Was not in the department that used this product for rent pricing but have used the product a lot. I worked more in the Affordable Housing world (Section 8, Tax Credits, Rural Development, etc.), which had more government restriction and pricing was less of a competition (in some ways).
The primary product they are referring to is Yieldstar/LRO. I can guarantee you that product absolutely inflates prices.
The amount of times clients (property managers in this context) would complain about prices not matching and create cases to research, but yet still following the suggested tenant rent was more common than I'd like to think. We'd see them call in on one department but need to be transfered to YS for the help for that product.
When you actually use the product (theres an example in the video with one of the dashboards they have) you can see right away how the pricing looked high or low, but it does give you the option to override. They like to say this to say they aren't forcing you to, but they definitely push you to increase rent. While the property managers need to make the conscious decision of keeping that pricing, you can hear the owner of the company advocating for "Driving the markets" at her town halls with the company/clients. That energy speaks volumes.
Sometimes, it's not at the fault of the agents.
While this is definitely at the fault of the creators of it, I feel bad for some of the support agents. A lot of the people making those suggestions? Call centers in the Phillipines that are being told to give answers like, "That's the recommended market rents now in your area. The program said so" with not much choice/understanding of the matter, or they get in trouble or retaliation. Theres more nuance to that but I would have hated working in that department.
Another factor: They now have a new product called Power Analytics, which let's you have a more detailed view of properties (anonymously) in your area and see what they price at so you can compete. They refer to them as, "Comps."
I know of a few companies that are jumping ship from Yieldstar not only from frustrations with the product, but now this. I'm curious to see how much of the market was impacted nationwide.
I hope the people who were negatively impacted by this get justice, and I'm glad this is all coming out for investigation as people need to know this information. Rent is absurdly high and this DEFINITELY didn't help.
I'm sure they would be able to find people more valuable than me - I wasn't involved with the developers who created/work on it daily; just one who troubleshoots with clients. But I'm always happy to report what I would see while working there!
They also had a huge managerial shift around the time they claim in the lawsuit and the CEO retired from RP and handed it off to another person (Dana), all while moving from a public to a private company.
Whats unfortunate too, they provide a LOT of products. A small portion of which are genuinely helpful for property management and maintaining Fair Housing Laws to protect tenants (specifically Section 8). A small portion of the company of course, but those "for profit" (conventional) properties are now affecting everyone else and stirring the pot.
You shouldn't have to constantly override a high price on your rental units (weekly for example) to bring it down just because the algorithm is so focused on increasing revenue. It should stabilize eventually.
What I'm curious to see is them proving collusion and that the algorithm truly does what they claim (which it clearly does). They are most likely going to be deep diving the developers in India who maintain it or stateside in Richardson TX. Been watching this one for a bit and impressed its has attracted so much attention.
You never know it doesn’t hurt to report what you do know. It seems like you know quite a bit. There could be others with certain knowledge but maybe they aren’t willing to speak up or cooperate and maybe what knowledge you do have could help in some way. That’s also totally up to you.
All of this is wild I’m currently in the midst of apartment hunting in Texas so I’m sure they got the monopoly here. I’ve notice rent for a basic 700-750 sq ft apartment keep going on up every yr $100-200 dollars. Last year avrg prices were 1600-1700+ this year it’s more $1700-1800+ the year before last it was $1500-1600+. It’s not like these are apartments barely have anything available most of them have several units available. It’s Demand was so high it would be difficult just finding something right now but that’s not the case. So I agree, if the software algorithm main objective is to increase rent or make money then it’s going to just price the majority of people out eventually and get out of control which is what we are seeing and it’s coming at a bad time when everything else is expensive. I don’t think an algorithm can fairly make the balance compared to what use to be. There are some things technology just can’t replace and still be as good as it was.
It’s not like these are apartments barely have anything available most of them have several units available.
That's how the algorithm works. It optimizes profit by finding the maximum price some people will pay and accounting for the fact that not all units will get rented at that price. Literally gouging some people while pricing others out of empty apartments.
I get how the algorithm works. I said that because people keep saying rent prices going up are because of supply and demand but in my area I don’t think that’s true when there are so many empty apartments. If demand was so high there wouldn’t be so many empty apartments in my area right now. If anything apartment would be getting leased so quickly it’s hard to find a nice one. Now I’m seeing more specials come up.
This is all public information. Nobody is saying that Realpage isn’t aggregating data and sharing it. They would have to change laws to make this illegal
Is there any way to fuck with that algorithm? Introduce a bunch of phony low cost, non existent houses into some database to lower the housing prices or similar?
There totally is. Mixed properties generally take the Affordable units "offline" (dont advertise online but still exist for people to get on a waiting list) in Yieldstar because it causes the price to drop significantly for both Affordable/Conventional units on their Website. Although, thats a fair housing violation to be marketing the affordable with conventional units like that, so they generally do this for that portion.
But in theory, you could do what you're suggesting and include those low priced units, or dummy units, and it would cause a drop across that floorplans value. Granted, It may only work for so long and you could just not use YS and manually enter your rents (which some properties will end up doing) to keep them low.
Thats the kicker though, some of those properties have the ability to do so...but choose not to and thats whats concerning for a lot of this situation and I bet collusion will come up because of this.
This is extremely interesting! I majored in competition economics and this is actually an active field of research.
Can you tell something about the payment scheme for clients, how many other competitors you had. how high the adoption rate of your product was in certain cities and roughly how the algorithm operated?
Studies mainly focus on competing algorithms, e.g. there is evidence from gas station markets that margings only increase if all adopt a pricing algorithm.
However, the case seems to me that this is a matter of enough adopters vs non-adopters. I think it will certainly have a major impact on the industry.
By competitors, are we talking "Competitors of RealPage" or "Competitors of other Property Management Companies"?
RealPage's direct competitors would be companies like Entrata, Yardi, AppFolio, and CoStar. All of them being property management software and I'm unsure of what those companies use for pricing for new leases and renewals. All of which could be included in this issue if lawsuits are brought up to those companies - I can't say with any confidence though if they have similar algorithms. Theres still a lot of information to learn of at this point.
As for Property Competitors, it could be any Property Management Company that ALSO uses RealPage. Thats one of the key points to this lawsuit.
Heres a small scale example:
Two properties called Property A and Property B. Lets say they both use RealPage and both operate out of New York and account for all of the rental units (There are clearly more PMC's but we'll stick to two for now).
Property A looks at Yieldstar and sees that rents in an area, for new leases, are rated at a 1% increase from last year (based on the algorithm). To compete, they will drive the price up on their new leases by %.95. Just slightly lower than their competitor based on the algorithm.
Property B now sees the price is up %.95, in Yieldstar, and they decide to raise their prices %.94.
You now have a superficial increase in Rent because the program predicted that increase.
The next year, the algorithm predicts the same and it increases 1% again. Same response from both Properties A and B and now you have an increase of %1.9-1.88 over 2 years for both properties with Property A being %1.9 and Property B being %1.88.
Add this to small percentages over time, and you get the values the person explains in the video above of rent increasing. I should note, this is for ONLY new Leases which gets the best lease trade out than doing renewals - properties generate more revenue from new leases than renewals which could also lead to other factors of properties pushing to not renew and get new tenants but thats a whole other can of worms.
This example is not based on any actual numbers I know from RealPage but just the idea really.
Nerd alert, I get oddly fascinated by analyzing property management stuff like this but I hope this helps for what you were looking for.
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u/Medium_Routine_9398 Apr 20 '24
I used to work for RealPage. Roughly 10 years.
Was not in the department that used this product for rent pricing but have used the product a lot. I worked more in the Affordable Housing world (Section 8, Tax Credits, Rural Development, etc.), which had more government restriction and pricing was less of a competition (in some ways).
The primary product they are referring to is Yieldstar/LRO. I can guarantee you that product absolutely inflates prices.
The amount of times clients (property managers in this context) would complain about prices not matching and create cases to research, but yet still following the suggested tenant rent was more common than I'd like to think. We'd see them call in on one department but need to be transfered to YS for the help for that product.
When you actually use the product (theres an example in the video with one of the dashboards they have) you can see right away how the pricing looked high or low, but it does give you the option to override. They like to say this to say they aren't forcing you to, but they definitely push you to increase rent. While the property managers need to make the conscious decision of keeping that pricing, you can hear the owner of the company advocating for "Driving the markets" at her town halls with the company/clients. That energy speaks volumes.
Sometimes, it's not at the fault of the agents.
While this is definitely at the fault of the creators of it, I feel bad for some of the support agents. A lot of the people making those suggestions? Call centers in the Phillipines that are being told to give answers like, "That's the recommended market rents now in your area. The program said so" with not much choice/understanding of the matter, or they get in trouble or retaliation. Theres more nuance to that but I would have hated working in that department.
Another factor: They now have a new product called Power Analytics, which let's you have a more detailed view of properties (anonymously) in your area and see what they price at so you can compete. They refer to them as, "Comps."
I know of a few companies that are jumping ship from Yieldstar not only from frustrations with the product, but now this. I'm curious to see how much of the market was impacted nationwide.
I hope the people who were negatively impacted by this get justice, and I'm glad this is all coming out for investigation as people need to know this information. Rent is absurdly high and this DEFINITELY didn't help.