A National Cartel Fixing Rental Housing Prices: The Scandal Continues to Grow

After becoming the target of multiple state attorney general lawsuits and investigations, nationwide class action lawsuits, a Department of Justice criminal probe, and the likely target of a recent FBI raid in Atlanta, RealPage – a private equity-owned corporation that creates software programs for property management – is finally responding to allegations it orchestrated a national rent price-fixing cartel that has sent rent prices through the roof.

Texas-based RealPage is accused of acting as an information-sharing middleman for real estate rental giants. The lawsuits against it and large property managers [1] contend that the latter agreed to set prices through RealPage’s software, which  also allowed the companies to share data on vacancy rates and prices in many of the US’ most expensive markets.

Many of the rental markets dominated by large landlords have seen astronomical growth in rental prices in recent years (even before the pandemic), as well as a rising number of evictions and spikes in homelessness. The lawsuits against RealPage and the rental management companies contend that its software covers at least 16 million units across the US, and private equity-owned property management companies are the most enthusiastic adopters of the RealPage technology. A separate lawsuit filed last year targets Yardi Systems and property management companies [2] using its price-setting software to collude on at least another eight million units.

It’s worth reproducing the RealPage’s June 18 statement in full to then dissect it:

Starting in October 2022, false and misleading claims about RealPage and its revenue management software have been reported to the media and in legal filings. These factual inaccuracies threaten to undermine the essential benefits RealPage’s solutions provide to both renters and housing providers. In fact, RealPage’s revenue management software contributes to a healthier and more efficient rental housing ecosystem.

“The time is now to address a number of false claims about RealPage’s revenue management software, and how rental housing providers operate when setting rent prices,” said Dana Jones, RealPage CEO and President. “Housing affordability should be the real focus. RealPage is proud of the role our customers play in providing safe and affordable housing to millions of people. Despite the noise, we will continue to innovate with confidence and make sure our solutions continue to benefit residents and housing providers, alike.”

Housing affordability is the real problem

Housing affordability, including the lack of affordable rental housing, is a critically important national problem created by a host of complex economic and political forces, including:

  • persistent undersupply of rental housing units,
  • increasing demand for rental housing in many areas of the country,
  • inflationary pressures that affect costs to build, insure and manage housing properties,
  • inefficient or unnecessarily onerous permit and zoning requirements,
  • higher mortgage rates and home prices driving more people to rent rather than own their own homes, and
  • changes in where and how people choose to live.

Setting the record straight

Here are the facts about RealPage’s revenue management software solutions:

  • RealPage revenue management software benefits both housing providers and residents.
  • RealPage customers:
    • decide their own rent prices,
    • always have 100% discretion to accept or reject software price recommendations,
    • are never punished for declining recommendations, and
    • accept recommendations at widely varying rates that are far lower than has been falsely alleged.
  • RealPage revenue management software makes price recommendations in all directions – up, down, or no change – to align with property-specific objectives of the housing providers using the software.
  • RealPage revenue management software never recommends that a customer withhold vacant units from the market. In fact, properties using our revenue management products consistently achieve vacancy rates below the national average.
  • RealPage uses data responsibly, including limited aggregated and anonymized nonpublic data where accuracy aids pro-competitive uses.
  • RealPage revenue management software serves a much smaller portion of the rental market than has been falsely alleged.

RealPage revenue management software offers prospective residents and housing providers more options and flexibility in lease terms, aids compliance with Fair Housing laws, does not use any personal or demographic data to generate rent price recommendations, and helps ensure that prospective residents have access to the best pricing available to everyone.

But statements provided by users of the RealPage software and even RealPage executives’ past statements indicate that the company is now likely lying in at least the following ways:

On Affordability 

While issues that RealPage mentions like undersupply and increasing demand in certain areas no doubt play a role, RealPage officials have also bragged about the outsized effect their software has on rental market prices. Company executive Andrew Bowen once said that the software was “driving it,” referring to rental price increases. He added: “As a property manager, very few of us would be willing to actually raise rents double digits within a single month by doing it manually.”

On Undersupply and Vacancy Rates

Again, the lawsuits against RealPage and statements by the company’s founder indicate that RealPage played a role in undersupply by advising property companies to leave units vacant in order to create an artificial scarcity of rentals. This anti-competitive behavior is made possible because property managers know that their “competitors” are also using RealPage’s system and will not undercut them.Here’s what one of the lawsuits alleges:

“RealPage allows participating Lessors to coordinate supply levels to avoid price competition. In a competitive market, there are periods where supply exceeds demand, and that in turn puts downward pressure on market prices as firms compete to attract lessees. To avoid the consequences of lawful competition, RealPage provides Lessors with information sufficient to “stagger” lease renewals to avoid oversupply. Lessors thus held vacant rental units unoccupied for periods of time (rejecting the historical adage to keep the “heads in the beds”) to ensure that, collectively, there is not one period in which the market faces an oversupply of residential real estate properties for lease, keeping prices higher.”

And here’s former RealPage CEO Steve Winn:

‘During an earnings call in 2017, Winn said one large property company, which managed more than 40,000 units, learned it could make more profit by operating at a lower occupancy level that “would have made management uncomfortable before,” he said.

The company had been seeking occupancy levels of 97% or 98% in markets where it was a leader, Winn said. But when it began using YieldStar, managers saw that raising rents and leaving some apartments vacant made more money.’

It’s worth noting the correlation between the increase of homelessness and RealPage really taking off following its 2016 acquisition of its main rival. A 2022 study from The Guardian and the University of Washington found that across 73 US cities and counties there were at least 18,000 deaths of people experiencing homelessness over the 2016 to 2020 time period with the number increasing 77 percent over that five-year period. (The federal government makes no effort to count the number of homeless deaths, and many believe the number to be much higher.) [3]

The lawsuits against RealPage document how in many metropolitan areas increase rents every year, whether vacancies were rising or falling, and in most instances, both rents and vacancy rates trended higher from 2014-2020, across various metropolitan regions where RealPage operates. For example in Nashville and Dallas:

On “Inflationary Pressures”

Over the past ten years, rent inflation has outpaced overall inflation by 40.7 percent. A witness in one of the lawsuits says the price increases have little to do with inflation but with collusion:

Another early developer of RealPage’s pricing software (“Witness 9”)44 reflected on how RealPage’s facilitation of collusion among property management companies and owners has pushed rents higher at a breakneck pace: “[T]hese optimization systems are really efficient at extracting value and they will push things until they start to break.”

And RealPage’s role might extend beyond just the millions of apartments priced using its software. Maureen Tkacik argues the following:

RealPage not only raised the rent, but it baked eternal rent hyperinflation into the forecasting math of multifamily housing, fueling a dramatic plunge in underwriting standards (and attendant rise in valuations) that lined the pockets of every manner of real estate speculator in 2021 and 2022. This maneuver led to extreme blowback when interest rates—and the floating-rate interest payments owed on the thousands of apartment buildings that changed hands during those years—began to balloon. Perhaps even more insidiously, when mortgage payments rose in 2022 and landlords should have, by conventional market logic, been jumping to fill empty apartments, RealPage instead gave them the tools to extract ever-higher revenues out of powerless renters, no matter how trash-strewn, roach-infested, or crime-ridden their homes had become.

On RealPage’s Price “Recommendations”

They would appear to be more than just mere recommendations. From one of the lawsuits: 

Beginning in approximately 2016, and potentially earlier, Lessors replaced their independent pricing and supply decisions with collusion. Lessors agreed to use a common third party that collected real-time pricing and supply levels, and then used that data to make unit-specific pricing and supply recommendations. Lessors also agreed to follow these recommendations, on the expectation that competing Lessors would do the same.

Here’s an Associate Vice President of one of the defendants talking up the collusionary aspect of the software, which was featured in RealPage’s own literature:

With LRO [RealPage’s Lease-Rent Options] we rarely make any overrides to the [pricing] recommendations . . . [W]e are all technically competitors, LRO helps us to work together . . . to make us all more successful in our pricing . . . LRO is designed to work with a community in pricing strategies, not work separately.”

The lawsuits also allege that there was considerable pressure to follow the “recommendations”:

To ensure that the landlords abide by these “recommendations,” RealPage puts significant “pressure” on them “to implement RealPage’s prices,” including by requiring clients to submit requests to deviate to the “corporate office” and tracking the “identity of the client’s staff that requested a deviation.” Multifamily Compl. ¶¶ 17-20, 261-86. As a result, landlords using RealPage adopt RealPage’s recommendations 80-90% of the time.

Furthermore, according to a joint legal brief from the DOJ and FTC, even without the additional pressure, these types of recommendations via algorithm are still illegal:

It is per se illegal for competing landlords to jointly delegate key aspects of their pricing to a common algorithm, even if the landlords retain some authority to deviate from the algorithm’s recommendations. Although full adherence to a price-fixing scheme may render it more effective, the effectiveness of the scheme is not a requirement for per se illegality.

FBI Raid in Atlanta 

RealPage’s statement comes four weeks after the FBI raided the Atlanta headquarters of Cortland Management on Wednesday, May 22 as part of the federal investigation into RealPage and the real estate management companies that use its software.

Why Atlanta and why Cortland? Well, for one, it owns nearly 85,000 apartment units (as of June 2022), and uses RealPage’s software. Atlanta also might provide some of the clearest evidence of RealPage’s devastating effects on renters. According to Bis Now:

…software-driven pricing affects 81% of [Atlanta] multifamily rental units. Since 2016, rents in the city have surged by 80%, despite rising vacancy rates that would typically result in lower rents.

The city is also a hotspot for Wall Street-owned single-family homes. According to a May report by the U.S. Government Accountability Office that looked at investor-owned single-family rental properties in 20 major US cities, Atlanta came out on top with 25 percent or about 72,000 properties.

And a recent report from Georgia State University, “Horizontal Holdings: Untangling the Networks of Corporate Landlords” published in the Annals of the American Association of Geographers, found that more than 19,000 were owned by just three companies — Invitation Homes, Pretium Partners and Amherst Holdings. The latter two are backed by private equity.

“These companies own tens of thousands of properties in a relatively select set of neighborhoods, which allows them to exercise really significant market power over tenants and renters because they have such a large concentration of holdings in those neighborhoods,” said Taylor Shelton, an assistant professor in the Department of Geosciences at Georgia State.

Atlanta Is Representative of Wider Trend Across the Country

As investors continue to snatch up properties, a trend that really took off during Obama’s foreclosure regime, they are also the driver behind the spread of RealPage’s price-setting software. From ProPublica:

RealPage’s influence was burgeoning. [In 2017], the firm’s target market—multifamily buildings with five or more units—made up about 19 million of the nation’s 45 million rental units. A growing share of those buildings were owned by firms backed by Wall Street investors, who were among the most eager adopters of pricing software.

…Somewhere around 2016, according to one trade group, the industry’s use of the pricing software began to achieve “critical mass.”

And it’s only gotten worse since. Corporate investors have continued to snatch up even more properties since the outbreak of the COVID-19 pandemic, in part because many smaller landlords were hit hard by non-payment from tenants who were protected by eviction moratoria.

Atlanta has the largest market for this kind of corporate landlord activity in the country, according to another study by Shelton. “You have to add up the next two or three largest markets in the U.S. together to have the same amount of corporate landlord investment that Atlanta has,” Shelton said.

And the big landlords are now making off like bandits. From a recent Common Dreams write up on the Accountable.US report on corporate landlord behemoths:

…more than 100 million people who rent their homes in the U.S. are not seeing the benefits of what one Biden spokesperson called “the great American comeback” in their housing costs, particularly millions of people whose homes are owned by corporate landlords.

The government watchdog found that the six largest corporate landlord companies brought in close to a combined $300 million in increased profits in the first quarter of 2024, with the profits mostly stemming from rent hikes.

Overall in the U.S., rent prices have skyrocketed by 31.4% since 2019 while wages have increased by just 23%, meaning tenants need to earn nearly $80,000 per year to keep from being rent-burdened and spending 30% or more of their income on rent.

The six companies included in the Accountable.US analysis on Wednesday have more than rent increases in common: They have all faced lawsuits regarding their use of the property management software company RealPage, which is alleged to have used an algorithm to fix rent prices, impacting about 16 million rental units in the United States.

The largest net income increase Accountable.US found among the six corporate landlords was that of Camden Property Trust, which increased its net income by 97% in the first quarter of this year to $85.8 million. The company spent $50 million on stock buybacks that it said were made possible by its “weighted average monthly rental rate,” which went up nearly 2% year over year.

Their profits are no doubt aided by RealPage, which along with the rental management companies has bragged ​​about how they can increase rents regardless of market conditions, including downturns or recessions.

A Common Thread

While ProPublica reports that Wall Street-owned real estate management companies have been some of the most eager adopters of RealPage software, RealPage itself is also owned by the private equity firm Thoma Bravo.

As the scrutiny of RealPage intensifies, it has not dissuaded public pension funds from investing in Thoma Bravo, which acquired RealPage in 2021, according to the Private Equity Stakeholder Project:

Despite the lawsuits against RealPage, more than 30 US public employee pension funds have invested a total of almost $4 billion in Bravo’s Fund XIV, the fund that acquired RealPage. These pension funds include the California Public Employees Retirement System, New York State Common Retirement Fund, and the Washington State Investment Board. The University of Texas Investment Management Company (UTIMCO) has been a large investor in Thoma Bravo, making six separate commitments into the company totaling $425 million. These commitments included a $125 million commitment to Bravo’s Fund XIV, (the fund which acquired RealPage in 2021). The University of Texas at Austin is also collaborating with Steve Winn, the founder of RealPage, to develop $200 million sustainable research facilities. Winn claims that Texas has “a fragile ecosystem that we need to protect,” and states that preserving the “land and the water for future generations of Texans is important.” However, The Real Deal notes that the facilities would be adjacent to Winn’s Mirasol Springs, a 1,400 acre development that has been the subject of concerns about ecological harm. The collaboration appears to be an opportunity for some positive press for the billionaire.

While Senators Bernie Sanders, Elizabeth Warren, Ed Markey, and Tina Smith, took an interest in the RealPage cartel and urged the DOJ to investigate last year, the Biden Administration has taken little public interest in the issue. A brief mention in the most recent State of the Union address was about all.

Much of the legal architecture that muddied the waters of price-fixing prosecution was established by the Clinton Administration and later sanctioned by Obama. “Information sharing” largely wasn’t prosecuted due to a Clinton-era loophole introduced by HRC in 1993 that allowed it in the healthcare industry (purportedly to help lower prices, although the opposite of course happened), but importantly, the rules were interpreted to apply to all industries. Those rules were further liberated in 1996 and then again in 2011 under Obama’s Affordable Care Act and its Accountable Care Organizations provision.

The current DOJ announced the end of that no-enforcement arrangement last year, however, when it closed those Clinton-era information-sharing loopholes. Principal Deputy Attorney General Doha Mekki explained the rationale behind the decision, saying that the development of technological tools such as data aggregation, machine learning, and pricing algorithms have increased the competitive value of historic information. In other words, it’s now (and has been for a number of years) way too easy for companies to use these so-called “safety zones” to fix wages and prices. Here’s Mekki at an antitrust conference in Miami:

An overly formalistic approach to information exchange risks permitting – or even endorsing – frameworks that may lead to higher prices, suppressed wages, or stifled innovation. A softening of competition through tacit coordination, facilitated by information sharing, distorts free market competition in the process.

Notwithstanding the serious risks that are associated with unlawful information exchanges, some of the Division’s older guidance documents set out so-called “safety zones” for information exchanges – i.e. circumstances under which the Division would exercise its prosecutorial discretion not to challenge companies that exchanged competitively-sensitive information. The safety zones were written at a time when information was shared in manila envelopes and through fax machines. Today, data is shared, analyzed, and used in ways that would be unrecognizable decades ago. We must account for these changes as we consider how best to enforce the antitrust laws.

The FTC also recently came out with a set of general guidance around algorithmic price setting. It’s titled “Price fixing by algorithm is still price fixing.”

Is the crackdown on RealPage the result of this new enforcement policy or did the company push too far even under the previous rules? It would appear to be a little bit of both. From ArentFox Schiff LLP, a national law and lobbying firm, on the shift at the DOJ:

The withdrawal of the policy statements forecasts greater DOJ scrutiny of information sharing; however, it is still clear that not all information sharing is illegal. Both the Supreme Court and the DOJ have recognized that, in many instances, competitors need to share information to achieve legitimate pro-competitive goals. However, exchanges of information could violate the Sherman Act, which prohibits a “contract, combination…or conspiracy” that unreasonably restrains trade, if they allow competing sellers to collude or tacitly coordinate in an anti-competitive manner, such as by coordinating prices. Generally, courts will balance these two competing concerns. The Supreme Court has protected information exchanges where the data was publicly available, was historic rather than current or forward-looking, and/or was aggregated to make the information anonymous. It has also emphasized that certain exchanges of current price information and information exchanges in concentrated markets may receive greater scrutiny.

Either way, a wide amount of latitude seems to rest with the DOJ and FTC. So while this is good news for now, there would appear to be little to prevent future DOJs and FTCs from issuing guidance that says the information-sharing safe zones are open for business again and the next FTC from declaring that “price fixing by algorithm is no longer price fixing.”


[1] Here are some details I could track down of the real estate goliaths named in the lawsuits who were using RealPage software to allegedly collude and keep rents artificially high:

  • Greystar: The nation’s largest property management firm with nearly 794,000 multifamily units, including roughly 100,000 student beds under management.
  • Trammell Crow Company, headquartered in Dallas, is a subsidiary of CBRE Group, the world’s largest commercial real estate services and investment firm.
  • Lincoln Property Co. Manages or leases over 403 million square feet across the US.
  • FPI Management. Currently manages just over 155,000 units in 18 states.
  • Avenue5 manages $22 billion in multifamily and single-family assets nationwide.
  • Equity Residential, the 5th largest owner of apartments in the United States, primarily in Southern California, San Francisco, Washington, D.C., New York City, Boston, Seattle, Denver, Atlanta, Dallas/Ft. Worth, and Austin.
  • Mid-America Apartment Communities, which as of June 30, 2022, owns or has ownership interest in 101,229 homes in 16 states throughout the Southeast, Southwest, and Mid-Atlantic regions.
  • Essex Property Trust (62,000 units). This fully integrated real estate investment trust (REIT) acquires, develops, redevelops, and manages multifamily apartment communities located in supply-constrained markets on the west coast.
  • Thrive Community Management (18,700 units in Washington and Oregon).
  • AvalonBay Communities, Inc. As of September 30, 2022, the Company owned or held a direct or indirect ownership interest in 293 apartment communities containing 88,405 apartment homes in 12 states and DC.
  • Cushman & Wakefield, with a portfolio of 172,000 units.
  • Security Properties portfolio reflects interests in 113 assets encompassing nearly 22,354 multifamily housing units.
  • Cardinal Group Holdings, LLC. 89,000 units managed with more than 100,000 beds and a heavy presence in student housing.
  • CA Ventures Global Services LLC. Manages more than 60,000 beds in 69 university markets.
  • DP Preiss Co. Specializes in student housing and has more than 30,000 beds in 12 states.

Consumer complaints against above landlords operating in Arizona can be filed here with the Arizona Attorney General case.

More information on the federal class action suit against RealPage is available here, along with an investigation request form if you rented through one of the above companies.

[2] Included in the lawsuit against Yardi are the following property management companies (I’ve tried to track down just how many rental units these companies control, listed here):

  • Alco Management Inc. Based in Memphis, Tenn. Manages more than 6,000 apartment homes in 9 states.
  • Bridge Property Management. Manages more than 50,000 multifamily units across the country. Headquartered in Salt Lake City with affiliated offices in New York, San Francisco, and Orlando.
  • Calibrate Property Management. “Based in Seattle, Washington, Calibrate is expanding its market reach. Now managing properties in Washington, Illinois, Arizona and Minnesota, Calibrate Property Management oversees approximately 1900 units and is rapidly growing.”
  • Clear Property Management. Manages apartment communities across Texas. Total number unclear.
  • Creekwood Property Corp. (Tonti Properties). Headquartered in Dallas and manages properties across Arizona, Colorado, Florida, Louisiana, North Carolina, and Texas. Total number unclear.
  • Dalton Management. Manages more than 1,500 apartment units across California, Oregon, and Washington.
  • HNN Associates. Manages roughly 7,000 units in the Seattle area, as well as others across Washington and Montana.
  • Jones Lang Lasalle (JLL). A Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries. Launched commercial real estate’s first AI-driven GPT model last year. JLL provides comprehensive real estate services in more than 4,000 buildings across the US and Canada.
  • KRE Group. Founded by Jared Kushner’s uncle, it managed more than 20,000 multifamily apartments throughout thirteen states.
  • LeFever Matson. Manages more than 3,000 units across California.
  • Legacy Partners. Manages a portfolio of over 50 multifamily communities with more than 12,000 apartment homes
  • Manco Abbott. As of 2005 (the most recent I could find), manages about 5,000 units in Central California.
  • McWhinney Property Management. Based in Colorado with more than 4,000 apartment units completed or under construction.
  • Morguard Corp. Manages nearly 18,000 units in the US and Canada, as well as 33.8 million square feet of commercial real estate.
  • Pillar Properties. More than 2,000 units under management.
  • Summit Management Services. More than 4,000 units across the country.
  • Towne Properties. More than 15,000 units under management.
  • Tribridge Residential.  6,000-plus units across Florida, Georgia, North Carolina, South Carolina, and Tennessee.

More information on the federal class action suit against Yardi Systems is available here, along with an investigation request form if you rented through one of the above companies.

[3] A report from the University of California, San Francisco released last year – the largest representative study of homelessness in the state in thirty years – found that economic factors were the main driver of homelessness, including low wages, a sudden unaffordable expense, and the rising cost of housing.

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  1. Pensions Guy

    Excellent post! As a retired antitrust lawyer (mostly on the plaintiffs’ side), I observed the steady erosion of interest in prosecuting antitrust cases, starting with the Reagan administration. Shamefully, Clinton and Obama continued the trend. It’s absolutely mystifying why Biden does not trumpet these initiatives, when every poll indicates enormous public dissatisfaction with housing affordability.

    1. NotTimothyGeithner

      Obama was elected in 2008. Voters needed relief. Even if Biden would take the name of the Great One in vain, the bare minimums of government aren’t going to undo the damage.

      Then Biden has the ilk of Tanden, Rice, and Zients running things.

      Biden needs perp walks, not a fine here and there.

    2. Neutrino

      Almost as if Biden’s admin is the latest helping out with a pincer movement. It may as well be described as a military action since there are casualties from the latest neoliberal hellscape process.

      Allow supply manipulations and rent spikes, then combine with goosed demand through many policies including the porous border, for example.

      Keep donations flowing, ignore feeble slogans and empty campaign promises. Yuck.

    3. Joe Well

      Is house affordability a popular issue with the affluent suburban senior citizens who are the new royalty of the Democrats? They materially benefit from this.

      Btw what do you think of Matt Stoller?

      1. simplejohn

        I have a paid subscription.
        Among the most information dense bloggers.
        I’d hate to see him cut back.

    4. i just dont like the gravy

      Biden’s inaction is only mystifying if you still believe in the illusion of American democracy. I suppose as a lawyer you can’t help but drink the Kool-Aid.

  2. politicaleconomist

    In fact, RealPage’s revenue management software contributes to a healthier and more efficient rental housing ecosystem.

    I don’t think this is what you meant to write

    1. Alice X

      It is a quote from RealPage (hence in blockquote):

      Conor wrote: It’s worth reproducing the RealPage’s June 18 statement in full to then dissect it:

    2. Conor Gallagher Post author

      Yeah definitely not something I would write.
      That’s part of the statement from RealPage, which is in block quotes, but I think I will italicize it too to make doubly clear.

  3. Mikel

    At some point, the BDSM economy has to collapse from ridiculousness.

    The overarching premise of this system: get as close to slave labor as possible and steadily keep jacking up prices (sometimes fast, sometimes slowly – but always steadily). WTH?

    If there is a hell, it’s run by PE. They priced out the devil.

  4. DDT

    Surge pricing is being applied by industries in a fun, variety of ways (and in this case by manipulating supply) across the board. It’s the wild wild west and everyone’s on their own.

    1. Joe Well

      This isn’t surge pricing at all since it has nothing to do with timing or demand. It’s classic market manipulation through collusion and rollups. They could have done this in 1880 with telegraphs.

  5. chris

    The question I have about all of this is now what? Let’s say every single RealPage player is sent to jail and the software is deleted and the national data scattered to the winds… are we going to unwind all those rent increases? Are we going to nationalize housing? What do we do now that various markets have become accustomed to significant rent and fee increases year over year?

    I look at it like Starbucks. They lead the way and now everyone can charge $5 for a cup of coffee. So what’s next? I am in favor of combating this kind of naked greed. I am happy to see government doing something that could help people. I am glad to see we’re beginning to enforce policies that could increase competition. But unless and until we reverse all the rental price increases I don’t see any of this helping citizens. I have no idea how to do that legally or otherwise. It feels like if we were to try an approach where we set price controls on rentals, market by market, nationwide, we’d see most of the smaller firms collapse and then be purchased by PE interests, who would then attempt to game the system again.

    I don’t know how to legislate a standard where we don’t have inhuman greed obsessed monsters involved with our housing supply.

    1. gk

      Starbucks opened a few years ago in Milan. Espressos cost 2 Euros, and I haven’t seen other places copying this (my local bar still charges 1.50 for a cappuccino, but they are an exception)

    2. jobs

      I think this is in part a huge cultural problem: USians by and large still see the parasitic PE/hedge fund ghouls that are running US society into the ground as successful and worthy of respect, instead of considering them mobsters in fancy suits and offices, rent-seeking and extracting value on a massive scale with the help of bought politicians and claiming everything they do is “legal”, as if that means anything these days. Killing Jews was “legal” in Nazi Germany.

    3. William Verick

      Civil forfeiture might be an option. The properties are being used to commit a crime. They are therefore contraband. That would definitely send a message.

      1. chris

        See, this is exactly what I mean. Let’s follow that path. Let’s assume for the sake of discussion you have a local municipality seize the rental units owned by any of these rental syndicates or big corporate landlords. You’ve hit them hard! Way to go Elliot Ness!Now what?

        These landlords are the ones who have been deferring maintenance like crazy. You’ve now saddled that municipality with all the code violations and other problems that were hidden but now have to be addressed. You’re also putting the burden of management on the municipality. Who are likely to outsource that management to a property manager. And the property manager may even be affiliated with the corp that the rental units were just seized from! And that’s assuming the population would let you do that. If you think the crazy shenanigans around the inheritance tax are something to behold, wait until the government starts seizing real property en masse. Americans are awfully funny about owning things and will fight back against that.

        The ideal situation, ignoring reality and other constraints, is to somehow enforce codes and maintenance while also controlling prices. Someway to hold these corps hostage to the commitments they have and send a message that housing is not an asset class so that further speculation is discouraged and the people who currently hold it are forced to be responsible for it until they’ve legally transferred the obligation.

        But I have no idea how any of that will work. Or could work.

        My personal bet for how this all pans out is that the syndicates and the Corp entities crash, sell the ruined properties to cities, and then offer to manage the properties that they allowed to molder while avoiding all their prior responsibilities. Even better, since most property management companies get money when they issue fees for things like late payments or assess damages on rental units, they’ll make money off of the problems they created. It will all be wrapped into some crazy housing and commercial real estate bail out. And so it goes…

        1. Anthony Noel

          Well, unfortunately given human nature, the only real solution is, drag them all into the common square and either A: Execute them publicly or B: Strip them and their families of all assets and leave them to the tender ministrations of generational poverty that they have created. Either way let everyone know that this is now the way of doing business, get caught and it’s not a slap on the rest, it’s not a fine that equals pennies on the dollar of your profits, it’s not even doing a few years in a Club Fed with Day Release, it will be a swift and terrifying and cruel conclusion to their lives.

    4. scott s.

      While you’re at it, what’s your plan for property tax, insurance, and building services inflation?

    5. Adam Eran

      Nixon stopped the feds from building affordable housing in 1971. Reagan (as he was cutting taxes on the wealthy roughly in half) also cut HUD’s affordable housing budget 75%. Biden could undo those items, and would probably receive endorsements from everyone but the FIRE bandits.

      1. chris

        Undoing those would not help much. The biggest issue we have now is there are no market incentives for building affordable housing and limited resources. So you’re basically asking builders to make less money for no reason other than the kindness of their hearts. We have limited access to construction materials. We have limited access to construction crews. We have limited land in desirable places. We have limited access to required public facilities like schools and sewerage. Given that, a builder is going to engage in projects they can benefit from the most. So either we nationalize the whole shebang, and nationalize production of construction materials, and revolutionize zoning… or we’ll see a lot of nothing happen.

        1. Vicky Cookies

          Why, other than assuming that the unimpeded market will solve our problems, would one think housing supply is the problem here? As evidenced by many points in the piece above, at issue is the natural tendency of a market to consolidation – empowered by the representatives of landlords in the government, I’ll add. Why do we need to waste limited resources building housing when enough exists that no one need sleep outside? Iirc, ~16m homes are empty in the US. The article also points to artificial scarcity being used to raise rents. At issue is that a class of people who own real estate are causing homelessness so that they can collect money for having already been rich. Nationalize the whole shebang? Yes, at least. So long as landlords exist a class, so will the homeless.

          1. chris

            Well, the problem is many of those houses exist in places where people do not want to live.

            It is absolutely true that the RealPage system is a method for property owners to weaponize artificial scarcity. It is also absolutely true that we take property rights and freedom of movement pretty seriously in the US. If I take 1000 homeless people from Skid Ro and put them in vacant houses in, say, Detroit, that’s something those formerly unhoused citizens may not appreciate. And then there’s the problem of supplying utilities and other necessary things for the people you put in those houses.

            This is a problem that needs to be addressed on a national level.

    6. Mesoscale

      Why not have rules that PE cannot own single family homes? Not even a tax rule, just a prohibition so housing stocks cannot be concentrated. The same, nearly the same, for multi-family, but strict limits on the number of units?

      1. chris

        Because single family homes aren’t the big problem here.

        It’s all the rental buildings and apartment complexes. For poor people, middle class, military, etc. And I actually have no issue if PE or other corps or syndicates want to buy single family homes. I don’t even mind if they build entire developments of single family homes. That would expose them to more liability and responsibility than they currently have. More risk too. There’s fewer options for making money off single separate buildings that are unoccupied. You can’t rely on the heat from adjacent units to keep the property above freezing so you either have to winterize or pay for heat or keep it occupied.

          1. chris

            So, with the caveat that data on this isn’t great and people causing the problem benefit from things being murky, the data I’ve seen says you are incorrect. Here’s an example.

            Currently only 4% of investor purchases are single family homes. And that’s an all time high. I’m not saying PE muscling in and buying properties isn’t a problem. I’m saying that with respect to single family homes, they’re not a large problem and focusing on that aspect won’t help a lot of people. Also, when you buy a single family home and choose not to maintain it, the scope of the damage you do is limited when compared to buying an apartment complex and choosing not to maintain it.

            1. J.

              You should probably look at the data a little more. You seem to be looking at data for the whole country; however PE is buying in specific areas, especially landlord-friendly ones, not the country as a whole. Georgia has awful tenants-rights laws.


              Paywalled, but the start of the article is visible and says:

              > According to Redfin, although investor purchases were down by almost 4% in metro Atlanta from last year, they still totaled $1 billion in the first three months. Atlanta ranked tenth among metro areas for the share of homes bought by investors, with a 21.1% share. Miami, Florida ranked first with a 30.6% share.

              Again, this is concentrated in certain zipcodes in Atlanta.


              > Investors also have a relatively high market share in the affordable market. They bought a record 26.1% of low-priced U.S. homes that sold in the first quarter…

              Maintenance is a problem both for apartment complexes and single family homes owned by PE. This article goes into it a bit:


              More on the topic, including a link to a study done recently as a collaboration between Georgia State and Rutgers:


              If you have something to counter this please post it, I’m interested in this topic.

              1. chris

                I am interested in this primarily from the perspective of national policy. I am sorry if this problem has burdened you where you live. PE is the tape worm starving our country right now. I can’t fathom how twisted you have to be to target critical resources for humans to live and look at them as growth opportunities for extracting profit.

                But the reason I’m not too concerned about PE in the context you mention is single family housing is a luxury that cannot solve our problems in terms of energy usage, efficient housing, or providing more opportunity to more citizens. I love my house. I’m very thankful for the plot of land it sits on. But I also know the rational way to allocate these resources is to build an apartment building where my house sits.

                What can I offer you is a promise that if we actually enforce disclosure and codes in jurisdictions, is that the PE house flippers will find they can’t profit off their purchases and will leave the market over time.

    7. Societal Illusions

      Where do we go from here to correct the problem?

      Firstly focus on the underlying conditions common to most every NC identified issue or imbalance or systemic gaming – and there are so many, right?

      We whinge about this thing or that thing and don’t seem to notice the commonalities between each one, which begins with poor outcomes for most being a feature and not a bug.

      Just as in our disease management system (aka healthcare) the hyper-focus on symptoms and “billing management aka profitability) instead of causation and underlying health which allows for the body’s resilience, we have lost “fairness” in the marketplace as those who have more take further advantage of those who have less. The underlying systemic issues or rot is ignored with the distraction of the particular egregious behavior being identified.

      What to do?

      Perhaps we can first look at was has been done that allowed us to arrive where we are now.

      Many have identified the private central bank system of money as the underlying foundational error that all other inequalities are built upon. Maybe revisiting options around that is a place to start.

      Equating corporate rights with individual rights is another place whereby the rot has been allowed to spread. Are not corporations creatures of the state – as they are given special powers by government? Then why can they not legally be regulated and controlled by government with impunity without impacting individual rights?

      Instead of only looking backwards, why can’t markets be made truly open via database technology? Imagine no statistics – or most of them being private? What would the real estate market look like without recorded titles and selling prices? This data could be better collected, managed and democratized so that more equal access and use of the data is available to more of us vs less of us. If private companies can track data, why can’t the government do it even better? And make it accessible to all?

      So much has been shared about the power of monopoly. Monopoly usually only occurs with government complicity – special rights or permissions not normally granted to others. TBTF banks are an example of this. Monopolies are most always corporations – which can be regulated by the state who created them. What if more data about them and their operations were made public, in an intelligent and accessible way? What if government didn’t protect them but instead allowed for or even encouraged disruptive entrepreneurial ideas and new products or ideas to take hold again and again? And PE has been behind a lot of this financialization. What legislative endeavors allowed this to occur? If society as a whole, but only certain special interests benefit from this endeavor, then either by removing the changes that allowed for their growth or finding alternative ways to reduce financial gaming that is either destructive via its extraction or creates more hurt than health, then likely another root cause can be removed.

      Perhaps our utilization of military power in all its many forms around the world to provide advantage to US based corporations doing business is something to also reconsider. The primary reason for our global presence seems to be clearly not focused on defending peace but to control and enforce. For whose benefit?

      Unfortunately, any systemic change will have winners and losers. Pension funds are mentioned in this article. Who benefits from those? Often the same people being damaged by loopholes and systemic problems so they are losing in one side and benefiting on the other. A lot of fear attached to this as well, which surely contributes to keeping much change from happening. This deserves to be better understood.

      I could go on but we don’t seem to often seek to understand how we got here and what forces have been applied to allow for fundamental concentrations of wealth to transfer from the many to the few. By clearly identifying the common causation for most of these outcomes and how we
      got here or how we can apply technology differently – publicly vs privately – then we could have better uncorrupted visibility as to where we really are.

  6. Bugs

    Brilliant post. Clear, dispassionate exposé of an immoral cartel set up and remote controlled by a monopolist tech entity, with the sole object of maximizing return on shelter and skimming off those increased margins, while increasing despair, homelessness and poverty. If the DOJ Anti-trust Division has suddenly come out of its induced coma, it will be fun to watch.

    1. Alice X

      >If the DOJ Anti-trust Division has suddenly come out of its induced coma, it will be fun to watch.

      Well, Conor wisely concludes with this:

      Either way, a wide amount of latitude seems to rest with the DOJ and FTC. So while this is good news for now, there would appear to be little to prevent future DOJs and FTCs from issuing guidance that says the information-sharing safe zones are open for business again and the next FTC from declaring that “price fixing by algorithm is no longer price fixing.”

      The history of successes by the afflicted against those afflicting them, as I understand it, has been of one step forward, one step back. Or worse, so…

  7. Mark Gisleson

    You can’t think about these things when you rent because you have no options other than sleeping in your vehicle (if you have one).

    I cannot imagine what this society would be like if all our decisions were made to benefit average people and not just investors.

  8. Tom Stone

    Here in Sonoma County the combination of price fixing and AirBnB has increased rents by @ 35% in my estimation.
    This is a good thing because it keeps the proles desperate and thus easier to control, for a while…

  9. Dean

    The common thread in many of these stories of price gouging is private equity involvement. PE is not a net positive to society. Rather it enriches the few at the expense of the many.

    When “capitalism” is untethered from morality and ethics, greed is the result and the masses pay the price with their wallets, their well-being, and sadly their lives.

    1. Stephen V

      What of the demand side, i.e. those pension Funds piling on?
      I’m convinced our town of 90k is full of parking garages, in part, bcz Muni Bonds are such a ” great investment .” Tax-free interest. Woo hoo !

  10. tales

    Unsurprisingly, my PE landlord made the “Yardi” list. I’d not heard of the class action lawsuit against it before reading this post though. Nice work on this post.

    As with other PE ventures, my landlord uses exclusively out of state vendors (GA) for many maintenance activities that could easily be sourced locally. I’ve wondered if they extract extra profits through vendors they own/control that charge super-premium prices rather than sharing them with investors or letting them stay on the general partner’s books. Hopefully, investigators will be able to follow the money.

    1. chris

      The key there is having competent AHJs as inspectors. AHJ = authority having jurisdiction. They’re the local code inspectors who say what is allowed and what is not. And then rolling out the enforcement campaigns wisely.

      One of the big impacts from the GFC and the resultant housing crisis was local code departments got hit hard. Losing the tax base meant no budget. People losing their homes meant no taste for enforcement. Local politicians desperate to do anything to reverse losses meant some departments in small to midsized communities were closed down. Or their remaining inspectors given impossible workloads.

      In theory, what’s supposed to happen is these properties are regularly inspected and the locally adopted codes are applied. And when these buildings engage in renovations or recognize improvements leading to rental increases, in many jurisdictions, they have to meet the newer codes. The AHJs are supposed to lead the charge there. But they’ve been largely absent during this period because there aren’t that many and the properties don’t want to work with the municipalities they exist in.

  11. Oldtimer

    More than 70% of the rental stock in the US is owned by individuals.
    We manage about 200 units for approx. 30 such individuals.
    The biggest nightmare for any landlord are vacancies.
    Landlords raise rents because people have money to pay it, it’s as simple as that.
    This is just an attempt to go after the big guys because that’s where the money is. Not’s saying they haven’t colluded to increase rents but such policies would be self destructive especially in a market they make less than 30% of the total . Now, if you talk about pharma, healthcare, finance, etc , that’s where the big whales are but their lobbying is too powerful.

    1. Carolinian

      Landlords raise rents because people have money to pay it, it’s as simple as that.

      Or alternately people have to pay it when landlords raise the rents or they will be homeless. Please admit that any manipulation of the supply and demand situation also benefits small landlords even if they aren’t the ones doing the manipulation.

      While I’m hardly an expert on any of this my understanding is that traditionally rental prices have been a function of the housing stock in general and the going price of land and houses. If home prices and interest rates are low then most people will opt to buy rather than rent. So as Michael Hudson and others here have pointed out the government will always have a very fat finger in this particular pie rather than it merely being the libertarian ideal of the “free market.”

      1. Oldtimer

        Renting in the US is very dynamic, people have to give just 30day notice to move out.
        This compared with most European countries where a lease is signed for minimum 3 years and notice of 3 to 6 months is expected.
        The advertisement and comps are very easy to get and the tenants are always on the look.
        That said, if people cant afford it they will typically move with their family or rent together with friends or move to a less attractive location and there will be a lot of vacancy which will bring down prices.
        My hunch is that people have more money and I can see this at the recycling center with the package boxes we remove every week. During the covid times when government checks were coming in, the amount of empty veuve clickot champagne boxes and whiskey blue label we would trash was insane, now things have moderated, not as much expensive liquor, more electronics but still the volume is much higher than before covid.
        Its my personal economic indicator, things aren’t so bad, we have increased rent by approx 30% post covid and no one moved out because of it. But also prices have on average doubled since 2019 for most maintenance articles (I track about 400 different maintenance items since 2012 and have detailed pricing each year) which leads me to believe that the inflation is much more than its reported.

        1. Rolf

          Renting in the US is very dynamic, people have to give just 30day notice to move out.
          This compared with most European countries where a lease is signed for minimum 3 years and notice of 3 to 6 months is expected.

          Sorry, but my experience has been precisely the opposite of this. Although it’s been decades since I rented, these rentals or lease agreements were all made in US university towns where housing was never cheap, so I doubt much has changed, and it was always: first and last month’s rent (or more) held as security/damage deposit, and a minimum yearly lease, which renewed automatically without a month’s notice prior to expiry. Breaking the lease before it was up meant forfeiture of deposit, and deposits were not often returned after vacating without a fight or delay. And if the property changed hands, you were out in the street or forced to sign a new lease, typically with a whopping jack up in monthly rent. And if you had problems with malfunctioning appliances, pests, security? Wellie. Good luck with that. Granted, this situation was typical for uni towns with student populations, so maybe atypical elsewhere. Dunno. But I do remember that if you could find an apartment as a private rental with a good, fair landlord who did their own maintenance (no property management service) and didn’t jack rents yearly — hold on to it!

          In contrast, in Europe (Germany), I had much more power as a tenant, because local ordinances concerning what landlords could and couldn’t do were strictly enforced. Real estate was also not viewed as the lucrative investment it is in the US.

          Maybe y’all’s experiences have been different, but as a renter in the US, I always felt precarious and powerless. Owning was the only way out of that trap.

          1. Yves Smith

            Yes, I never heard of anyone breaking a lease and not losing the deposit. The idea you can casually break leases here is bogus. You might be able to leave early IF you grovel to the landlord and IF he can find another tenant to start at the exact end of your lease term…or better yet, you find a good replacement tenant.

            1. Oldtimer

              You are liable till the term of the lease according to law indeed. In reality things are more fluid. Most leases after a year become automatically month to month with 30day notice required. Any tenant who wants to break the lease will do so, the landlord has fiduciary duty to rent the unit asap. Usually if the tenant cooperates with the showings the unit will be rented before he/she moves out. But many will start making enough complaints that no landlord would want to deal with and will be glad to let them break the lease in exchange for unit keys. We have never gone to court to pursue eviction or recover unpaid rent because simply its not worth it. You don’t want the tenant to trash the unit. Rental laws at least in California are notoriously biased against landlords, and the rule number 1 is to avoid litigation with tenants.

        2. Greg Taylor

          In North Carolina, with the landlords in this post, if you decide to leave, you need to give 60 days notice (you pay rent for 60 days after giving notice.) In addition, if you are breaking a lease, you owe an additional 2 months rent due at the time you give notice of the lease break (i.e. immediately). If you need to leave immediately and break your lease, it costs you 4 months rent.

          The landlords who use this (legal) scheme must give 90 days notice before raising the rent so the renter has 30 days to decide before being subjected to the higher rents via the 60 day notice for leaving.

    2. chris

      I think you’re reflexively responding to what you feel is a criticism about your business. While many property managers are useless leaches, not all of them are! Faint praise, I know, but still. Anyway, this is about scale. The mom and pops and your 200 units ain’t a big deal. I’m talking about the REITs with 115000 rental units. Here’s some useful collected stats for the conversation. The landlords being discussed here move markets. They drive the rents that your mom and pops can charge, not the other way around.

      As for landlords raising rates because people have money to pay… that’s family blogging BS. Landlords raise rates because they want more money. They don’t care if current tenants can pay or not, as is self evident from the eviction crisis that’s been occurring. Landlords get away with raising rates because the people who are renting don’t have as many options now as they did before 2007.

      If you’re a property manager how many times have you told a landlord, no, you shouldn’t raise rates? And if you did that, how many times did the landlord agree, or at least reconsider? Recent statistics and the data discussed in this article show that if you could say yes to either question you are in the minority. I have been a landlord. I have worked with property managers. While my sample size is small, I can tell you the experience was not positive. But I’ll also say that trying to rent properties in depressed areas between 2010 and 2018 was a hard time. I looked at numbers and saw that there was no basis to raise rates. I got stuck owning a house I couldn’t sell when I needed to move. Because I didn’t rely on that income for my family, we made it work. But my friends and business associates? They raised rates every year regardless. And looking at things post 2019 there’s been even less consideration for not raising rates.

      1. Vicky Cookies

        As a tenant organizer, I can tell you that the people whose roofs are owned by ‘small-fry’ landlords correctly perceive them as a major part of the problem; 70% of the problem, if Oldtimers’ unsourced claim is accurate. Indoor sleeping should not be a commodity, and anyone involved in skimming their own profits from the sad fact that it is, in my view, ought to divest from such activity and make some personal reparations. They are profiting, essentially, from the threat of homelessness, while contributing to that problem.

        1. chris

          Ms. Cookies, I do not mean to imply that the suffering of you and your fellow tenants isn’t important. A bad landlord at any scale is a trial to live through.

          I can tell you based on what data exists that the estimate of about 70% of landlords being small timers is accurate. However, I can also tell you that the property numbers are not equally distributed. Public data about this subject has been getting increasingly sketchy for years now. But there are somewhere around 50 – 55 million rental properties in the US. The larger investors and corps and related trusts own more than half of those. If you want to think about this problem using rough math, it’s true that any landlord can be bad, but 1/3 of landlords are 2/3 of the problem.

        2. Oldtimer

          Landlords provide a service just like every other business. They aren’t profiting, mainly getting by and making a living. Many landlords do go bankrupt, it takes some evictions and trashed units and you are deep in red. What has saved landlords is Fed policy of inflating asset prices which allows them to borrow more against increased spurious building values.
          Don’t blame landlords, the issue is that wages haven’t kept pace with inflation which is a problem of government spending not landlords.

      2. Oldtimer

        “…As for landlords raising rates because people have money to pay… that’s family blogging BS. Landlords raise rates because they want more money…”
        This is nonsense. Landlords always want more money like every other business.
        Why didn’t they raise rates between 2008 and 2019? Did they become greedy all of the sudden? Why not triple the rents immediately to get more money since the tenants have no choice but to pay?
        Dealing with an empty unit and an eviction is every landlord’s nightmare.
        You would have to double the rent to recover the cost of vacancy and eviction which will never work. It can take up to 6 months and more to process an eviction and your unit will be trashed.
        In California you must raise rents every year now because there is a maximum you can raise the rent per year (5%+CPI) so you don’t want to be left behind thanks to government regulation.

        1. chris

          Did you read the article? Or look at any of the FRED links CA shared?

          I think you’re putting an awful lot of faith in your very small sample of your local market. To the extent that you think prices didn’t increase between 2009 and 2018, did you notice the part in the article about how RealPage usage reached critical mass in 2016? Again, maybe read the article and think about how it differs from your experience. Or provide some data that backs up your position that these claims are incorrect.

          But, even with all that, on what basis do you propose landlords have any claim to increase rents other than, they can? Are the people you’re managing properties for significantly improving the houses or units every year? We’re not talking about a fresh coat of paint. New appliances? New AC? Solar powered parking covers? Better fire protection systems? Is everything up to code? And I mean current code year, not what you’re allowed to consider as acceptable. And if they are doing that every year and the improvements come to more than 10% of the value of the property, or whatever threshold your jurisdiction has, are they following the requirements in the property maintenance code and updating critical systems to a new code year? Odds are the answer to all that is no. They’re increasing rent because they’re increasing rent. Why? Because they can. How much? Whatever they can get away with. The rental property isn’t materially different from year to year. They’re just assuming that because the market is different, they should adjust prices. That whole concept is called rentierism and it is something a lot of writers on this site oppose.

          Everyone who maintains properties will tell you maintenance costs have increased over the last several years. But those costs are supposed to be priced into the rental fees to begin with, not thrown on top because they’re unplanned. You’re not guaranteed to make money on any investment. Rental properties are no different. Yet we have landlords admitting that they unfairly hold back all or part of a tenant’s security deposit, because why?

          Maybe you and the people you manage properties for are some of the good guys. Maybe you treat your tenants well and the buildings are clean and no one complains about rent. I hope that’s true. But what the article suggests, and what a lot of data supports, is most renter’s aren’t experiencing what you’re claiming is the norm.

          1. Oldtimer

            Correct, my thoughts reflect my own experience but its from the small landlord point of view. I don’t understand your arguments against landlords increasing rents, they make no sense to me, they are a business and must get the most of their asset like everyone else.
            My groceries are the same groceries as 2019 but prices have increased by 40 to 50% , and so is everything else.
            Should we ban grocery stores from increasing prices?
            If you owned rental property you would know that it takes a lot of expenses to maintain it. I dont know any landlord that want to let they property decay or refuse renovations. Especially our units are coastal and they deteriorate quickly, a lot of money goes in renovating them.
            Plus it is hard to rent run down properties too.
            If there is a semblance of free market left in this county without true monopolies, it is the rental market.
            It also bore the brunt of covid shut down as the government mandated the rent moratorium for years without the benefits of PPP that went mainly to big businesses. Its very hard to withhold the sec deposit, at least in California.
            If you do, you must do it only to repair damages caused by the tenants and keep a lot of paper trail as most will go to small claims court if they feel you are cheating them and the judges will rule on tenant’s favor usually and punish you if they see that you do not have a solid case.
            Security deposits is just like money in the bank, its treated by law like that, you don’t want to play with it and its not worth doing it.
            What matters for us is that the tenant is out and we get possession of the unit asap, not saying there arent slumlords exploiting tenants not aware of their rights, but at least in California you will be playing with fire.
            The general issue with tenants is that they treat the unit as a “rental ” which means they usually damage a lot of stuff because of carelessness and because they pay rent they feel they are entitled to damage appliances, cabinet doors etc.
            Regarding costs, I told you about the items we track having doubled, but if you try to hire a plumber or electrician you will be paying $250 and more per hour plus $120 truck fee to show up. As an example, one 600Amps 6 meter panel that we paid approx $7000 in 2015 we got it quoted by 6 contractors, the cheapest being $28,000, so it gives you an idea of what things are in the real world.

            1. chris

              I’m intimately familiar with the real world in this sense. I inspect apartments, condos, and other properties all over country as part of my position. I personally inspect anywhere between 200 to 1000 apartment units a year, in multiple metro areas. I am often doing work on behalf of various contractors. I am aware that the cost of their labor and the cost of their materials has increased significantly in the last several years. I expect the cost of HVAC related repairs and replacements to go through a step change in the next two years too if we continue to pester China and frustrate the global supply chain. But very little of that has any direct impact on what we’re trying to discuss here.

              The problem is the fundamental concept of rents.

              Taking it back to the point if the article, the rental market in the US has been materially altered by fraudulent behavior. All of your comps for what rent should be in your market are wrong. All of them. Because even if you didn’t rely on YieldStar from RealPage, what data we have says the other properties in your area did, which means when you assessed the market to determine what rental rates should be for a particular unit, wrapped in that cost is an element of fraud which allows you to inflate your asking price for rent without having done any work to earn that money. Which gets back to the fundamental problem of rents that the like of Dr. Michael Hudson and other NC contributors have written about for years. So let’s try to break this down into math, and apologies to the finance experts around here if I get this wrong. I’m an engineer, not an accountant.

              Your rent (R) includes the base cost of owning and maintaining a property. You’ve also got random increases in jurisdictional fees you can’t do anything about. Let’s call that R=B+t+i+x. B is your base mortgage, t is taxes and fees, i is insurance, and x is unanticipated maintenance costs. To the extent that none of those change, there is no reason to increase rent. But we know the costs of maintaining a property tend to increase the older the property becomes and aside from hiring and training your own in house labor, your costs for hiring contractors will increase. Depending on where you live, insurance costs increase too. So the equation becomes: R(t)=B+t(t)+i(t)+x(t) where the base rate stays the same but taxes, insurance, and repairs become functions of time. In general, you would expect the time series of rents and rent increases calculated in this fashion to follow general inflationary rates. But that has not happened since 1992 or so. And in the last 8 years, the increases in rents have been extraordinary. What the article shows, and what other people have also reported, is that the reason for rental increases above and beyond general inflation is fraud and market manipulation on a grand scale. Such that the time series equation looks like this:


              Where y is an additional factor many institutional investors are applying to the base rate because they’re leveraged and want to increase income to cover the leverage, T is the multiple landlords pass along in fees and other costs when properties need repairs, F(t) is the increase in market rates due to algorithmic collusion and illegal scarcity from actors like AirBNB, and P(t) is the political factor where laws and regulations have decreased the ability to build more rental units and increased benefits of concentrating on more expensive properties by destroying to lower cost options. My argument, and what I’ve taken is the argument of many other economists who study the problem of rents and the social problems of high cost of living, is that your owners are not entitled to F(t) or P(t), y is a part of your own poor planning, and T is typically property managers sticking it to tenants. These are part of “unnatural factors” that combine to increase monthly rental rates and contribute to landlord profits when the landlords have done nothing (except perhaps bribe local officials) to earn those profits.

              Now, as has been argued on here already, in terms of pure housing stock, this really shouldn’t be an issue. We have a lot of vacant property in the US. People could move to Detroit or Youngstown and buy a house for $2000 and exit the whole rental rat race. The problem with that is the places where rents are increasing the most as described in this article and others, are also the places hoarding opportunity. It’s possible, even likely, that the same finance officer who decides to eliminate the last plant in Southern Indiana building something is also a landlord who owns property in Chicago and will benefit if people have to move from Indiana to Illinois to find work where there are jobs. That same Chicago landlord is also probably a NIMBY donating to local politicians to not allow the construction of low income housing near their property, which also increases the market value of the property.

              So, to sum up, your properties are not materially different year to year, month to month, unless something extraordinary has occurred, but market rates for those properties are inflating well beyond what CPI and other metrics suggest is “natural”. The explanation for why that is occurring in the US, and why it has been occurring especially in the last 8 years, is criminal behavior. Any increases in rental rates that incorporated market assessments in at least the last 8 years are based on fraud. They should be rescinded.

              The problem of course, is, there are no options which allow that to happen. But that’s a discussion for another time.

              1. Oldtimer

                Sorry or not reading your math part of the post, my head hurts.
                Its looks like fed models, elegant and complicated, but wrong.
                There is no general agreement of what value and the right price is for anything out there because if there was, trade would grind to a halt.
                Why trade if nothing is gained or lost?
                People buy smth because they think it has more value that what the seller is asking and the seller sells it because he thinks its getting more that what it is worth.
                Its all subjective and works fairly well provided there is no compulsion on the buyer or seller to do the transaction because value and price are very subjective notions. So is with rents.

                Your paragraph :
                “….It’s possible, even likely, that the same finance officer who decides to eliminate the last plant in Southern Indiana building something is also a landlord who owns property in Chicago and will benefit if people have to move from Indiana to Illinois to find work where there are jobs…”
                Sounds like some far fetched conspiracy theory that even if it happened it certainly is an extreme outlier.

                “….rates for those properties are inflating well beyond what CPI and other metrics suggest is “natural”…”
                Maybe the CPI isn’t reflecting the real inflation going on.
                In my book, inflation is always CPI + asset prices as there is no valid reason to talk only about CPI.

                “….The explanation for why that is occurring in the US, and why it has been occurring especially in the last 8 years, is criminal behavior…”
                You need to explain why all of the sudden in the last 8 years decent taxpaying people decided to become criminals “en masse” all over the country.

                1. chris

                  No, you need to read the article. Based on what we know from RealPage, and their YieldStar product, any decision you made relying in market comps was influenced by illegal collusion and fraudulent behavior. As for what happened in the last 8 years, we reached a critical point where RealPage had a controlling interest in the market and their algorithm helped set prices for thousands upon thousands of rental units. To the extent that using the algorithm landlords and property managers discovered they could run their businesses with lower occupancy rates and make more money. That is all in the article. And it is reflected in the data CA shared with the FRED links.

                  You also need to consider that shelter is not a typical trade good. We don’t talk about it that way. We don’t need a clean, safe place to live the same way we need a vehicle for instance. Your prior statements which boil down to “they have more money to pay more rent so what’s the problem?” ignore that we have standards for living expenses like rent that we don’t apply to other purchases. There’s a reason we set targets for rent or mortgage payments as less than 30% of income. We don’t worry about that for other categories because those are negotiable or typically items one can sell if needed.

                  I’m sorry you don’t want to think in terms of math, so let’s try something else. There’s a non-zero part of rent evaluations in the last 8 years at least, and likely for longer, that rely on a market that was explicitly influenced by illegal behavior. To the extent that you relied on comps for setting rates, and those comps relied on your market, your rates were also corrupted by that illegal behavior. This is beyond any issues that people have historically had with the concept of rents. This is beyond an assumption that property value increases over time. This is profiting from illegal behavior. And in the case of property owners with thousands upon thousands of units, it is inflicting misery on a massive scale.

                  It would be helpful for this discussion if you shared some details of what you typically experience too. Because what I see in a lot of units, are buildings that went up in the 70s, with HVAC equipment from the 80s, with interior styling from 90s, that people claim to have improved with a new coat of paint and a thorough cleaning that happened in 2010. There is no material improvement. You just think things should cost more to rent, because you’re the property owner and you can. That’s the way things work in this country. That is what property owners are legally allowed to do. Doesn’t make it right. And in the case of people who have used YieldStar, it means that they have engaged in significant abuse that will likely have criminal implications.

                  1. Oldtimer

                    I read the article before commenting and thought it was total nonsense.
                    I don’t buy the premise of high vacancy rates in exchange for some rent increase. Its a stupid idea.
                    A 50% vacancy would imply doubling of rents on the remaining tenants to get the same income. Makes zero sense.
                    Plus the whole idea is bogus and doesnt stand to basic examination.
                    If such was the case and its a recent phenomenon, the vacancy rates in the US would be much higher than they are historically. They arent.
                    Your theory need to explain why do we have such low vacancy rates in the US?
                    Algorithms might temporarily influence but ultimately dont set prices in the real world, its demand and supply that matters in the end. So is with renting. People have more money, I can see that, and they pay the higher rent. The stats show this too.

        2. CA

          These comments and the argument on the small owner rental market are interesting. I learned from and appreciate them.

          Critical will be to keep track of the large scale ownership of small properties.

  12. Superduperdave

    Very nice job on an important issue. This one is deeply tied up with politics, so it will be interesting to see what happens in the event that Orange Guy is reelected.


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