year in property tax. On basically the same house. How is that fair? kinda a boomer “I got mine” type mentality. Also part of the bay area real estate problem, in addition to zoning/byzantine planning, borken process – why would anyone want to move out?!? Moving out would mean +$15,000/year tax, every year. Just stay put.

Of note in Singapore there’s not really the concept of “apartment building” business and it works fine (very dense NYC tier housing there). The reason why is the more “units” you own, taxes become progressively more brutal, an apartment building would be tax armageddon. So most rentals are a person who owns a few condo type units and rents them, few enough that taxes aren’t bad. Most people aim for owning, and for owning there is a private sector but a public government sector that provides home at more reasonable prices with various perks and incentives. That’s how to handle housing when you’ve got tons and tons of people and almost no land.

The people living in SF and it’s surrounding areas clearly want things the way they are. Who are we to force them to build “affordable” housing just because we think it might be good?

“We”, mostly being people who don’t even live in SF…

Do the tax payers of SF not get a say in how their community is managed? Are we now advocating people have a “right” to live in SF despite it’s cost or something? How does that work in reality, and most importantly, why?

It is in the interest of the entire country that these regions be forced to allow maximum housing development, because it will raise incomes across the entire country.

>Do the tax payers of SF not get a say in how their community is managed?

We know why zoning density restrictions exist, because their birth place was across the bay in Berkeley, whose proponents loudly extolled its benefits in pushing out anyone who was not White. This was the original intent of getting a say in development: to prevent undesirable racial minorities from moving in next door.

San Francisco weaponized housing density restrictions to push black people out of Haight-Ashbury, and to this day, continues to fight any and all housing development that might reverse this grave injustice.

You can either get ahead of a state-wide solution and implement something where you have some control that works for your community, or you can do nothing and wait for the state government to begin to remove zoning from local control.

“High” rent is relative to the area, and rent is high across the entire country currently.

Lack of rental housing drives up rental prices. The lack of rental housing is largely due to unnaturally low interest rates. People qualified for oversized loans, and bought up the rental supply, converting them into homes instead.

Since cash was easy to acquire via loans, this resulted in an unprecedented period of time where housing prices were driven upwards with near-zero limiting factor. That was the market where people were overbidding asking-price by $50K+ without even seeing the house… that was/is a very unnatural market. This bidding process resulted in significantly overvalued homes, which made them inaccessible to lower-income people. So the rental market shrunk significantly, and housing prices went through the roof… then runaway inflation came knocking, making everything that much worse.

Which is to say, all of this is the creation of poor federal policy, and there isn’t much your state or city can do about it.

> The six largest publicly traded apartment companies in the U.S. — all of which are linked to an alleged rental price-fixing scandal — experienced profit increases during the first three months of the year, according to an analysis from left-leaning watchdog group Accountable US exclusively shared with The Hill.

> In the analysis, the companies earned a combined $300 million in profit during the first quarter of the year, in part, due to rent increases.

Lots of profit to squeeze out with regulation, based on the evidence. The Vienna model is a proven model if for profit enterprises walk away from housing.

https://thehill.com/business/housing/4718252-large-apartment…

https://accountable.us/report-top-corporate-landlords-see-pr…

I definitely support regulations around housing: housind needs to be safe (fire exits, sprinklers, etc.). Landlords can’t engage in deceptive practices, like putting up ads for one unit and giving the tenant a different one. Units should be promptly repaired. Landlords shouldn’t discriminate on the basis of protected class. I could go on.

Supplier diversity is needed to prevent use of market power to restrict new supply coming online to hold rents higher than they otherwise would be (strong evidence homebuilders are doing this current state, restricting supply to juice profitability). The rest should be self explanatory. As you said, there is no silver bullet; it is various policy measures working in concert to attempt to arrive at a desired outcome. I am not anti profits, I am anti “gouge the human for basic needs for profits.”

TLDR Some profits? Okay. Too much profit? Not okay. People living in constant fear of not having a home? Not okay. Build, build, build.

(am a landlord myself, do not raise rents unless actual costs go up, reduce rents when needed by tenants, keep my profits reasonable (~%6-%10), usually no more than $100/month/door)

How many economics studies, from all schools of economic thought, across 100 years of research need to prove that price controls don’t work before people start accepting that fact?

In practice what does this mean? If landlords raise rents beyond what people can pay… doesn’t that mean they lose tenants? If they do not lose tenants, then by definition doesn’t it mean they have not raised rents beyond what people can pay?

> Dynamic price control of rents to prevent them from accelerating beyond what wages can support (existing tenants win vs potential new market entrants…

Can you elaborate on what you mean by “existing tenants win vs potential new market entrants”? Does this mean that landlords must rent at lower rates to someone who has lived in SF for some time, versus an immigrant that is willing to pay higher rents?

It benefits existing renters because new entrants (new renters) would have to pay market price, but existing renters might be behind market rent if market rents are increasing too quickly. Same way that Prop 13 works.

Dynamic in the sense that it’s not fixed at 2% but tied to some sort of variable index (San Diego for example does CPI + 5% with a hard cap of 10% YoY increase I believe)

It’s called rent control. That’s literally describing the existing rent control policies in SF: rent is fixes save for an extremely minor increase around 2%. Allowing a fixed price increase is still a form of price controls.

I really want the previous comment to elaborate on this:

> existing tenants win vs potential new market entrants

The issue that we have here – market rates controlled by RealPage. Since everyone uses RealPage, in terms of price for renters it’s essentially the same as if every building was owned by the same company.

I’m appalled how long it took for this lawsuit to be filed. We knew about this price fixing for quite some time.

Or how about cars? Let’s ban profit on cars. That’ll make them cheaper, right?

https://www.theatlantic.com/ideas/archive/2024/08/economists…

https://www.ncsl.org/financial-services/price-gouging-state-…

https://www.whitehouse.gov/briefing-room/statements-releases…

From a paid Matt Stoller BIG (https://thebignewsletter.com/) piece on monopoly pricing:

> Something real is going on. In individual markets, CEOs have been bragging publicly that they are restraining production to increase prices. Profit margins in the food industry jumped during Covid and haven’t come back down. Or take rent. There’s a company called RealPage that works with the biggest corporate landlords to hold apartments empty so they can increase prices, which jumped up 11% in 2022. There’s some evidence of conspiracy around pricing in virtually every industry. Turkey, poultry, and pork. Frozen french fries. PVC pipe. Anesthesiology. Oil. Ammunition. Pharmaceuticals. K-Pop. Credit bureaus and FICO, Verisign, industrial gasses, architectural software, locks, entertainment data. Homebuilders. Garden chemicals. Defense and aerospace. Ticketing. Estate Sales. Gaming. Drug wholesaling. Work ID information. Seeds and chemicals.

Laws to crack down on this behavior has popular support, so I won’t spend additional time defending the idea in this forum, as it is unnecessary.

The Price is Wrong: How Biden Can Get Inflation Right

https://blueprint2024.com/wp-content/uploads/2024/06/Screens…

> The most popular policies are calling on all states to suspend taxes on groceries (68% selected), cracking down on overcharging by hospitals (66%), starting a congressional committee to hold hearings on and investigate price gouging and overcharging by corporations (63%), requiring public utilities to cut rates for electricity (63%), reducing the deficit by cutting spending (62%), and prosecuting price gougers (61%).

The outrageous profiteering in food and groceries is not with the hyper-subsidized agriculture industry that grows food and raises livestock, but up the supply chain in the middle-men who buy this to process and package it (especially meatpacking). Consumers, farmers, and grocers would all be served if the monopolies that absorb massive food profits were busted.

> Something real is going on. In individual markets, CEOs have been bragging publicly that they are restraining production to increase prices. Profit margins in the food industry jumped during Covid and haven’t come back down. Or take rent. There’s a company called RealPage that works with the biggest corporate landlords to hold apartments empty so they can increase prices, which jumped up 11% in 2022. There’s some evidence of conspiracy around pricing in virtually every industry. Turkey, poultry, and pork. Frozen french fries. PVC pipe. Anesthesiology. Oil. Ammunition. Pharmaceuticals. K-Pop. Credit bureaus and FICO, Verisign, industrial gasses, architectural software, locks, entertainment data. Homebuilders. Garden chemicals. Defense and aerospace. Ticketing. Estate Sales. Gaming. Drug wholesaling. Work ID information. Seeds and chemicals.

Sounds like the real solution to this problem is the same solution to the housing market: Too many laws preventing new entrants, which prevents natural competition from lowering prices.

The problem is the needless and protectionist laws and regulations. If you want to see the effectiveness of monopoly regulation, look at California’s PG&E vs Texas’ deregulated electricity provider market. Californians are paying outrageous bills, meanwhile Texans have their choice of paying different electricity providers, and thus have much lower electric rates.

I could buy this for many industries, but real estate has no functioning free market dynamics because there is no external pressures to facilitate maximal usage of land value (and therefore sale or productive usage like building more homes), in fact most of zoning laws do just the opposite – they encourage low yield development for the sake of holding existing land owners value higher.

A land value tax would flip this narrative, applying an actual market force to real estate market dynamics. This would incentivize maximal productive use of land to pay for the land value tax. Not to mention, land value taxes are easier to implement and assess value on. It also puts an actual value on what makes the land valuable – the community aspect, like being located near shopping centers – and returns money back into the community. Combined with upzoning, you would see more churn in the housing market and massive incentivizes to build more housing, because you would finally have a pricing pressure on the value of the land.

Changing zoning alone isn’t going to make the same dent either, because it does nothing to incentivize the sale of land, same with changing any regulation around housing. You need something that facilitates land owners to actively make productive maximal use of land value, and an LVT will do that.

What are “excessive profits”? 10%? 15%? 25%?

> experienced profit increases during the first three months of the year

Does this even mean anything? This could mean their vacancy rate decreased and thus their business is more profitable. I don’t see the issue with companies reducing vacancies and providing more housing to more people.

What expert thinks increasing costs will lower prices?

If regulations make it impossible to build housing and public housing has the same regulations, who is paying that bill? The existing residents via sales and property taxes?

you can google construction costs in sf. how does regulations reduce any of those numbers?

(0) – https://www.kiro7.com/news/local/king-county-taxpayers-payin…

If you can earn 25% percent in profits in the current environment then it is a clear indication of an inefficient market – a market that needs to be regulated in order to create efficiency (like in this case as with many other cases: remove monopolistic behavior).

While it is problematic if you can’t derive profits from productive activities it is also problematic when entities derive unsustainable profits – also for the party deriving the profits.

If there is not a bit middle class to consume products, then there will not be be a market to supply products to.

I am also not proposing any formal system.

I am saying that it is quite easy to spot profits that are too high.

I am also saying that the governments role is to ensure efficient markets.

In this case it is suing RealPage.

It could also be making it easier to make housing in a specific area to counter under supply.

it is all regulation.

I wouldn’t be surprised if corporate-run apartments are more expensive. They’re are usually renting much nicer buildings with amenities like air conditioning, parcel delivery rooms, gated parking, etc.

If there was enough supply, they absolutely would.

> They’re are usually renting much nicer buildings with amenities like air conditioning, parcel delivery rooms, gated parking, etc.

It sure sounds like you’ve never rented. This is, in the vast majority of cases, not reality.

I have, in fact, rented in San Francisco. I rented from a small landlord in a building that had no A/C, no package room, no parking. I had to fix my refrigerator and shower mixer myself because she barely spoke English. But it was a cheap apartment! I also rented from a corporate landlord. It had a lot of amenities like a gym, a package room, and parking. But I paid a lot more for that apartment.

And most amenities are bullshit. They’ve taken ordinary, expected services and privatized them, externalizing the costs to residents for kickbacks, and made elective services like cable and internet mandatory through exclusive provider agreements to inflate revenue.

In aggregate, squeezing older properties subsidizes newer properties by equalizing returns. They’re making just as much or more off of cheaper properties as newer “premium” ones.

No, but this doesn’t change the fact that housing is a basic good like gasoline and insurance. Controls in those industries don’t prevent companies from investing. Profit regulation doesn’t mean no profit.

> price controls on housing lead to few developers willing to build there

Because there are alternate places without those controls. If housing were treated like the essential good that it is, there wouldn’t be any ROI havens, and developers would adapt (or die if they can’t accept reducing the typical ROI, which averages around 15%)

> rising demand which has not been satisfied by new housing construction

There’s plenty of demand, just not for the houses that are being built. (That’s not to say there aren’t specific cities where there is no supply). Based on most affordability standards, many can’t afford the typical rent or mortgage. If those prices can’t come down, or income can’t go up, then new types of much cheaper housing must be built.

The way that the government influences gas prices is that they stockpile or release oil from the US strategic reserves. They don’t regulate prices. They influence supply in order to influence prices. The analogy would be building public housing.

I’m not sure what you mean by treating housing like an “essential good”. Most essential goods aren’t subject to price controls. There aren’t price controls on food, for example. Most countries that set price controls on food experience famines (or the price controls are widely ignored and the black market becomes the normal market).

> Texas’s APGL kicks in when a disaster is declared by the governor or the country’s president. Under the law, merchants are not allowed to sell or lease fuel, food, medicine, lodging, building materials, construction tools, or other necessities at “exorbitant” or “excessive” prices, with those caught facing civil penalties of up to $10,000 per violation, rising to $250,000 if elderly consumers are affected.

There’s very specific, and very short-term windows in which prices cannot be raise excessively. It’s not even remotely comparable to price controls on rents.

They colluded with property management companies to capture 80% of existing multi-family dwellings and raised rents to inflate hard asset values of PE owned properties nationwide. Just because this is the closest that homeowners have had to a bailout in their lifetimes doesn’t mean they didn’t profit even more.

It was a scam.

But where I’m not going to agree is the notion that setting rent above a certain threshold is “abusive landlord behavior”. If a landlord is setting the rent too high, the consequence should be that the unit stays vacant. If someone is willing to pay that rent, then evidently the rent wasn’t too high.

This can led to situations where the most profitable move for landlords is to take advantage of the discrepancy to regularly raise the rent for existing renters by more than the market, in attempt to maximize profit. Sure they might have to deal with the hassle of finding a new tenant every couple of years when someone gets priced out, but if it leads overall to slightly higher profits it’s the winning capitalist move.

The rentiers are ostensibly following the law, but the overall cost to the population and quality of life loss to renters can be significantly outsized compared to a sliver of additional profit for the rentiers. This is a great example of externalized costs in a free market and exactly where government should generally be attempting sensible regulation.

we seem to accept this at face value, but there’s lots of evidence that supply is not the only issue, or even the biggest. Example: in Toronto this year there’s been over 220 large real estate projects go insolvent. There’s clearly a limit on the demand side.

https://en.m.wikipedia.org/wiki/Price_discovery

Since the good has very inelastic demand, suppliers have an easier time influencing the market. Small changes in supply should cause big changes in price, in both directions. However, prices go higher much faster during high demand than they go lower during low demand.

And it’s not something new. When price is lower than market, people do buy it.

Set the same price controls across the entire nation, suddenly there is no disincentive to not build in any one area.

That’s not the case. If you add the same price controls everywhere, then the same near-zero housing gets built everywhere.

Construction companies will shut down, they will not continue paying people to build housing at a loss.

Removing the profit-motive from the equation does not magically net increased benefits for everyone. It’s usually the opposite in reality… landlords end up doing the absolute bare minimum because sinking a bunch of money into renovating the bathrooms or kitchen will not yield increased rent under these proposed policies. Or people looking to invest in housing/apartments for rental income decide it’s ROI is far too low to be worth the hassle and risks… so less housing is built.

This line of thinking looks at some minority of people living in slums, and assumes every rental owner is actually a slumlord. So, the solution is obviously to degrade the situation for everyone because some small minority of people have it rough…

(edit) anyway, rent-control on market housing do not work, but limited non-market housing do apply downward market pressure, even when done poorly and unplanned (as shown by AP&P study)

In your comment you explicitly specified that the whole country should adopt the same price controls as SF.

SF’s price controls are sufficiently onerous that nearly no new housing is built there.

I absolutely did not say this.

I said “Set the same price controls across the entire nation”, which means one set of consistent price controls for the country, not the existing set of price controls that SF currently has.

Perhaps I should have worded it as “Set a consistent set of price controls across the entire nation”.

You’re correct, “Set a consistent set of price controls across the entire nation” is a much better wording.

Imagine a county is in the middle of a famine, and the government in a few provinces set price controls on food. The famine worsens in those provinces. Is the problem helped by setting price controls nationwide?

Just like farming being an industry allows you to sit at a desk all day instead of being out there foraging.

You could provide housing like undeveloped nations do, where large families live in cramped hovels without electricity or running water.

In the sense that someone should want an apartment with 2 bathrooms, a fireplace, and a pool – it’s easier to treat housing overall as a consumer good.

But it doesn’t function like that.

Building the house isn’t even the part that is the problem. It’s land/space and how some people maintain monopolies on those.

A free market might make the materials and construction of a house cheaper. It address that space is limited and that most expensive space is often where there are more jobs.

Regardless of who pays for it, housing modern peoples is an industry.

I will also note that the currently in-vogue 5-over-1s lean heavily towards “Industrial housing”. Funny how diffent economic systems both with a captive market converged towards no-frills housing.

You seem to be suggesting that either housing must be exploitatively expensive, or people must live in squalor.

And yet the cost of housing more or less always increases. Isn’t that enough to suggest that there’s something about this “industry” that doesn’t quite make sense the way it’s handled?

Government housing should absolutely exist, but only as a safety net as their management is incredibly inefficient.

Private housing isn’t the issue here: collusion is. Collusion should generally not be tolerated in a well regulated capitalist system.

Problems with regulation are the expected consequence of living in the real world and not a model. They should be fixed and we can do better.

I just don’t see how any of this leads us to more regulation. More government control means less efficiency and likely MORE corruption.

> It is essential to living a decent life.

What troublesome phrasing. “Provide” implies people should get housing for free, and “decent” implies getting “decent” housing for free…

Well, so who is actually paying for it then? Magical handwavy “government” money? Everyone knows where government money comes from, right? Right?

Do we want more printed money and uncontrollable inflation? No? Oh so we should just steal this money from people who worked hard, because some others didn’t?

> It should not be a driver of lining the pockets of people who are already rich.

Ah yes, the ol’ “rich people bad” whipping horse. Despite the tens of millions of jobs created by “rich people” and the millions and millions of people who live in actually decent housing in exchange for market rates.

The fact that some people actually truly believe “free government housing” is going to be “decent” is absolutely tragic. Yes, let’s doom millions to the “projects” because it makes us feel better knowing those darn rich people aren’t making money!

If anyone wants a porthole view into what government housing looks like – take a look at the plethora of stories and pictures from our military barracks, across all branches. Mold, bugs, broken appliances, holes in walls, locks that don’t work… and nobody cares despite the very vocal, highly visible complaints. There’s a reason our service men and women scramble to off-base housing the moment they are allowed.

> The fact that some people actually truly believe “free government housing” is going to be “decent” is absolutely tragic

Council houses are fairly highly regarded in the UK (i.e. the property, in terms of space, light, build quality. The estates/tenants, not so much…). They also have a track record of maintaining them far better than private/social landlords – I can personally attest to that.

It is the large homebuilder companies that build truly awful, “tragic” homes, cutting every single possible corner imaginable for an extra penny of profit.

Wikipedia also indicates in the 1970’s the UK government dramatically and suddenly cut back on funding for these homes (among other things), which led to some very poor living conditions.

Your quality of life being dependent on the whims of politicians and budgets outside-your-control seems awful…

Yes the Conservatives stopped building council homes, mostly through neoliberal ideology that the government shouldn’t provide housing. The private market houses are far worse quality

The trend continued into the 80s but blaming thatcher and neoliberalism is simplistic at best.

https://www.ons.gov.uk/peoplepopulationandcommunity/housing/…

Table 2A, housing starts by FY.

1970 185k. 110k in 1978/79 before thatcher’s landslide. By 1980 (so before the 1980 housing act came in) down to 58k.

The starts are what’s important as those are the ones impacted by new legislation and policy.

89,630 (1979)

88,540

68,330

40,080

39,170

37,580

30,410

25,380

21,820

21,450

19,350

17,870

11,230

5,700

3,360

2,880

3,440

1,740

1,550 (1997)

You’re going to claim the Conservatives of that era didn’t stop building council houses?

Compare with the 18 year period before Thatcher:

119,350 (1961)

132,070

126,240

156,830

167,300

179,170

202,860

190,670

182,380

179,280

157,380

122,360

104,570

124,140

152,470

153,750

145,070

113,660 (1978)

> By 1980 (so before the 1980 housing act came in) down to 58k.

I don’t recognise this 58k. What is the exact cell of that number?

She didn’t reverse the trend, but she didn’t start it.

How would real estate developers feel if construction companies / subcontractors had a similar product for pricing their labor? Or how would any company feel if employees worked together to set the price of their labor? That sounds kind of familiar, and doesn’t sound like something most companies would be happy about.

RealPage’s big issue is market penetration, though. They control pricing for enough of the housing stock to artificially manipulate the cost of housing.

It’s one thing to promise to get clients a sale price on the far end of the bell curve. It’s another thing entirely to move the entire bell curve.

If I invest in a stock and the stock goes down, nobody looks at my intentions and decides whether I should make money off it. It’s my responsibility to understand what I’m investing in.

If I invest in harming consumers, nobody should look at my intentions and decide whether I should make money off it. It’s my responsibility to understand what I’m investing in.

Even if RealPage didn’t know what they were doing was harming renters, they should have known that. Knowing how your actions affect people is a prerequisite to running a business in any market, but especially in a market where people’s basic needs are at stake.

The answer to this question does not matter.

This is worth publicizing during election season. Rents are going up due to collusion.

> Even in the best of circumstances, prosecuting criminal antitrust cases can be challenging. They require a deep understanding of a particular market and proof beyond a reasonable doubt that the defendants entered into an illegal agreement. His- torically, the Division relied on multiple witnesses to testify that an agreement, or “meeting of the minds,” existed. There is often a thin line between lawful information-gathering and unlawful price-fixing, making it difficult for jurors to understand what, exactly, constitutes criminal conduct. One former Antitrust Division attorney went so far as to say that juries “don’t like to convict in antitrust cases” because they view violations as “technical.” Another recalled seeing jurors appear shocked when they learned during trial testimony that an antitrust conviction carries a maximum sentence of 10 years in federal prison. An attorney who interviewed jurors after one trial said that some jurors expressed anger that the Division was expending resources to prosecute these cases at all.

(1) https://www.justice.gov/atr/criminal-enforcement-fine-and-ja…

(2) https://www.americanbar.org/content/dam/aba/publications/ant…

We won’t miss them.

There are two new aspects to RealPage in terms of being anticompetitive:

1. Using information from one customer to help set prices for other customers. Once you hit a certain market percentage, this effectively allows you to set prices; and

2. If everyone uses the same software that spits out the same results then this is effectively collusion even if it’s not actual collusion, as in the trope of dark, shadowy figures meeting in a cigar-filled room.

Every aspect of our life is getting financialized as companies seek to extract every dollar from us. You see it with PE buying up vet clinics en masse for example. If you’ve wondered why your vet bills have gotten so expensive, that’s probably why.

Anyway, using rent to squeeze every dollar from people in a way that raises everybody’s rents with the blessing of the state (which has been the case until now) is state violence. It is using the necessity of shelter to cerce money from you.

People in general don’t see this sort of thing as violence but it is. Just like polie crackdowns on protests are state violence.

They say they want dense, walkable, core neighborhoods but when people actually try to build denser housing it’s like pulling teeth.

There actually is some building happening but the demand is so far ahead of the supply that it’s not nearly enough.

There are a lot of places, particularly the high demand places, where the cost of acquiring the houses in the first place is the hang up. Everyone is certain they can get half a mil minimum. That drives costs considerably when you need 1/2 a block, or a full block for high density development. It’s not easy. You could even have to end up giving the current land owners some preferential share of the finished development. Which, of course, means there’s less profit for other potential partners at the end.

People ask, why are apartments so expensive? In high demand areas, that’s a big part of the reason. Land acquisition costs were so high that it precludes building anything that can offer that <USD3000 a month price tag. (And to be honest, that’s not even all that affordable really. But it illustrates how the numbers on a lot of these new developments work out.)

Usually the municipality or the state has to step in with some kind of break in order to make the numbers work out. And that’s when we get to the step you’re talking about where the state or the municipality demands this or that or the other. But the politicians have to demand something for the break, or it’s seen as just having handed over taxpayer money to their buddies in construction. ie – corruption.

So from beginning to end, it’s a tough problem.

EDIT:

It seems before I even finished typing my message, sibling messages appeared illustrating the point I was making in the last paragraph. There is no way in today’s environment of completely broken down professionalism and trust, that a politician can give a concession without getting something for his/her community that s/he can use as justification for the concession. Otherwise, people, rightly or wrongly, just see it as handing free money to a politician’s friends.

Combine with upzoning and it would really stimulate the housing market in short order without subsidy.

Land, being largely finite – especially when you start considering how communities make land more valuable etc – shouldn’t be treated as a manufactured good. A land value tax is the only way to bring market incentives to real estate, because otherwise there is no pressure on owners to sell or otherwise make more productive use of land. Our current policies from local to state to federal, all incentivize holding land regardless of its utility.

These neighbourhoods can be served by light rail / street cars allowing more distant travel via rapid public transit, further reducing the need for cars. Look at a lot of the older neighbourhoods in big cities such as Riverdale in Toronto (1) to see what streetcar suburbs look like.

(1) https://www.youtube.com/watch?v=MWsGBRdK2N0

Also these are basically fake numbers.

Unit could be an entire complex with hundreds of actual apartments.

—

EDIT:

They dont own any direct units, apparently, but they own a large percentage of the companies, developers, funds that do.

It a far more nuanced issue and hard to get a true understanding of, as money is the grout that fits everything together – its hard to see how it all works.

If their ownership is a drop in the bucket on a national level, then what you’re proposing would only make sense if they’re heavily concentrated in a few cities. Is there evidence this is happening?

>Unit could be an entire complex with hundreds of actual apartments.

Dividing the total asset value by the number of units gets you around 300k, which seems in the price range for a single family home. That doesn’t entirely rule out what you’re describing is happening, but if it is the effect must be low.

Same DNA:

>>he business that would become BlackRock started under the umbrella of Schwarzman’s firm in 1988. “They used to be called Blackstone Financial,” Schwarzman said. “We started in business together. We put up the initial capital.” Schwarzman started Blackstone three years earlier in 1985.

>>When Fink decided to branch out on his own, he needed a new name for his asset management operation, Schwarzman said. “Larry and I were sitting down and he said, ‘What do you think sort of about having a family name with “black” in it.’”

Thanks for the input though – I am working on figuring out how to document all these entanglements – there are a lot of others also attempting to do so, if you have any links to such, I appreciate real data that I can trust (I am mapping out The Oligarchs, their entanglements, and what/who they are/actually own.)

>The owner of a vacant lot in a thriving city must still pay a tax and would rationally perceive the property as a financial liability, encouraging them to put the land to use in order to cover the tax. LVT removes financial incentives to hold unused land solely for price appreciation, making more land available for productive uses. Land value tax creates an incentive to convert these sites to more intensive private uses or into public purposes.

The entire purpose of a land value tax is to encourage the productive use of land, which boils down to either building stuff on it to make it more productive or selling it to someone else so they can largely do the same.

Otherwise it is a simple tax burden to hold. While extremely wealthy individuals may choose to do this, its unlikely that businesses (like PE firms) are going to let their tax obligations stack over time and hold empty land / buildings etc. Same goes for individuals who are taxed at wildly different rates (like in California with Prop 13) simply based on time of sale

(0): https://en.wikipedia.org/wiki/Land_value_tax

The goal should be ownership for folks who want it, not a nation of renters.

What’s frustrating is when (as appears to be obnoxiously common in the UK) affordability requirements for mortgages mean someone “can’t afford” to buy even when their mortgage payments would be less than their current rent. While the landlord probably has an interest-only mortgage and doesn’t pay tax on their mortgage payments.

Here’s a thought: tax landlords based on their self-assessed property value, but make it so that the tenant has the right to buy the property for that amount.

It’s not really your home if you are obliged to sell it after x years.

The traditional societal compact with private property is that the property is yours for as long as you choose to keep it. (Providing you pay the taxes covering the costs to provide municipal services to your property.)

This kind of changes that, and I’m not sure it would stand up to constitutional scrutiny?

Unless I’m misunderstanding the proposal, this would change that practice. You would be told how much you could rent the property for, as well as the date you would need to sell the property. (Which, I’m guessing, would be based on the rent amount?) So a radical change from before in terms of private property rights.

Median household county in my area is about $55,000 a year. The median price of a house is $450,000. Assuming two people, the 50th percentile wage is equivalent of $14/hour. (This as an eyeball looks pretty close to a median wage.) Fair market rent for a 2 bedroom apartment (40th percentile) is 1500, or 32% of income.

If you let everyone get their own bedroom? For a below median two bedroom apartment, they will barely be able to afford the place.

A 4 bedroom place is $2500, so you’re going to get about 100 dollar discount, but that all gets wiped out if one of your roommates leaves and you can’t find a replacement. The more people sharing a space, the more risk there is.

It’s tougher out there right now if you’re not on an engineer’s wage.

Oh totally agree. Just pointing out that a straight comparison of wages to home prices doesn’t dictate unaffordability.

I realize this is a spicy take, but we’ve really got to get away from this thing where we advantage passive income for wealthy landowners. It didn’t work out well for society in enlightenment-era France, it didn’t work out well in Victorian England, it didn’t work out well in Tsarist Russia, and I’m not convinced that removing birthright qualifications and primogeniture makes all that much more equitable in the modern USA than it did in any of those periods that we tend to look back on as being indefensibly elitist.

I only know this because I have been preparing to rent my primary residence to see if it’s more economical to sell today or hold and sell later, while renting. The answer is the latter, but in terms of real cash I will be in the red for about 2 years until the (very small) difference in mortage + insurance + taxes + upkeep and the rent will be profitable. And even then, it’s maybe $150/month.

All told it’s a slightly better investment than S&P 500 index funds, but resistant to downturns. But it’s not a real source of passive income, you don’t get your cash out for years.

(0): https://d18rn0p25nwr6d.cloudfront.net/CIK-0001687229/a154763…, ““We operate in markets with strong demand drivers, high barriers to entry, and high rent growth potential, primarily in the Western United States, Florida, and the Southeast United States.”

(1): https://www.sec.gov/Archives/edgar/data/1562401/000119312513…, “The continuing development of apartment buildings and condominium units in many of our target markets increases the supply of housing and exacerbates competition for tenants.”

You have to change the structure of the market so they no longer see these investments as profitable.

One way local areas do this is by “homestead tax exemption” which reduces property taxes if you live in your own home, but this is binary and punishes small landlords equally as big ones.

My town is experimenting with allowing this exemption if anybody claims the address as their primary residence, whether it is the owner or not. The main purpose is to cut down on people keeping vacation homes, but it should also make things more expensive for flippers and speculators.

Small landlords are no better than big ones if they’re keeping properties empty.

Once an area reaches a certain % of landlords (no idea the actual %, but it’s low), it leads to a general decline of the neighborhood. These landlords are buying starter homes (apartments and houses) whether they are PE companies or individual landlords, driving up the cost of “cheap” housing.

Housing is not a free market by any stretch of the imagination, so if you just move one lever you don’t always get the response you would in a true free market.

Now you might say those bans aren’t 100% effective, but why do they need to be 100% to be justifiable?

Arguably, the reason we don’t already have this is because a large contingent of the voting public has been conditioned to believe that if the government does something well, it’s communism, so the government should do anything well.

The American housing market does not seem to have much speculation right now. Houses actually provide utility around equal to what they cost here, theres just a big enough wealth disparity combined with not enough housing that a huge number of people cant afford that price.

The American market has lots of speculation. Many landlords are just in it for the appreciation given that they can’t even make a mortgage payment with rent, I know of multiple homes in my (Seattle) neighborhood owned by Chinese investors that are barely lived in.

There are unsold units because the price went crazy due to speculation. Empty housing is one of the main indicators of a real estate bubble. American vacancy rate has slowly crept up but is still extremely low outside of manhattan. Americans tend not to believe housing will appreciate faster than the stock market, so housing speculation is limited, although of course not unheard of. We’d need LVT for that.

If a vendor anywhere in the world has more stock than their customers want, the price goes down. If more people want it than the vendor can provide, the price goes up. If there’s more food than animals that want to eat it, animals eat their fill and the rest rots. If there are more animals than food, each spends increasing effort developing strategies to get more than their neighbors.

Now, if someone claims they can prove that demand increasing by X results in prices increasing by exactly Y, I’m with you. There are too many variables to make that predictable. But the basic idea behind it? That’s pretty fundamental.

Game theory is mathematics, not science. You can derive the basics of supply and demand from game theory.

Economics is a soft science. But so is history and, I’d argue, a good deal of computer science.

You can derive supply and demand from game theory once you make some assumptions about preferences, costs, rationality of players, etc., all of which are non-mathematical, mostly empirical concepts.

Plenty of landlords would rather a unit in a building go empty for longer than compromise on rent in a way that weakens their negotiating position with the other units. (Also, with lenders.)

The argument for taxing vacancies is city taxes are often set on the assumption of occupancy. A vacant unit doesn’t contain a tax-paying worker. The vacancy tax adjusts for that.

> Remove tax benefits like bonus depreciation or accelerated depreciation

Agree.

Yep, I watched my last apartment (which I left partially because the rent went up to an unreasonable price) sit vacant for several months and laughed at how he could have made much more money if he compromised slightly on rent (which he seems to eventually given in to, so his greed only served to lose him money and not get the price he wanted).

In my experience: A tiny minority (for housing – not sure about commercial). This is one of those cases where selection bias applies. As most landlords really hate vacancies, the ones you do see are the tiny few that don’t. And because they let them be vacant for months, it adds to the selection bias. They perhaps own most/all of the property, so the vacancy cost is miniscule (only property tax).

I do know the bulk of landlords are fussy about the type of consumer they get (e.g. decent credit rating, etc), and will allow for longer vacancies to get them – the rationale being that a bad occupant costs more than the vacancy charge – especially in tenant friendly states like California (extremely expensive to evict).

Keep in mind – the bulk of them don’t own the properties outright – they are paying a loan. In a place like where I live, they may need to pay $2000/mo on a property that they rent out for $2300/mo. That $300/mo is a very slim-to-nonexistent profit margin once you account for costs. If it goes vacant for a month, they are losing over 6 months of net revenue. When you factor in the costs, it may well be closer than a year’s worth of gain. The property doesn’t appreciate much here, so they’re not gaining in that fashion. Now when an eviction takes 4 months to execute, you can do the math on how they may prefer a 1 month vacancy to a bad tenant.

Really: Get rid of fixed interest mortgages and you’ll discourage rent seeking behavior. Most are playing the long game: They’ll accept a net loss of, say, $100-200/mo because they know their costs are (relatively) fixed, and in, say, 5 years the rents will have gone up enough to break even or yield a small profit. Keep it up for the next 30 years and they’ve made good money (and had a tenant pay for all the equity).

If you want to discourage rent seeking, discourage the main incentive: The cheap loan.

Of landlords altogether, sure. Counting by unit in high-demand locations, unclear.

> property doesn’t appreciate much here

You’re describing a stable housing market. Those aren’t where RealPage is accused of making mischief.

Also important for commercial vacancies. The rent is too high, costs for commercial goods and services (and especially food and entertainment) is inflated by inflated rent so restaurants and consumer businesses can’t stay open because they can’t afford to pay the rent and lower prices to attract customers at the same time. And yet a huge proportion of the commercial space is just empty.

A vacancy tax makes up for that missing tax revenue from a running business and also just raises the quality of life for the people of your city by giving them opportunities for things to do and lowering the bar for entry into running a business.

> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed

Yes, you’ve successfully articulated the point. In an actual free market where supply can be added easily with minimal headache, buying an asset to rent it back is perfectly fine. In something like the housing marketing, buying a home specifically to rent it out is bad whether it’s one unit or one thousand because supply is already artificially constrained. The end of that line is BlackRock buying up thousands of homes and materially hurting Americans. The fact that some random person with a few million in inheritance can make money in the interim is irrelevant.

> but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won’t give a loan on – and they renovate them, bring them up to code, etc.

It’s pretty easily to exclude vacant homes with open permits that are actively being renovated or with 203(k) loans, or to provide revenue-neutral tax breaks. This is a legitimate criticism but it means you address the criticism, it doesn’t mean the original goal is bad or impossible.

> There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages.

We should definitely remove fixed-interest mortgages for non-owner occupied purchases.

Just as with single payer health care: While it works very well in other countries, people in the US will insist it will fail here. 🙂

>Yes, you’ve successfully articulated the point.

And the goal. Why raise taxes on vacancies? To push out owners whose primary goal is to leach out a few percentage points above loans they can get or to sit on property while it appreciates in value (while harvesting tax benefits on the depreciation of the structures they maintain to a minimum because _margins_)

There just shouldn’t be a class of people whose business is harvesting tax benefits and arbitrage of trust by banks.

There could easily be exemptions to a vacancy tax to allow for, or even encourage, renovating a home.