by Jon Anderson
I don’t like Uber and Lyft because they operate on an uneven playing field. I don’t like Airbnb for similar reasons, and for the in/out/party upheaval they can cause to neighborhoods. I don’t like drug companies that raise prices just because they can. Therefore, it’s no surprise what I think of new apartment rental apps Rentberry and Biddwell.
Rentberry began in San Francisco (of course, right?) in 2016 and has been experimenting with 10 trial cities (including Dallas and Houston). They feel they’ve honed their app sufficiently to expand to over 1,000 cities … including more in Texas. On the other hand, Biddwell is so far limited in reach to Canada, but the concept is the same and I can easily see it crossing borders. Either way, Rentberry may have kicked off a new low in apartment renting.
Here’s the deal. Landlords list properties on the site with a suggested rental amount. Prospective tenants register and qualify (lengthy profile about needs, creditworthiness, etc.). Each pays $25 to register. At this point it sounds a little Angie’s List … but wait.
When a prospective tenant finds an apartment they like, the bidding begins … yes, bidding … like eBay or livestock. In tight markets, multiple tenants vie for the same unit and outbid each other until the rest cry “uncle” and bow out. Rather bloodsporty if you ask me.
You didn’t think these apps make their millions $25 at a time, did you? Noooooo. Seems Rentberry’s future model is to also charge a fee equal to 25 percent of any savings or gain from the original rental amount. For example, if an apartment was listed for $1,000 and was secured for $1,100, the landlord owes Rentberry $25 per month for as long as the tenant rents the unit. Similarly, if the unit goes for $900, the tenant pays the $25 every month as long as they live there. No word on what happens when the lease is renegotiated the following year. Is the tenant tossed to the lions to rebid to keep their home? If the lease amount increases beyond the original rental amount, is the tenant still liable for the $25 per month? That would stink.
The founder of Rentberry, Alex Lubinsky has received all the media raspberries you’d expect (something he’s tacitly courted like many Silicon Valley CEOs thinking bad boys sell or at least attract investors). The expectation is that bidding wars in hot areas will only drive up rents further and price people out of the market (like the residential housing market is already doing here in Dallas). In fact when Rentberry first started, Lubinsky crowed that landlords would see a five percent increase in rents. Flash forward and now …after significant backlash … it seems that Rentberry states that they actually decrease rents by 5.1 percent.
Being a data guy, I know that you can make numbers work for you a lot of the time. The 5.1 percent savings reportedly reflect an average across all transactions within the 10 test cities. That’s ignoring the fact that any given city will have hotter areas where tenants compete more and rents rise faster … along with downright chilly areas where the opposite is true. You’d also need to factor in greedy landlords who set leases too high. Combining all that, perhaps rents are down 5.1 percent, but I’d lay dollars to donuts it’s helped increase rents in hot areas disproportionately.
There’s another thing it may also help increase besides rents … homelessness. Homes going to the highest bidder will always mean the poorest suffer most. One Silicon Valley Tenants Coalition offered my favorite quote in these circumstances, “Just because you can make money off the housing crisis [shortage], it doesn’t mean you should.”
Welcome to the EpiPen of apartment hunting.
Remember: High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement. If you’re interested in hosting a Candysdirt.com Staff Meeting event, I’m your guy. In 2016, my writing was recognized with Bronze and Silver awards from the National Association of Real Estate Editors. Have a story to tell or a marriage proposal to make? Shoot me an email firstname.lastname@example.org.