Fuck Algorithms, you Techholes

At least this was my initial sentiment as I was contemplating the impact of algorithms on housing.

Any of you ever read Mark Manson’s The Subtle Art of Not Giving A Fuck?

Well, I finally decided to read it. (In case you haven’t, it’s more about choosing your cares and worries wisely rather than not caring at all.)

With those previous sentiments in mind, I came across this at the bottom of page 26: 

The premise is that happiness is algorithmic, that it can be worked for and earned and achieved as if it were getting accepted to law school or building a really complicated Lego set. If I achieve X, then I can be happy. If I look like Y, then I can be happy. If I can be with a person like Z, then I can be happy. This premise though, is the problem. Happiness is not a solvable equation.1

Quote by Mark Manson, The Subtle Art of Not Giving a Fuck, page 26. (I do not receive any financial benefit from sharing this link with you. But if you want to learn more about him and his book; there ya go.)

Thank you, Mark Manson.

Now, can I add to this?

Housing is not algorithmic either.

Zillow thought that they’d create an algorithm determining the price of your home. It’s now commonly known as the Zestimate. Every real estate agent in the universe knows how fallible their little algorithm is. And annoying too. Can you imagine how many times a real estate agent has had to figure out a way to diplomatically say,

“Yes, Mr. Potato Head; I understand your Zestimate is $100,000 more than my suggested listing price. But you see- Zillow doesn’t know that your house is full of termites and cat shit.”

By now, you’d think that all homebuyers and sellers alike know that algorithmic home pricing features are highly vulnerable estimates subject to change. But not all of them do.

Ironically, these home price estimates miss the very things that determine the market value of a home. External environmental conditions aren’t priced in- such as noise, parking, or neighbors who hate curtains (and clothes), for example. These same algorithms also fail to price in home defects, upgrades, or if Professor Plum was murdered in the library with a candlestick.

This is why ibuyer algorithms and Zestimates suck when determining a home’s price.

In fact, they suck so badly that Zillow’s algorithmic-driven home-flipping business lost nearly a billion dollars in 2021. Congratulations to all you homeowners who banked in on their carelessness (you should have sold to people but I digress).

I love Zillow. But their Zestimate could use some improvement.

Recently, an article from ProPublica highlighted a new plague in the rental market.

More algorithms.

In a nutshell, big/corporate landlords are using software to provide them with rent recommendations for maximum optimization (profit).    

Of course, this totally makes sense.

Some corporate techholes have an unhealthy obsession with data.

Data is their gold mine. It becomes feedback for algorithms and those algorithms give them more leverage in their profit-seeking endeavors (or at least this is how simpletons like me imagine them to work).

Algorithms are like the data version of Dr. Jekyll and Mr. Hyde.

The friendly, Dr. Jekyll side is helpful and provides ease and access to things that we like and want more of- like the latest outrageous news stories or stupid modifications for your Toyota Tacoma.

In housing, for example, (aside from Zestimate) Zillow seems to magically drop neat houses into my email. I love this because I didn’t have to do anything but open my email and just like that- whoomp- there it is! An awesome house that I didn’t have to spend time searching for. Yay!

But wait- what does the Mr. Hyde part of the algorithm look like?

Well, the feedback loop keeps feeding itself, amplifying. After a while, you stop seeing things that you don’t like. You stop seeing other choices. Over time, little-by-little, you no longer decide for yourself what you like and don’t like because the algorithm decided for you.

When applied to housing, the algorithm-based feedback loop decreases choice and can artificially inflate prices.

In the rent algorithm discussed in that ProPublica article, the landlords squeeze more profit by inching up the rent to the maximum level deemed acceptable. It’s important to note that “acceptable” doesn’t mean “this is alright, I accept this”.

Instead, “acceptable” means, “I can barely manage this price, so I’ll say yes for now while I keep looking for something better and more affordable”.

Now, here is the problem. The more people that accept the rental rates in this algorithm, the more the algorithm is reinforced; thus true. Your “yes, for now” becomes a “yes, across the board” for every landlord who uses that platform. Now- all those landlords will collectively demand that rate as a base. In the end, renters lose bargaining power and choice. Eventually, you won’t be able to find something better and more affordable.

Are you still with me?

Landlords are a necessity. Landlording is difficult, expensive, and sometimes it’s a shitty job. They do deserve compensation. But mom-and-pop landlords probably aren’t the issue here. I’m not blaming them. I’m blaming the techholes who create these gross algorithms with one goal in mind: profit at the expense of quality of life.

I don’t believe people should have to spend 30/40/50+% of their income on housing. San Diego rents are so high that if you’re a minimum wage worker, you need 3 people to afford a two bedroom rental. Atlanta rents are even worse at 5 people needed to afford a two bedroom rental (for minimum wage workers). I don’t think that its any coincidence that Atlanta has the largest share of corporate-held single family rentals in the US. (You can download this crazy corporate landlord report here.)

The first step to building wealth is being able to save money. The general outcome of these algorithms is more money in corporate bank accounts, and less savings in yours.

Hearing that rents are being manipulated makes me sad and mad. It affects the ability to save! It negatively affects quality of life.

I’ve also wondered if the algorithms are legal. Couldn’t they be in violation of anti-trust laws by basically price fixing? Others have had the same question, prompting the Fed to probe algorithmic rent-setting (read more about that here and here).

In the meantime, what can be done?

Well, we can take the ibuying algorithms with a grain of salt.

We can say “no” to homes that are priced too high by offering less or not buying them at all.

We can say “no” to rents that are too high by not renting from corporate landlords that are out of tune with reality.

Or we can get creative with co-ops, homeshares, or rent-to-own programs, like they’re doing in the UK.

The problem is, unless we say “no” on a mass scale, there will be no change.

Perhaps there’s a way to track the landlords who use rent algorithms; allowing renters the freedom to ignore their spaces. Or maybe that’s laughably unrealistic.

Am I just giving too many fucks?

Does treating housing as an algorithm leave the general population better off, or worse?

What do you think?

Thanks for reading,

HouseRat Zero

P.S. You can read more about algorithms here.

Footnotes

  1. Manson, Mark. The Subtle Art of Not Giving A Fuck. New York, NY. Harper Collins Publishers. 2016

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