It's been some time since I wrote about the ongoing drama facing multifamily revenue management. The last few months have seen a few developments, attracting what might generously be described as a mixed bag of industry commentary. It's getting harder to cut through the (ahem) noise.
Two articles published by non-industry sources caught my eye in the last couple of weeks, as I believe they frame the current state of affairs in a potentially helpful way, as I will discuss in this article. But before we get onto that, let's quickly recap some of the major milestones in this saga:
Nobody following the above timeline should be surprised that a bill similar to Colorado's has appeared in another progressive legislative body. And as a long-time San Franciscan, it gives me no pleasure to acknowledge that this is the latest in a litany of bad legislative decisions made on behalf of the city. But it is important to avoid learning the wrong lessons from this latest development.
Like the Colorado bill, the San Francisco ordinance targets those algorithms that use competitor data, specifically targeting the largest vendors in the market. That has led to a feeding frenzy as smaller vendors and their partners scramble to turn the San Francisco decision into a business development opportunity.
But RM remains hard to do, which is why so few companies have succeeded at it over the last 20 years. The San Francisco decision does not confer viability on otherwise inadequate software products (whatever their marketing says). And large companies with large installed bases will surely make their applications compliant: there really is no need to include competitor data—public or otherwise—in RM algorithms.
The Bigger Picture
The real problem with the current industry chatter is that it distracts from the bigger picture. The San Francisco initiative relates to one specific type of functionality, but it is naive to think that that is where it will end, especially now that the Federal Government is increasingly involved.
The best article I have read for some time on this issue was published last week by Jay Ezrielev, an antitrust and federal regulation expert, entitled "The DOJ's War on Progress in Rental Markets." In it, Ezrielev considers an impending DoJ antitrust lawsuit that we will soon be able to add to the above timeline (and, no doubt in the most sensational terms, to the LinkedIn feeds of various industry "influencers.")
In his article, Ezrielev describes the DOJ's legal framework for the RM litigation, which the agency laid out in a detailed memo last November (see above). Ezrielev explains how the rationale the DoJ is planning to apply in the case of RM would hugely broaden its ability to pursue other types of technology with very little evidence of any wrongdoing. As Ezrielev argues, this is generally very bad news for technological innovation.
That reminded me of an observation that I made while I was testifying in front of the congressional hearing in Colorado earlier this year. The arguments supporting the ban on RM could equally be applied to many other technologies that our industry will increasingly rely on to run our businesses efficiently. Lawmakers get to create new laws, and if striking down multifamily technology looks like a vote-winner, RM will be the beginning and not the end of this process. The same logic applies to government agencies like the DoJ.
Ezrielev's argument contrasts almost completely with the one described by Roger Kama in The Atlantic, which claims that the government does not have enough capacity to bring antitrust proceedings against technology companies. Kama's article presents the usual mosaic of out-of-context quotes and launders various unattributed or non-expert opinions to make the point that we should want more, not less, regulation like this. Interestingly, the William and Flora Hewlett Foundation, a Northern California-based philanthropy organization, is credited with supporting the article.
Why this matters for multifamily operations and technology
These two articles frame a debate that multifamily should be aware of. Our industry is becoming more collaborative, more dependent on data, and more reliant on technology to contain the escalating costs of running multifamily communities. We should anticipate more shared resources and databases, particularly in the domain of AI. That will offer endless opportunities for legal actions any time an attorney general, state legislature, or even presidential administration is up for reelection.
The precedent that these individual laws set is more concerning than the short-term consequences of San Francisco.
What to do? First, take great care where you get your information from. If the article finishes with "...give us a call," or the social media post starts with "This is HUGE," etc., then be sure to have a pinch of salt handy.
If legislation comes up that will affect your business operations, get involved with your local apartment association to see what you can do to help resist it. Colorado demonstrated that even highly progressive legislatures usually have enough moderates who can be persuaded of the damage that bills like these can do. And in that case, more sensible heads prevailed, at least for now.
We have bigger things to think about in multifamily than skirmishes over individual software products. But wherever we can, we should think about the chessboard rather than play checkers with something that could do long-term damage to the development of technology and operations in our industry.
Photo by Hans Eiskonen on Unsplash