RentWolf, Live Offer, Rentberry: Rent bidding apps enable tenants to offer even more income to Lords; Tenants are going extreme measures to make ends meet against a backdrop of rising rents
Tweet Topic Started: 27 Apr 2017, 10:48 AM (3,171 Views)
More good news on rent bidding apps. It looks like this could give savvy landlords a welcome little boost to their regular rental income. It's definitely something worth encouraging...
Renters are already the weak party at the negotiating table because they cannot ignore their need for a place to live. But a new series of apps that pit renter against renter will only further tip the balance of power in favour of landlords, making it even harder to get a house.
The fierce competition in the rental market often results in renters paying more than is necessary. Over 150,000 tenants pay more than 50% of their incomes for housing.
These apps may seem like they give renters more power – they are marketed using words like “fairness” and “transparency”, but they also note that landlords are missing out on “millions and millions”.
Renting is a zero-sum game. Every dollar that a landlord gains is a dollar out of the tenant’s pocket. And in a market already tilted in favour of landlords, these apps could further push up rents.
To address the problem of renting affordability we need technologies that promote more cooperation between renters, rather than competition. The apps
There are several different rent bidding apps, and they all work in different ways.
Live Offer asks prospective tenants to fill out forms and these are then ranked for the landlord to choose. The prospective tenants can see where they are in the rankings, in real time.
Rentberry is more of a real-time auction site. Prospective tenants submit bids, can see what the current highest bid is and how many bids there have been.
With Rentwolf, prospective tenants set up extensive profiles, as they would with AirBnB, and then apply for properties through the marketplace. What is the right price?
Real estate is worth what people are prepared to pay for it. But tenants will always be the weak party at the negotiating table.
At least as far back as David Ricardo in 1817, economists have theorised that landlords take what is left over once other costs are deducted from the tenant’s income. In other words, rent is as much as tenants are able to pay.
Even before that, Adam Smith recognised that all real estate is a monopoly for landowners. This is because the supply of land is strictly limited, giving excessive negotiating power to whoever owns it.
But these apps overwhelmingly rely on auctions, which can itself be a problem due to what is called the “winner’s curse”.
Studies have shown that so long as there are at least two motivated bidders, the winning bid tends to either equal the value, or be one bid above it. In other words, the winning bidder in an auction will often overpay and will “suffer” for having won.
In the case of renters, this means paying excessive rents throughout the lease. Even worse, as more people bid similarly, the ruinous rents become accepted as normal. They become the market rent.
This same phenomenon has been shown in everything from jars of coins to oil-drilling rights and, yes, real estate.
Some research has further shown that in an auction the second-highest bid could be the “rational price”.
My own controlled experiments have shown that people are easily encouraged by necessity to bid excessively in auctions. This is despite full knowledge of the ruinous consequences.
This is because people have only a limited capacity to vary their needs. We all need to live somewhere, and our culture limits the options. If the option is sharing with relatives or accepting a lower standard of living due to high rents, then our sense of independence will often prompt our willingness to tighten our belts.
These rental apps will play into these stresses and uncertainties, making it more likely people will overbid in the auctions. This is why these rental apps are likely to result in higher rents. How technology can reduce rents
Some time ago researchers suggested that renters might be able to reduce rents by banding together.
Working together, renters would be able to create the equivalent of there being only one buyer in the market – a monopsony. A monopsony works like a monopoly, but for buyers rather than sellers. For real estate rents, if land owners enjoy a natural monopoly-like advantage, then tenants have to behave like a monopsony to negate the power imbalance.
The current crop of rental apps do not address this imbalance. They only inform bidders as to what other, similarly stressed people, are bidding. It stresses them to bid higher.
Already, we are seeing the power of Facebook to build communities around renting. There are groups that help people find flatmates, for example. If the internet is to tackle the problem of renting affordability, then we need to extend this community, for renters to act in unison on rent.
Without a service that seeks to unite renters, rather than have them compete, housing affordability will only get worse. Rent bidding apps will increase landlord revenues and do so at the expense of tenants.
Just looked at 2 places this week. One was $375/week in Mount Pleasant, one of Perth's most prestigious suburbs. Delightful 3 bedroom house. It's already been reduced but no takers. We turned it down because the cooking range was electric. Another place we told them we'll rent it if they install 3 reverse cycle air conditioning units in 3 rooms. Otherwise no deal. The owner's getting the quotes. Meanwhile they sit empty. Rentals are such money makers, aren't they?
Probably not more than they earn, but it could force them to cut back on some of the little luxuries in a renter's life - booze, ciggies, pokies etc.
Renters smoke, drink and go to the pokies? You sometimes annoy me but every now and and then you write something so ridiculous I can't help but feel sorry for you.
If you assertion was true and they cut back in these things to pay rent the economy will be affected, do you understand what happens to jobs and the economy when people stop or limit their discretionary spending?
You are advocating a housing system that is so unsustainable it people have to stop spending which in turn will tank the economy. You previously advocated discretionary spending and cash withdrawals using 'equity', you really come across as an economic moron.
hidflect
17 May 2017, 07:18 PM
Just looked at 2 places this week. One was $375/week in Mount Pleasant, one of Perth's most prestigious suburbs. Delightful 3 bedroom house. It's already been reduced but no takers. We turned it down because the cooking range was electric. Another place we told them we'll rent it if they install 3 reverse cycle air conditioning units in 3 rooms. Otherwise no deal. The owner's getting the quotes. Meanwhile they sit empty. Rentals are such money makers, aren't they?
And Perth is still on its downward cycle, so unfortunately the repossessions will start to tick up after July and the real hurt will set in. Perth is on a horrible trajectory and it's clowns like BP and Shammy to name a few that should be on here apologising for their incredibly stupid advice.
The last thing specufestors, sorry landlords , need is price discovery. Rat has this opium pipe dream of desperate renters all scrambling over children's toys in an effort to outbid each other to secure a wooden lean-to for 95% of their pay but this reveals their ignorance of technology. The reverse is true. I cracked my rent down from $500 -> 450 -> 420 by sending the PM an email with 3-4 properties near my house all listed for lower rents. Thanks to realestate.com. Price discovery is a bitch. It's part of the "Perfect Economy" model in economics and it destroys profits.
Specufestors, with their clamshell-like mind, refuse to innovate so they pay the price. Look at how people run their businesses from the internet. No one needs the High Street shop window anymore. Commercial rental prices slump. For America, it's Armageddon as mall after mall shuts down, bankrupt with nothing to replace it. I trade stocks from my living room. Never go to the city. Never commute. Never pay parking fees. Never eat lunch at a city-rent paying burger bar. I could move out to the countryside and buy an acre of land from a farmer and not suffer one dollar. THAT'S the future that land hoarders should fear, if they had the width of perception to see it coming. Sadly, their brains extend only as far as "Hur hur hur.. muh rent money..".
Just looked at 2 places this week. One was $375/week in Mount Pleasant, one of Perth's most prestigious suburbs. Delightful 3 bedroom house. It's already been reduced but no takers. We turned it down because the cooking range was electric. Another place we told them we'll rent it if they install 3 reverse cycle air conditioning units in 3 rooms. Otherwise no deal. The owner's getting the quotes. Meanwhile they sit empty. Rentals are such money makers, aren't they?
I'd kick you in the dislikeable person if you applied for one my rentals.
The last thing specufestors, sorry landlords , need is price discovery. Rat has this opium pipe dream of desperate renters all scrambling over children's toys in an effort to outbid each other to secure a wooden lean-to for 95% of their pay but this reveals their ignorance of technology. The reverse is true. I cracked my rent down from $500 -> 450 -> 420 by sending the PM an email with 3-4 properties near my house all listed for lower rents. Thanks to realestate.com. Price discovery is a bitch. It's part of the "Perfect Economy" model in economics and it destroys profits.
Specufestors, with their clamshell-like mind, refuse to innovate so they pay the price. Look at how people run their businesses from the internet. No one needs the High Street shop window anymore. Commercial rental prices slump. For America, it's Armageddon as mall after mall shuts down, bankrupt with nothing to replace it. I trade stocks from my living room. Never go to the city. Never commute. Never pay parking fees. Never eat lunch at a city-rent paying burger bar. I could move out to the countryside and buy an acre of land from a farmer and not suffer one dollar. THAT'S the future that land hoarders should fear, if they had the width of perception to see it coming. Sadly, their brains extend only as far as "Hur hur hur.. muh rent money..".
Thank you. I will use your email idea in a few months when our lease is up. You are right about decentralization, this is happening. I've seen it in country nsw where I've built factories. They were from Sydney and all their sales went online so they just needed some storage and a small office. Cheap/ lots of space/ beautiful rolling hills/great lifestyle and a busy business.
The last thing specufestors, sorry landlords , need is price discovery. Rat has this opium pipe dream of desperate renters all scrambling over children's toys in an effort to outbid each other to secure a wooden lean-to for 95% of their pay but this reveals their ignorance of technology. The reverse is true. I cracked my rent down from $500 -> 450 -> 420 by sending the PM an email with 3-4 properties near my house all listed for lower rents. Thanks to realestate.com. Price discovery is a bitch. It's part of the "Perfect Economy" model in economics and it destroys profits.
Specufestors, with their clamshell-like mind, refuse to innovate so they pay the price. Look at how people run their businesses from the internet. No one needs the High Street shop window anymore. Commercial rental prices slump. For America, it's Armageddon as mall after mall shuts down, bankrupt with nothing to replace it. I trade stocks from my living room. Never go to the city. Never commute. Never pay parking fees. Never eat lunch at a city-rent paying burger bar. I could move out to the countryside and buy an acre of land from a farmer and not suffer one dollar. THAT'S the future that land hoarders should fear, if they had the width of perception to see it coming. Sadly, their brains extend only as far as "Hur hur hur.. muh rent money..".
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