Why Multifamily apartment pricing is broken

Personally, if I’m ready to buy something, I need to know two basic things. First, what’s my excitement level for it and secondly, how much is it? That makes sense right? Overextending oneself is something one does right out of college when you think you have the world at your feet and assume that money grows on trees and so you run up your credit cards because you’re young and dumb. Not that I would know anything about that. Most people, though, are much smarter, whose thoughts are driven by the need to have what they want, balanced by how much they can afford. Fundamentally, at the end of the day, it’s really all about affordability – and at its heart – price.

I stumbled across funny reviews for a really huge television on Amazon a few weeks back. I admit I was intrigued by the size of this thing. 85 inches of pure 4K High Definition goodness. Whoa. Then, I saw the price tag and had sticker shock and collapsed in a heap of I’ll Never Own a TV As Awesome As That.

The price – unaffordable – way out of my league – was ridiculous but thank you to Amazon for publishing the price and letting me know that I am not as financially sound as maybe I’d like.

Some Multifamily companies or dare I say it, ILS’s, would have advertised the television this way:

amazonTVPrice

It’s annoying enough that sometimes I can only view a price when I add it to a cart. Some would argue that by getting someone to call or submit a form, you could sell the benefits and get them to buy it anyway. It’s a known fact that more than 59% of internet users shop online because it’s easier to find prices. Showing apartment pricing on websites isn’t a new concept, of course. We’ve all been doing it in some form or fashion for 10 years. If you aren’t at least showing a range of prices, you’re doing it wrong. If you’re showing specific unit availabilities, then you’re probably ahead of the game – but are you really?

Here’s where things get dicey.

I’ve mentioned many times in this blog that technology should help us provide a better experience for our users, our renters, us. Can you imagine if when searching for that TV, I had to click a button to be taken off Amazon’s site, dropped onto another website which kind of looked like Amazon but wasn’t run by either Amazon or the company who makes the TV, to pull a pricing feed that’s outdated by hours or days, to view televisions with names that don’t really relate to much of anything, to view prices that seem to change daily based on length of time but lack any transparency?

We’re asking our prospects to do that.

We are allowing our Property Management software or pricing systems to drive the front prospect user experience bus. It’s clumsy. Even worse are the instances where you think you’re going to get the unit pricing availabilities the website claims, but instead you’re given a lengthy contact form with a We’ll Call you Later. Meh.

Why do we accept this?

udrTo highlight my point, UDR just released a really amazing new website. They tell you the pricing on specific apartments is from [Insert price]. When you’re ready to lease, you must click Lease Now. A weird window pops up and the experience suddenly changes. This isn’t UDR’s fault. They are forced into doing this because they cannot natively pull their actual pricing from their Property Management system and make it work. The popup is merely web pages from their Property Management software’s host rather than UDR’s. It doesn’t look the same. It doesn’t function the same. All of that time and money they’ve spent to create the wonderful UX has now been handed off to someone else who doesn’t share the same vision.

This should not be acceptable anymore.

A few ILS’s are slowly trying to solve the availability and unit pricing dilemma. Some offer links but those links take you off of the ILS and onto other 3rd party sites unrelated to the property management company or ILS. The overall experience is reduced further still.

Unit availabilities and pricing should remain seamless and built in no matter the site. Expedia goes out and gets the prices and then shows them to you natively. There are no clicks off, no different screens, no entering a falsely branded 3rd party site. They are adaptable.

Home Depot, Walmart, Hotels.com, to name a few, have been trying out a new technology that will change prices according to website and shopping behavior. Could we get our websites to notice that you have viewed several other listings recently, viewed a property or two of ours and when someone visits our website again, adjust the price a little lower as an incentive? No, we can’t.

AdaptableWe need better information flow. MITS, the technology behind our industry communications, hasn’t been updated since 2010, which in computer years, makes it 80 years old. We need better transparency, better, more adaptable technology, better interoperability, and more openness. The data is ours, we should be able to use it as we need to. Outdated, daily dump availabilities aren’t good enough. Information becomes stale far too quickly. Rent ranges need to go.

If someone on our website wants a 2 bedroom apartment, allow them to select it on a property map, for how long, and for how much. We need to use our technology better. Changing the game starts now.

Happy renting everyone.

About the author

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  • Lisa T.

    Great read, Bill! One of my personal favorites is the ‘check availability button’. Click it and voila! You are given an email form to send. “Check availability’ … right…

  • I agree that it’s not acceptable, but I’m trying to understand where the breakdowns are happening.

    Bill, is this truly a function of feeds that can no longer deliver the information web developers need? (I know there are some missing data points that ideally should be added.) Is it that PMSs need to be better about sharing data in an easy-to-use (and affordable) manner? Is it mostly just an opportunity for website designers to improve their UI? Do we need to educate apartment marketers about user experience and conversion optimization?

    Your “TVs sold by ILSs” example is spot on, but that’s not a data issue. The ILSs have the pricing, but they are measured by the volume of leads they deliver, so every single pixel on their site is delivered to optimize for capturing leads … not for delivering what the consumer wants.

    What’s the first step we need to take?

    • Sadly, I think it’s a mixture of everything you mentioned. The data usage fees are ridiculously high and it seems that there must be a complication with accessing it OR it’s not flexible enough to give what is necessary. Too many companies use 3rd party vendors to compensate hence hindering a website’s UI flow.

      I think of it like IDX for Real Estate. There should be some central form of communication that everyone can subscribe to and have it pull the appropriate data. The data structures themselves are all over the map and as I said, need to be updated desperately. Plus, if you want to be able to pull data, your site should be IDX-compatible (or whatever we call it) and since there will need to be certain specs, it should work regardless of site platforms.

      In addition, while XML was a great method of communication, I think JSON has bumped it in terms of usefulness and packet size. Plus with scalable databases like MongoDB designed specifically for sharing JSON the data can be delivered instantaneously.

      This isn’t an overnight change but I think a group of people leading the way towards streamlining our information processes could go a long way towards changing the industry.

    • Chris Herndon

      Mike, Please forgive the ensuing dissertation, but the answer’s kinda complicated.

      For better or worse, I’ve earned my PHD in property management software over the past 6 months. The more I learn, the more I’m amazed by the insane degree of misinformation, misaligned incentives and protectionist measures (by the PMSs) that borders on anti-competitive business practices (the sort of stuff the FTC sues Microsoft and Google for each year but our space is too small for them to take notice).

      To answer your question as to whether or not the data is freely available, well sort of. Let’s start with all the misinformation…

      Most of the industry’s marketing thought leaders would say that they’d like their unit availability & pricing data to be displayed by their ILS marketing sources. Most of the ILSs (when pressured by their clients) have publicly expressed their willingness to offer this level data transparency to their rental-seeking consumers. When PMCs request this data sharing capability from their client reps at PM software vendors, they are typically told that the only way to achieve this is to provide a check availability link to their ILSs, which (to Bill’s point in his blog) results in a clunky user experience that’s mostly unusable on mobile.

      What few PM software client service reps (and consequently their clients) realize is that the PMSs have succumbed to pressure over the past 18 months and built APIs to share availability & pricing data in a fashion that would allow ILSs to import the data in real-time and display that data in a user-friendly fashion within their native user interface.

      Few management companies or ILSs realize that these APIs exist since they are not widely advertised. For the ones that discover their existence, they have to learn the web of complex rules around access and pricing, which are always different depending on who you ask.

      PMCs who run Yardi Voyager, MRI VaultWare and PSI Entrata (for their core) are able to syndicate availability and pricing data to their marketing sources for free.

      RealPage OneSite requires ILSs to pay a large annual data license fee, plus a variable fee for each site. Of course, ILSs can still only access this data if the client subscribes to an availability product, so RealPage charges a la carte on both sides. To my knowledge, Zillow and Apartment List are the only ILSs who have agreed to this charge.

      MRI does not syndicate availability data via its API (even for a fee) unless you subscribe to VaultWare, and PSI will only syndicate this via API for Entrata Core clients, which does not benefit the majority of PSI’s client base. I’m told that the reason PSI cannot syndicate pricing data to ILSs (for non Entrata Core clients) is because they are legally restricted from doing so by Yardi, though I find this hard to believe since PSI already syndicates all manner of property data with its ILS Portal product. What’s so unique about pricing data?

      Which leads us to misaligned incentives…

      At then end of the day, PMSs have no desire, whatsoever, to share this data with ILSs. First, if unit availability & pricing data becomes ubiquitous on ILSs over the next 18 months (as I believe it will) this will reduce the incentive for rental consumers to navigate to the property website, a highly lucrative product for PMS’s.

      Further, all of these PMSs are paranoid that consumer-facing companies like Zillow and Apartment List will decide to vertically integrate and compete directly with their software offerings. They last thing they’d like to do is seed a competitor.

      Finally, most ILSs are in the lead generation business. Traditionally, management cos have struggled to track lead-to-lease conversion rates, so the way they evaluate the effectiveness of their marketing spend is on a cost-per-lead basis, increasing the incentive for the ILS to generate as many leads as possible.

      Even for management cos with lead tracking tools that attribute leases to marketing sources, most use “first lead” or “first contact” as their lease attribution logic, meaning the lead with the first chronological time stamp receives lease credit. Consequently, ILSs have every incentive in the world to generate as many leads as possible. This is the very reason the deceptive “check availability” lead form exists.

      The dirty little secret in the ILS business is that displaying unit availability and pricing data to renters reduces lead volume by over 50%. So long as ILSs are evaluated on the basis of cost-per-lead or cost-per-lease (as defined by first lead attribution) they will resist the urge to display unit availability data on their property pages. They may deny this in public, but the requisite API integrations to make this transparency happen will get de-prioritized in the product roadmap for quarter after quarter.

      Which leads us to back to protectionist behavior…

      PMSs generally view their clients’ data as their own proprietary assets, when in fact their clients’ data should belong to their clients and their clients only. In fact, Property Solutions launched its entire Entrata campaign on the basis of data freedom (http://youtu.be/s9Sz1yBxSwA). Time will tell if PSI will practice what it preaches or if it will fall into the age-old PMS trap of locking up its clients’ data and throwing away the key.

      Since all software becomes crappy and obsolete over time, the only way for PMSs to retain clients is to a) keep costs reasonable (which would negatively impact profit margins), b) improve the ease and functionality of the software (which requires highly paid UI designers, product managers & engineers) or c) institute high switching costs. Most have opted for Plan C. The best way to maintain high software switching costs high is to lock down the data. If the data’s easy to access, it’s easy to transfer into a new system.

      Despite all the aforementioned challenges, I believe we’re on the verge of breaking down some serious walls. It’s gonna take annoying people like me and Bill that refuse to take no for an answer. It’s also going to take some large and influential clients to exert pressure on the software vendors. In addition to being annoying, I’m an also on a mission to eliminate the rampant misinformation and provide management company execs with the knowledge and confidence to exert the requisite influence. This is a movement, and it won’t achieve its objectives without strong support from all parts of the industry.

  • Great article, Bill! I think you are really shedding light on an important problem in how the multifamily industry does marketing.

    To add to your analogy, I think another problem that complicates how prospective residents view pricing online is the fact that a ton of apartment websites still don’t offer floorplan-specific content (photos, videos, marketing descriptions, etc.).

    To extend your analogy, this would be like advertising “TV” for a certain price–it might be a good deal, or it might not, depending on the screen size, features, specs, etc., but the prospective resident just doesn’t have the information to make a good judgment from the website alone.

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