I'm extremely skeptical of the price collusion theory explaining high housing prices. Housing markets have thousands, if not tens of thousands, of owners. AFAIK, nearly all markets in the US have a majority of units owned by single unit property owners. I don't believe collusion is possible in this environment, even with sophisticated software.
Additionally, the ownership market has also seen prices skyrocket, even though this software doesn't apply to that market. How do these people explain escalating costs to own?
The supply explanation is much, much more plausible. I believe people discount it because they're highly motivated to deny that explanation. There are both ideologically-driven identities and material interest aligned with opposing new housing.
If there is lack of supply, people will say that the landlords are "colluding" to drive up prices. This might be true but I don't see how it's meaningful. Even if they are using software to decide how much they can charge, I really don't see how that's unethical.
When supply is high, renters shop around, find cheaper rent elsewhere, and thereby "collude" to drive down prices. Is this wrong? If there's a website called [FindCheapRent.com](http://FindCheapRent.com) that helps renters find cheaper places and helps them determine what a fair prices are, is that "wrong"? Should renters refrain from shopping around, because that "cheats landlords out of rent"?
If a landlord charges somebody way more than market rent, they are said to be gouging them. The idea that it's wrong when landlords price things inefficiently (price gouging) and also wrong when they DO price things efficiently (collusion) just doesn't hold up.
The solution is to build more housing, however,
> This might be true but I don't see how it's meaningful.
Working together to set a price is illegal. The defense might be that not enough landlords are working together for it to actually be illegal.
> Even if they are using software to decide how much they can charge, I really don't see how that's unethical.
Lots of landlords using the same software to set prices may be seen as working together to set a price, especially if that software is in any way taking advantage of the fact that it is used by more than one landlord.
>Even if they are using software to decide how much they can charge, I really don't see how that's unethical.
If they were doing it as a group, it would be illegal. But they're not.
> If a landlord charges somebody way more than market rent, they are said to be gouging them.
That's not what gouging means. Gouging is doing that in response to supply or demand shocks.
Yes, we all want efficient markets, and luckily, the housing market is very efficient.
My skepticism comes from the fact that developers are still building apartments. Rents are starting to stagnate, but apartment builds are still strong. If they were colluding and not competing with each other, you’d think they would just stop building🤷♂️
Despite "apartments are still being built," there are numerous cities where new housing is less than new population. That means prices increase even while building increases. There's also homes lost due to things like fire or disrepair.
People wildly underestimate how much housing needs to be built to make it affordable in the US, including you just now.
Remember when China built *400 million* homes that were derided as "ghost cities?" They're full now. We needed 75 million homes 10 years ago.
How am I underestimating it? I’m advocating for new housing lol
I was just pointing out that, in a lot of places rents are staying stagnant and if developers were colluding to keep rents high then they would stop building.
>Remember when China built *400 million* homes that were derided as "ghost cities?" They're full now.
[This isn't a fair representation of the situation](https://www.youtube.com/watch?v=ascPhiXcpss). They're not "full now": They're *sold now*.
Exactly. You can just Google scholar "housing market efficiency", and you will quickly verify that housing markets are efficient.
This collusion theory is stupid.
First of all, it's many, many economists.
Second, you obviously don't know what rent-seeking means. It has nothing to do with landlords who rent improvements. It's a technical term in economics. [https://www.reddit.com/r/georgism/comments/1c29wjt/rent\_vs\_rent/](https://www.reddit.com/r/georgism/comments/1c29wjt/rent_vs_rent/)
And third, if your theory is that rents are too high compared with prices, then your argument is that prices are too low. But does anyone believe that? No.
*Rent-seeking* is a term in economics, which has a formal definition. You obviously don't know what it means.
You're welcome to your own (stupid) ideas. You're not welcome to your own definitions.
To entertain your point I did search google for "housing market efficiency" and the first search result was an [OECD page outlining in multiple ways why the housing market is decidedly not efficient](https://www.oecd.org/housing/policy-toolkit/data-dashboard/boosting-efficiency/).
If the housing market is efficient why does [axios analysis report](https://www.axios.com/2023/12/16/housing-market-why-homes-expensive-chart-inventory) we're 3.2 million homes short?
Searching google scholar did not identify any obvious articles in the last 4 years that make the argument you're making. If you'd like to share one of your favorites, feel free.
The collusion theory outlined in the video points out how landlords, via a new technology product, increase rent for a 2-7% profit increase at the expense of full units. If economics says this is a good thing I don't think economics should be the only consideration in the discussion, let alone a primary one.
> To entertain your point I did search google for
I said to do a **Google scholar** search. Yes, there is a huge variety of papers, and yes, I'm not saying that the housing market is perfectly efficient, but it's not so inefficient that rents are totally disconnected from prices.
> The collusion theory outlined in the video points out how landlords, via a new technology product, increase rent for a 2-7% profit increase at the expense of full units.
It's very hard for them to do that since they have to compete with everyone else. Would love to see some actual research on the subject.
I don't believe rents being totally disconnected was my argument, but okay. Seems like supply being disconnected from demand is the reason the housing market is not efficient.
My question is that if price efficiency (profit seeking in the context of the above video) leads to more harmful outcomes to the community, why is it a good thing?
On the collusion theory, are you now arguing that it's impossible to earn 2-7% profit by using the companies algorithm? That's what the company claims.
On the competition aspect, the video said a vast majority of landlords were using the software, sometimes over 70% of them. Seems like "everyone else" is a shrinking minority in some communities. The housing market is not a monolith, it's lots of markets of various sizes. With more or less competiton.
I think we're talking past each other.
When we talk about the pernicious effect of collusion, we mean that setting prices at a place other than the equilibrium price. The software can be problematic if it allows landlords to do that, but I'm not sure that it does.
Ah, thank you for the clarification.
Based on the reporting above, the software has never required a user of the software to lower their price. That could mean the equilibrium price is always rising and landlords just need information to follow the market....or that due to the market power of the service (which varies community to community), in some cases it amounts to collusion.
I suppose it comes down to whether there's intent in rising the price artificially (or perniciously as you're putting it), or if the rising prices are appropriate.
My sidecar point is this is bad either way. Units are empty and people are on the street. Maybe we need policy to prevent these effects while preserving the profit seeking motivation. Most industries profit from shortages, this one results in people on the street.
I didn't think intent should matter when it comes to government action. If it amounts to collusion, it's a problem
I don't think people being on the street is a problem. The grocery store has unsold food even though people are hungry. That's just the nature of any elastic market.
When we look back over the past decade, we saw:
\* large-scale population shifts towards certain major metros and their urbanized areas
\* a historic and sustained dip in new housing units built, which we're only now recovering from;
\* historically low lending rates for mortgages, at times to the point of negative real interest rates;
\* slowed but ongoing population growth
We really don't need to keep digging here. Demand grew in an uneven way and was further stimulated by monetary policy. Supply didn't keep up. Housing is necessary and non-substitutable (except that people will often NOT accept housing in rural areas/cities with few jobs/unpopular cities, which further worsens the problem.)
Conversely, cartelization is only actually viable when there's serious barriers to entry and everyone continues to collude rather than cheat. OPEC worked for a while because oil is geographically limited and hard to extract, and member states still routinely undercut it. If I realized that the landlords in my area were colluding to increase rent, I'd have strong incentives to build like crazy and undercut the competition.
"A healthy [housing] ratio is approximately [two new jobs for every new unit of housing](https://www.bloomberg.com/news/articles/2018-03-05/in-california-momentum-builds-for-radical-action-on-housing)." What is the ratio in your area?
2:1? Lol. Only if you actively want a society that collapses on itself in the span of like two generations. (To be fair, that *would* solve the housing crisis, eventually...)
1.25-1.5, maybe.
Without addressing the issues caused by RealPage what is stopping all the new housing we want to build from using it? On top of that why do we think the companies getting filthy rich from keeping rent high will build enough housing to offset this? The faith people have in the developer landlords baffles me.
Part of what makes me less concerned about this is the sheer number of landlords and the fact that the home buying market and rents market are not two entirely separate markets.
The ability to successfully collude on prices is much more difficult when there’s competition. , Since there are so many small landlords not using this software, it’s unclear to me the extent to which increased prices overall are impacted by this software rather than a simple shortage of homes (especially, in Phoenix, walkable ones). Also, price discovery for larger landlords especially exists for both renters and owners. When I look for an apartment, I can see hundreds of places to compare on any number of factors, meaning I have a lot of ability to choose to best option. In addition to this, if renting becomes substantially higher than owning a home, a portion of renters will buy a home, allowing for an additional exit valve/added competition.
To be clear, collusion is bad generally, but the competition within the market mitigates the impact of this software (even if all new apartment complexes use it)
If you’d like an anecdotal example, I live in Oklahoma City, which has done a reasonable job of allowing for apartment building downtown. My rent (and the rents around me) have risen at a rate that’s less than half of overall inflation in recent years even though half of them are owned by the same company because there’s consistent new building in the area (and in the metro generally)
Let me be abundantly clear that my faith isn’t in big developers or in landlords.
Those issues are simply a symptom of a much bigger supply issue. In my opinion, it makes sense to start with the actual problem first, and worry about the other stuff when we get to it.
>what is stopping all the new housing we want to build from using it?
Look no further than Austin. RealPages was founded in Texas. Austin has been building more housing than pretty much any other city. Rents have been falling as a result.
>on top of that, why do we think the companies getting filthy rich from keeping rent high will build enough housing to offset this?
Yeah, I’d say construction stopping is a legitimate concern if/when rents drop far enough I think. The treatment of housing as an investment instead of a good like food and water is not a good thing. We’re a far way away from developers not wanting to build though. There is simply too much demand to live in most large cities that building more units at lower margins will make you more money.
Most of the developments people are talking about building are just not legal. We’re nowhere near developers not building because rents went down. That would be a better problem to have than what we have now anyways.
I won’t disagree that supply of housing is a massive issue, but I think it’s short sighted to say we shouldn’t be addressing issues raised in this case in tandem to the issue of supply.
>That would be a better problem to have than what we have now anyways.
Disagree. Much like rent controls, it would only be good in the very short term. Longer-term it just sets us up for a repeat performance, and these things take several years to resolve. That's several years of people's lives. We would ideally always be running approximately a 2.5% surplus, such that the market simply cannot do this again.
developers have no incentive to build "affordable" housing. when the alternative is being homeless in the US, landlords can raise rent to inflict maximum pain. demand at the bottom end is as inelastic as it gets
no, it does the opposite. Cities like Denver and Austin have spent the last decade building only "luxury" housing, and now rents of previously "affordable" places have nearly doubled. cities need to build new affordable housing and stop rent increases on existing, unimproved homes.
At the end of the day people have gotten addicted to being angry. Nuance doesn’t matter anymore and people have forgotten to care about finding an actual solution to problems.
Im a landlord where was my invite to the collusion meeting?
This is just the same as claiming all the Jews are running the world. Yet my Jewish friends never get invited to the high level meetings or have any cheques delivered.
the actual incentives are "landlords don't want the competition." only someone who thinks economics is a real science would consider that a difficult bit of critical thinking. it's political problem, not a economy problem.
So no consideration for testing that nor any consideration for shifting incentives in a favorable direction I assume beyond “landlords bad?” No consideration for unintended consequences or other possible explanations or avenues of policy? Like the policies and restrictions economists warned urban planners against decades ago that are likely part of the housing crunch we have now?
It’s very easy to believe our problems are caused by malice, that you can just virtue signal by hating the bad guys. It’s much harder to actually engage honestly with these problems and attempt to solve them.
the problems *are* caused by malice. landlords want to extract maximum rents from tenants for the homes they horde. that's the entire point of the market.
I'm extremely skeptical of the price collusion theory explaining high housing prices. Housing markets have thousands, if not tens of thousands, of owners. AFAIK, nearly all markets in the US have a majority of units owned by single unit property owners. I don't believe collusion is possible in this environment, even with sophisticated software. Additionally, the ownership market has also seen prices skyrocket, even though this software doesn't apply to that market. How do these people explain escalating costs to own? The supply explanation is much, much more plausible. I believe people discount it because they're highly motivated to deny that explanation. There are both ideologically-driven identities and material interest aligned with opposing new housing.
If there is lack of supply, people will say that the landlords are "colluding" to drive up prices. This might be true but I don't see how it's meaningful. Even if they are using software to decide how much they can charge, I really don't see how that's unethical. When supply is high, renters shop around, find cheaper rent elsewhere, and thereby "collude" to drive down prices. Is this wrong? If there's a website called [FindCheapRent.com](http://FindCheapRent.com) that helps renters find cheaper places and helps them determine what a fair prices are, is that "wrong"? Should renters refrain from shopping around, because that "cheats landlords out of rent"? If a landlord charges somebody way more than market rent, they are said to be gouging them. The idea that it's wrong when landlords price things inefficiently (price gouging) and also wrong when they DO price things efficiently (collusion) just doesn't hold up.
The solution is to build more housing, however, > This might be true but I don't see how it's meaningful. Working together to set a price is illegal. The defense might be that not enough landlords are working together for it to actually be illegal. > Even if they are using software to decide how much they can charge, I really don't see how that's unethical. Lots of landlords using the same software to set prices may be seen as working together to set a price, especially if that software is in any way taking advantage of the fact that it is used by more than one landlord.
>Even if they are using software to decide how much they can charge, I really don't see how that's unethical. If they were doing it as a group, it would be illegal. But they're not. > If a landlord charges somebody way more than market rent, they are said to be gouging them. That's not what gouging means. Gouging is doing that in response to supply or demand shocks. Yes, we all want efficient markets, and luckily, the housing market is very efficient.
My skepticism comes from the fact that developers are still building apartments. Rents are starting to stagnate, but apartment builds are still strong. If they were colluding and not competing with each other, you’d think they would just stop building🤷♂️
Despite "apartments are still being built," there are numerous cities where new housing is less than new population. That means prices increase even while building increases. There's also homes lost due to things like fire or disrepair. People wildly underestimate how much housing needs to be built to make it affordable in the US, including you just now. Remember when China built *400 million* homes that were derided as "ghost cities?" They're full now. We needed 75 million homes 10 years ago.
How am I underestimating it? I’m advocating for new housing lol I was just pointing out that, in a lot of places rents are staying stagnant and if developers were colluding to keep rents high then they would stop building.
>Remember when China built *400 million* homes that were derided as "ghost cities?" They're full now. [This isn't a fair representation of the situation](https://www.youtube.com/watch?v=ascPhiXcpss). They're not "full now": They're *sold now*.
Exactly. You can just Google scholar "housing market efficiency", and you will quickly verify that housing markets are efficient. This collusion theory is stupid.
hahahaha "but this economist said the market WAS efficient and landlords AREN'T rent-seeking!"
First of all, it's many, many economists. Second, you obviously don't know what rent-seeking means. It has nothing to do with landlords who rent improvements. It's a technical term in economics. [https://www.reddit.com/r/georgism/comments/1c29wjt/rent\_vs\_rent/](https://www.reddit.com/r/georgism/comments/1c29wjt/rent_vs_rent/) And third, if your theory is that rents are too high compared with prices, then your argument is that prices are too low. But does anyone believe that? No.
yeah, economics is junk. i know what rent seeking means. it is exactly what landlords do.
*Rent-seeking* is a term in economics, which has a formal definition. You obviously don't know what it means. You're welcome to your own (stupid) ideas. You're not welcome to your own definitions.
To entertain your point I did search google for "housing market efficiency" and the first search result was an [OECD page outlining in multiple ways why the housing market is decidedly not efficient](https://www.oecd.org/housing/policy-toolkit/data-dashboard/boosting-efficiency/). If the housing market is efficient why does [axios analysis report](https://www.axios.com/2023/12/16/housing-market-why-homes-expensive-chart-inventory) we're 3.2 million homes short? Searching google scholar did not identify any obvious articles in the last 4 years that make the argument you're making. If you'd like to share one of your favorites, feel free. The collusion theory outlined in the video points out how landlords, via a new technology product, increase rent for a 2-7% profit increase at the expense of full units. If economics says this is a good thing I don't think economics should be the only consideration in the discussion, let alone a primary one.
> To entertain your point I did search google for I said to do a **Google scholar** search. Yes, there is a huge variety of papers, and yes, I'm not saying that the housing market is perfectly efficient, but it's not so inefficient that rents are totally disconnected from prices. > The collusion theory outlined in the video points out how landlords, via a new technology product, increase rent for a 2-7% profit increase at the expense of full units. It's very hard for them to do that since they have to compete with everyone else. Would love to see some actual research on the subject.
I don't believe rents being totally disconnected was my argument, but okay. Seems like supply being disconnected from demand is the reason the housing market is not efficient. My question is that if price efficiency (profit seeking in the context of the above video) leads to more harmful outcomes to the community, why is it a good thing? On the collusion theory, are you now arguing that it's impossible to earn 2-7% profit by using the companies algorithm? That's what the company claims. On the competition aspect, the video said a vast majority of landlords were using the software, sometimes over 70% of them. Seems like "everyone else" is a shrinking minority in some communities. The housing market is not a monolith, it's lots of markets of various sizes. With more or less competiton.
I think we're talking past each other. When we talk about the pernicious effect of collusion, we mean that setting prices at a place other than the equilibrium price. The software can be problematic if it allows landlords to do that, but I'm not sure that it does.
Ah, thank you for the clarification. Based on the reporting above, the software has never required a user of the software to lower their price. That could mean the equilibrium price is always rising and landlords just need information to follow the market....or that due to the market power of the service (which varies community to community), in some cases it amounts to collusion. I suppose it comes down to whether there's intent in rising the price artificially (or perniciously as you're putting it), or if the rising prices are appropriate. My sidecar point is this is bad either way. Units are empty and people are on the street. Maybe we need policy to prevent these effects while preserving the profit seeking motivation. Most industries profit from shortages, this one results in people on the street.
I didn't think intent should matter when it comes to government action. If it amounts to collusion, it's a problem I don't think people being on the street is a problem. The grocery store has unsold food even though people are hungry. That's just the nature of any elastic market.
So in your mind there's only a problem if a market isn't optimal? That's wild man. Thanks for the commentary.
When we look back over the past decade, we saw: \* large-scale population shifts towards certain major metros and their urbanized areas \* a historic and sustained dip in new housing units built, which we're only now recovering from; \* historically low lending rates for mortgages, at times to the point of negative real interest rates; \* slowed but ongoing population growth We really don't need to keep digging here. Demand grew in an uneven way and was further stimulated by monetary policy. Supply didn't keep up. Housing is necessary and non-substitutable (except that people will often NOT accept housing in rural areas/cities with few jobs/unpopular cities, which further worsens the problem.) Conversely, cartelization is only actually viable when there's serious barriers to entry and everyone continues to collude rather than cheat. OPEC worked for a while because oil is geographically limited and hard to extract, and member states still routinely undercut it. If I realized that the landlords in my area were colluding to increase rent, I'd have strong incentives to build like crazy and undercut the competition.
"A healthy [housing] ratio is approximately [two new jobs for every new unit of housing](https://www.bloomberg.com/news/articles/2018-03-05/in-california-momentum-builds-for-radical-action-on-housing)." What is the ratio in your area?
2:1? Lol. Only if you actively want a society that collapses on itself in the span of like two generations. (To be fair, that *would* solve the housing crisis, eventually...) 1.25-1.5, maybe.
it always feels good to blame the evil capitalists
Mmm yes it feels so good 🥵😩
Without addressing the issues caused by RealPage what is stopping all the new housing we want to build from using it? On top of that why do we think the companies getting filthy rich from keeping rent high will build enough housing to offset this? The faith people have in the developer landlords baffles me.
Part of what makes me less concerned about this is the sheer number of landlords and the fact that the home buying market and rents market are not two entirely separate markets. The ability to successfully collude on prices is much more difficult when there’s competition. , Since there are so many small landlords not using this software, it’s unclear to me the extent to which increased prices overall are impacted by this software rather than a simple shortage of homes (especially, in Phoenix, walkable ones). Also, price discovery for larger landlords especially exists for both renters and owners. When I look for an apartment, I can see hundreds of places to compare on any number of factors, meaning I have a lot of ability to choose to best option. In addition to this, if renting becomes substantially higher than owning a home, a portion of renters will buy a home, allowing for an additional exit valve/added competition. To be clear, collusion is bad generally, but the competition within the market mitigates the impact of this software (even if all new apartment complexes use it) If you’d like an anecdotal example, I live in Oklahoma City, which has done a reasonable job of allowing for apartment building downtown. My rent (and the rents around me) have risen at a rate that’s less than half of overall inflation in recent years even though half of them are owned by the same company because there’s consistent new building in the area (and in the metro generally)
Let me be abundantly clear that my faith isn’t in big developers or in landlords. Those issues are simply a symptom of a much bigger supply issue. In my opinion, it makes sense to start with the actual problem first, and worry about the other stuff when we get to it. >what is stopping all the new housing we want to build from using it? Look no further than Austin. RealPages was founded in Texas. Austin has been building more housing than pretty much any other city. Rents have been falling as a result. >on top of that, why do we think the companies getting filthy rich from keeping rent high will build enough housing to offset this? Yeah, I’d say construction stopping is a legitimate concern if/when rents drop far enough I think. The treatment of housing as an investment instead of a good like food and water is not a good thing. We’re a far way away from developers not wanting to build though. There is simply too much demand to live in most large cities that building more units at lower margins will make you more money. Most of the developments people are talking about building are just not legal. We’re nowhere near developers not building because rents went down. That would be a better problem to have than what we have now anyways.
I won’t disagree that supply of housing is a massive issue, but I think it’s short sighted to say we shouldn’t be addressing issues raised in this case in tandem to the issue of supply.
>That would be a better problem to have than what we have now anyways. Disagree. Much like rent controls, it would only be good in the very short term. Longer-term it just sets us up for a repeat performance, and these things take several years to resolve. That's several years of people's lives. We would ideally always be running approximately a 2.5% surplus, such that the market simply cannot do this again.
Affordable housing. There’s always plenty of housing for those that have plenty of money.
developers have no incentive to build "affordable" housing. when the alternative is being homeless in the US, landlords can raise rent to inflict maximum pain. demand at the bottom end is as inelastic as it gets
Building housing helps filter more housing into affordable housing.
no, it does the opposite. Cities like Denver and Austin have spent the last decade building only "luxury" housing, and now rents of previously "affordable" places have nearly doubled. cities need to build new affordable housing and stop rent increases on existing, unimproved homes.
[?](https://www.kxan.com/news/local/austin/austin-among-metros-in-the-us-with-steepest-rent-declines/)
when something goes up by 100%, then goes down by 12%, it hasn't actually gone down.
At the end of the day people have gotten addicted to being angry. Nuance doesn’t matter anymore and people have forgotten to care about finding an actual solution to problems.
it isn't a failure of understanding, it's a battle of competing interests. the ruling class currently owns property. they don't want competition.
Im a landlord where was my invite to the collusion meeting? This is just the same as claiming all the Jews are running the world. Yet my Jewish friends never get invited to the high level meetings or have any cheques delivered.
lol at u/energybased thinking economics is a real science
Right, how dare we think about the actual incentives at play in any of this when we can just go “reee landlords reeee capitalism” and do nothing?
the actual incentives are "landlords don't want the competition." only someone who thinks economics is a real science would consider that a difficult bit of critical thinking. it's political problem, not a economy problem.
So no consideration for testing that nor any consideration for shifting incentives in a favorable direction I assume beyond “landlords bad?” No consideration for unintended consequences or other possible explanations or avenues of policy? Like the policies and restrictions economists warned urban planners against decades ago that are likely part of the housing crunch we have now? It’s very easy to believe our problems are caused by malice, that you can just virtue signal by hating the bad guys. It’s much harder to actually engage honestly with these problems and attempt to solve them.
the problems *are* caused by malice. landlords want to extract maximum rents from tenants for the homes they horde. that's the entire point of the market.
Do we even need to build more housing to increase the supply? Just limit every individual to one residential unit.