SPEAKER_00 0:00

The People Under the Stairs, the 1991 Wes Craven movie? A kid breaks into a house to stop an eviction. He finds the slumlords are keeping their own children locked under the stairs. They cut out their tongues for breaking the rules. Now the kids eat anyone who comes down. They made $24 million on a $6 million budget. Disappeared for 30 years. Jordan Peel announced a remake five years ago. Now Monkey Paw Studios has shrunk to a skeleton crew. The sequel doesn't need a studio anymore. And mommy and daddy still own the building, still collect the rent. They just don't need a basement anymore. The cruelty got automated. Hold on. What's this? Generated automatically? Mommy and Daddy already know my address. They didn't have to call. The notification just did it for them. My landlord didn't just raise my rent, a server did. Joey's still shuffling. He paid for healthcare cruelty. Now I'm paying for housing cruelty? The machine doesn't care what's wrong with you. I'm back. Okay, here's what actually happened. There's this company called RealPage. They built software that collects private rent data from competing landlords. They run all of it through one pricing algorithm, and it sends every landlord back a recommendation for what to charge. 16 million apartment units, one algorithm, 80% of property management revenue software market in this country runs on it. Let me show you what that looks like on the ground. Seattle's Belltown neighborhood, downtown zip code, over 9,000 apartments in it, 70% of those apartments run by just 10 property companies. And all 10 of those companies, you got it, they're using RealPage. So if you're renting in Belltown, you've got 10 landlords competing for your business on paper, and one algorithm setting all 10 of their prices. Now picture it with 10 lemonade stands instead. If every kid sets their own price, that's competition. Some charge a dollar, some charge 50 cents. One kid puts it in a mason jar and calls it artisan. But if every kid sends their secret prices to one app and the app texts them all back, hey besties, $4.75 today, that's not competition anymore. That's 12-year-olds running a price fixing cartel and calling it dynamic pricing. Now the old cartel was simple. Competitors meet in a room, they share prices, somebody gets caught, right? Everybody goes to jail. This new version, they never have to talk to each other. They just all talk to the hub, and the hub talks back to all of them. So technically, nobody's coordinating. They're all just reading from the same answer sheet. The spokes never touch each other, they only touch the hub. That's the model. And we know what it costs renters because the White House Council of Economic Advisors actually ran the math. Renters in real-page buildings pay about $70 a month more than they would in comparable buildings without it. In high penetration markets, places like Atlanta, that jumps to $181 a month. $3.8 billion extracted from renters in 2023 alone. The algorithm doesn't care you've been there for four years. Traditional pricing works one way. Empty apartment, you drop the rent until somebody takes it. This algorithm runs the math in the other direction. 94% occupancy makes more money than 97. Empty units mean pricing power. So your vacancy is the goal. Inventory discipline, they call it. Your vacancy is their favorite tenant. And the landlords aren't just ignoring the software. RealPage employs people called pricing advisors. Their job is making sure their clients accept the algorithm's recommendations. Required compliance rate? 80 to 90%. In student housing, it runs 98 to 99%. So when they call it a recommendation, what they actually mean is when HR asks if you have a minute. The minute is the part where you fill out the paperwork. The number's already set. The landlord just confirms they got the message. The DOJ noticed eventually. They sued, they settled. And now RealPage has a court-appointed monitor. Algorithm probation. Three years of supervised release. And they can only use 12-month-old data now, which means your rent is set by last year's greed. Vintage Greed in the companies owned by private equity. Yeah, I know. Supply matters. But that's another episode entirely. This one is about the architect. Hub and Spoke is the architecture. Let's go find this architect. I'll be back at noon. Time to tell you what I found. Current resident again? Alright, whatever. So look at this. United Health, one company, insurance, PBMs, providers, billing software, every step. We mapped that one already. Now look at RealPage from this morning. Toma Bravo owns it. I think that's it, or Thoma Bravo, whatever. Turns out they also own the property management software at half of these buildings. United Health's playbook. Same architecture, different building. And before your brain picks a team here, Thoma Bravo's people gave a million and a half to Republicans the last three cycles. 450,000 to Democrats, plus another 400 grand of PACs that won't tell you which side they pushed. So they do have a preference, but they also have receipts on every side. And the Belltown number from this morning? That's not unusual. Phoenix Metro? 70% of multifamily units running on real page. This isn't a building problem or a neighborhood problem. It's a metropolitan area problem. This is the math. The receipts don't have a party. They have a return address. Okay, here's the line that named this whole episode. This is from inside the rent optimization industry. Reportedly from a guy who actually built one of these systems. Quote, humans have too much empathy. Yep, he said it. Too much empathy. Pretty sure that's not what the empathy and leadership seminar said. They diagnosed the property managers with occasionally knowing the tenant in 4B had a kid, a car repair, and no spare $347. What did they do? They prescribed software. Property managers used to actually live near their tenants. They knew the tenant in 4B by name, and they sometimes cut her a break on the rent because they'd seen her in the hallway with the kid. That was the problem. Compassion was leaking into the pricing model. So what did they do? They removed the human and replaced them with math. Because math never feels bad. Math only feels quarterly earnings. They patched out empathy like it was a memory leak. And remember this morning when I said the algorithm doesn't care that you've been there for four years? That was just a start. It also doesn't get tired. It doesn't have a Sunday. It runs the math at 3 AM when you're crying in the kitchen and at noon when you're trying to forget. The spec sheet calls that a feature. They diagnose property managers with giving a shit and prescribed algorithm therapy. Bomba bravo. 10 billion dollars for software that castrated human decency and replaced it with Excel. They own the pricing and the management and the data and my fucking Fidelity Real Estate Fund just went up another 19 bucks while I was yelling about it. Alright, I'm sorry. I'm fine. Although, real quick, under the settlement, RealPage can only use 12 month-old data now. So somewhere in Texas, an algorithm is calculating my 2026 rent based on what my neighbor was paying in 2024 when she still believed in brunch. Okay, moving on. This is where the story stops being landlord's bought software and becomes landlord's help design the machine. You see, then I found this. Camden Property Trust didn't adopt YieldStar. They built the goddamn thing in 2002, sold it, then kept right on using it. And the moment they knew it worked, construction noise. They had townhouses near a building site. Leasing staff said discount the rent. The noise is awful. The algorithm said raise prices. They raised prices, it worked. Camden's own leasing team called that the Eureka moment. Eureka. Greek for buck empathy. Tenant turnover went up 15 percentage points. More people leaving, you think that's bad. Nope. Revenue went up 7.4%, so they made more money with fewer tenants. The CEO went and bragged about it in a trade press interview back in 2008. Then in 2022, a reporter at ProPublica read his own quote back to him. He said sounds awful. Then in April of this year, Camden settled for $53 million. Two installments, no admission of wrongdoing, court approval pending. So the company that invented this software sold it and then kept using it for 24 years gets to pay a fine that's less than they make in a quarter. And just like healthcare has its facility fees and balanced billing. Guess what? Housing has loot boxes too. Ballet trash $30 a month. Amenity fee $75. Pet rent $50. Package acceptance $20. Smart home technology $25. Water sewer trash bundled $85. And then $999 to pay rent through their portal instead of mailing a check like a caveman. So that's just shy of $300 a month on top of your actual rent. All of it mandatory, none of it negotiable, and not a single dollar of it shows up in the listing price. They turned an apartment into a freemium app you can't uninstall. The FTC investigated invitation homes for this. They found the fees were deceptive. Find them $48 million. Which sounds great, right? Except that's less than what they actually collected in fees. So they profited from the crime. Deny, overcharge, bill, collect. Healthcare did it with your body. Housing does it with your shelter. That's pattern recognition. That's all this is. We've got the architect. Six o'clock, I'll give you the move. I know where your head goes. Mine went there too. And it's still wrong. The spreadsheet is the enemy, not the employee trapped inside it trying to pay their own rent. The DOJ sued RealPage in 2024. Took until late last year to settle. The deal came with restrictions, a monitor, and three years of supervised adulthood for a pricing machine that already learned how to behave when nobody was watching. They got a monitor, somebody watching them. Yeah, right. In theory. In practice, it's a babysitter for a machine that already knows where the cookies are. So who paid? Not real page. The fines landed on the landlords. Greystar settled for 50 million in class action, plus seven more to the states. Cortland settled the same day the amendment complaint dropped. The wave is still rolling. The software company keeps operating. The cartel got a chaperone. Everyone else paid their bill and went back to work. But here's the point. They got sued and the DOJ used the words hub and spoke conspiracy. That's not my language, that's theirs. Three things you can do this week. One, ask your landlord point blank if they use algorithmic rent setting tools. Watch their face. The flinch is the data. Two, demand the all in number. What's the total monthly cost, every mandatory fee included? Because if the ad says 1650 and the real number is 1950, that's not a market adjustment, that's a shell game. Three, local pressure. San Francisco banned this, New York banned this, your city can ban this. Ask in writing, screenshots age better than memory. Ask what software sets your rent. And here's why this is harder than just walking away. Your retirement fund probably owns shares in the private equity firm that owns RealPage. That firm also owns property management companies. They might own your landlord. So when your rent goes up, your 401k goes up. The math works because you pay both sides. Quarterly statement says you're winning. Lease renewal says different. Full disclosure? I want to find the server that this algorithm lives on and physically break the thing with a hammer. I literally spent 20 minutes last night looking up where data centers actually are. Turns out there's one in Plano, Texas. I priced the flight, I priced the rental card too. It surged. Of course it did. But instead, I clicked accept renewal. Because the alternative is homelessness. And I have bills and the show, and I'm not actually flying to Plano. Who wants to go there anyway? And somewhere a server just registered my click as price elasticity confirmed. Push higher next year. We participate while complaining. I'm not better than you. I'm stuck too. But being stuck doesn't mean being silent. And the algorithm still doesn't give a shit. Doesn't get tired, just runs the numbers and sends the notice. Same way it did this morning, same way it'll do tomorrow. Joey's still shuffling. He's still paying for health care he can't afford. I'm stuck paying for shelter I can't afford. Same machine billing us in different rooms. Mommy and Daddy know where you live.

SPEAKER_01 13:11

Same time next week.