What I find interesting about this is that someone can still afford it because the market sets the price. We know that housing costs have increased immensely due to limited supply and because housing is a need, but someone can still afford it. Otherwise, they’d lower the price to whatever someone can pay. So if a lawyer cannot afford the rent, who can??
The old adage used to be that an empty rental was costing you money. Landlords would work for around 75+% occupancy, and to achieve that the price would also stay lower, to keep it occupied.
Then the price fixing of airlines happened, and the guy responsible (whose name I can’t recall at the moment - maybe someone else does?) went into real estate with the same software approach. The theory? If you can charge enough off of a few to pay for all the others, then occupancy doesn’t matter.
Let’s use the numbers from the OP - $700 and $3600, with a 20 year gap. The post is from several years back, but let’s use 2004 and 2024 for inflation calcs. $700 in 2004 is just a hair under $1200 today, so with a cost of $3600 - triple - that would mean one tenant has the same value to them as three. So if you have 6 units and have 3 tenants, you’re now making a LOT more money overall, as those two tenants provided the same as six under the older model.
TL;DR: Shitty people and shitty companies trying to get the most money they can, with zero regard for the impact of these decisions.
That still needs to go through an approval process, so not until September.
Even still, I wouldn’t consider that regulation to be the end-all be-all of dealing with it. The ban, iirc, is specifically for “algorithmic price setting”. So let’s say that goes through, and I’m a landlord. Here’s the regulation:
It shall be unlawful to sell, license, or otherwise provide to San Francisco landlords any algorithmic device that sets, recommends, or advises on rents or occupancy levels that may be achieved for residential dwelling units in San Francisco.
Well I can still hire a consultant, can’t I? A person, maybe one who works for a larger consulting firm. So I hire them to determine the “appropriate” price. So this consultant needs to come up with the prices for me, how are they going to come up with it?
Well they can still use software to run calculations, right? As long as I, the landlord, am not purchasing, licensing, or otherwise provided a device that uses an algorithm (a very generic term here, which is a separate issue), that consultant can use a variety of tools to come up with values can’t they? So the consultant uses multiples of the same systems for evaluation, and provides the landlord with the same price/price range I would have gotten in the first place.
This is how I expect it to be worked around at least.
Rental prices are very possibly not determined by the market these days. RealPage and other companies like it may be colluding to fix prices at artificially high levels.
Otherwise, they’d lower the price to whatever someone can pay.
Not necessarily. You’d have to look at vacancy rates. But even a city-wide statistic won’t be very useful because it looks at low- and high-income units alike. Fancy new buildings have higher vacancy rates due to higher prices. If you had some way to isolate the vacancy rates of high-income buildings, I think you’d see there are quite a few vacancies.
So if a lawyer cannot afford the rent, who can??
Lawyer salaries are not universally high. The idea that lawyers make a lot of money comes from the top lawyers. Don’t look at “average” lawyer salary, as the mean of a set of data can be heavily skewed by outliers.
With vacancy and short term rental rates rising that’s just not true. They’re raising prices because it makes sense for their business model and because they’re operating in price cartels. The business model works because there’s enough people who can afford it to cover costs on the rest of the units and have a profit still. The cartel works together to make sure there’s no one undercutting with enough units to affect the market price.
Then they can go back to wall street and say they have x number of units worth y amount. Which is worth millions to the large rental corporations.
The idea of a million rental units all operating at market cost is outdated. It’s more like 126 blocks of units with 8 of them at 100,000 and the rest spread between small landlords. It’s the 8 blocks that set the market. Working together they’re effectively a monopoly.
Renting black lists are another example of this. If you’ve ever taken your slum lord to court there is a chance the big corporations will never rent to you again. Which is like 90 percent of the market.
It’s because housing became an investment. Like money, the majority of property will soon be owned by the 1%. The only ones who can afford it are those who are seeking to profit from it, or rent it. Suck everyone dry.
With a 10% rate of return money doubles every 7 years, rule of 72. With wages being pretty damn flat eventually people won’t be able to afford things on income but on wealth because that’s the only thing that’s tracking alongside property valuations. Edit: basically peak capitalism
What I find interesting about this is that someone can still afford it because the market sets the price. We know that housing costs have increased immensely due to limited supply and because housing is a need, but someone can still afford it. Otherwise, they’d lower the price to whatever someone can pay. So if a lawyer cannot afford the rent, who can??
The old adage used to be that an empty rental was costing you money. Landlords would work for around 75+% occupancy, and to achieve that the price would also stay lower, to keep it occupied.
Then the price fixing of airlines happened, and the guy responsible (whose name I can’t recall at the moment - maybe someone else does?) went into real estate with the same software approach. The theory? If you can charge enough off of a few to pay for all the others, then occupancy doesn’t matter.
Let’s use the numbers from the OP - $700 and $3600, with a 20 year gap. The post is from several years back, but let’s use 2004 and 2024 for inflation calcs. $700 in 2004 is just a hair under $1200 today, so with a cost of $3600 - triple - that would mean one tenant has the same value to them as three. So if you have 6 units and have 3 tenants, you’re now making a LOT more money overall, as those two tenants provided the same as six under the older model.
TL;DR: Shitty people and shitty companies trying to get the most money they can, with zero regard for the impact of these decisions.
San Francisco the first city in the nation ban the practice, using rent-setting software?
That still needs to go through an approval process, so not until September.
Even still, I wouldn’t consider that regulation to be the end-all be-all of dealing with it. The ban, iirc, is specifically for “algorithmic price setting”. So let’s say that goes through, and I’m a landlord. Here’s the regulation:
Well I can still hire a consultant, can’t I? A person, maybe one who works for a larger consulting firm. So I hire them to determine the “appropriate” price. So this consultant needs to come up with the prices for me, how are they going to come up with it?
Well they can still use software to run calculations, right? As long as I, the landlord, am not purchasing, licensing, or otherwise provided a device that uses an algorithm (a very generic term here, which is a separate issue), that consultant can use a variety of tools to come up with values can’t they? So the consultant uses multiples of the same systems for evaluation, and provides the landlord with the same price/price range I would have gotten in the first place.
This is how I expect it to be worked around at least.
3 lawyers and 1 teacher (who can only afford a corner in the kitchen) as roommates.
Rental prices are very possibly not determined by the market these days. RealPage and other companies like it may be colluding to fix prices at artificially high levels.
This ProPublica article covers the practice fairly well: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent
EDIT: apologies, that was the wrong article. This is the one I wanted to link: https://www.propublica.org/article/yieldstar-rent-increase-realpage-lawmakers-collusion
Someone who has normalized paying upward of half their salary in rent.
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Not necessarily. You’d have to look at vacancy rates. But even a city-wide statistic won’t be very useful because it looks at low- and high-income units alike. Fancy new buildings have higher vacancy rates due to higher prices. If you had some way to isolate the vacancy rates of high-income buildings, I think you’d see there are quite a few vacancies.
Lawyer salaries are not universally high. The idea that lawyers make a lot of money comes from the top lawyers. Don’t look at “average” lawyer salary, as the mean of a set of data can be heavily skewed by outliers.
With vacancy and short term rental rates rising that’s just not true. They’re raising prices because it makes sense for their business model and because they’re operating in price cartels. The business model works because there’s enough people who can afford it to cover costs on the rest of the units and have a profit still. The cartel works together to make sure there’s no one undercutting with enough units to affect the market price.
Then they can go back to wall street and say they have x number of units worth y amount. Which is worth millions to the large rental corporations.
The idea of a million rental units all operating at market cost is outdated. It’s more like 126 blocks of units with 8 of them at 100,000 and the rest spread between small landlords. It’s the 8 blocks that set the market. Working together they’re effectively a monopoly.
Renting black lists are another example of this. If you’ve ever taken your slum lord to court there is a chance the big corporations will never rent to you again. Which is like 90 percent of the market.
This type of collusion should be illegal.
The blacklist is legal in most states. The price cartel is not.
It’s because housing became an investment. Like money, the majority of property will soon be owned by the 1%. The only ones who can afford it are those who are seeking to profit from it, or rent it. Suck everyone dry.
With a 10% rate of return money doubles every 7 years, rule of 72. With wages being pretty damn flat eventually people won’t be able to afford things on income but on wealth because that’s the only thing that’s tracking alongside property valuations. Edit: basically peak capitalism
Not really. There are a lot of apartment complexes in places that are barely occupied because of the price. Or fit 3 people in an efficency.
It’s why there is a surge in homelessness in this country. Especially in big cities like LA and San Francisco
In my country it is really cheap to keep houses vacant waiting for q gentrification push or a more favorable market for sellers