Can Tech Tools Make Apartment-Hunting in New York Affordable?
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In other words, a much better plan would be to solve the systems problem which is this case is the "economic rents" -- market inefficiencies -- which use politics to create an artificial scarcity of housing through zoning density restrictions and overuse of historic landmark status. This use of politics to create the artificial scarcity transfers income/wealth from the apartment renter to the landlord.
It makes people like Donald Trump far wealthier than they'd be if we eliminated the laws that create the artificial scarcity.
There used to be an artificial scarcity of taxicabs in NYC where the number of taxi medallions were limited to 13,000 and the taxi medallion had a market value $1.2 million. Then Uber/Lyft came along and the taxi medallion owners and banks/credit unions that financed the medallion mortgages tried to use politics to limit their use in NYC, but thankfully they failed. Now we have lower fares (but not from taxis) thanks to Uber/Lyft and the taxi medallion "landlord" has seen the taxi medallion value drop to $700,000 or less.
Those who are interested in further understand the issue should see works by Harvard Economist Edward Glaeser, see the NY Daily News op-ed, "Build Big, Bill."
Also, Financial Times Columnist who has a BS and MS in Economics, Tim Harford, had written an enjoyable and brief book about Microeconomics called, "The Undercover Economist."
We have a 24/367 Apple Store, 7 stores in Manhattan :-)
E.g. Paris steadily runs a train every couple minutes on many lines with no problems, and we could too after deploying switching technology improvements.
And the only pedestrian sidewalk I've ever seen at gridlocked capacity is Rockefeller center in Christmastime.
Also, merging LIRR and NJT and through-running RER style is so obvious yet never brought up. Penn is not intended to be a terminal and it shows.
http://www.streetsblog.org/2016/07/01/the-new-york-of-2016-n...
The subway problem could be partially solved with true dedicated lanes for buses/trams and offboard fare payment. It's not hard, these are both incredibly common in Europe.
I think more are planned.
If you lived in NYC, you wouldn't see Airbnb as a solution but rather a problem created. It allows transients into buildings and we don't want that. We value our safety and pay for it financially.
The real solution is to undo the laws that create the artificial "economic rents" that benefit landlords at the expense of renters. See Economist Glaeser's column I cited above.
You can't really skirt regulation in the same way when it comes to building housing. People are going to notice when you try to erect a 50 floor skyscraper in a historical district.
If you want to increase the number of residences on a given piece of land, you have to replace single family homes with high-rises, no way around it.
The tech tools referred to in the story are only doing the latter; they aren't adding more rentable space and so are far more limited in what they can do about pricing or shortages.
[1] e.g. redirected taxis from long lines at major pickup points to sporadic pickups at less common places
The only similarity with Uber is that it would have made it easier to get a ride, but the effect would still be opposite of Uber with respect to medallion prices.
http://www.nydailynews.com/opinion/build-big-bill-article-1....
Paying a broker costs roughly a month of rent, so even if the value of your time is $200/hour, you're coming out ahead by doing the work yourself. I've had luck with both pay-to-play aggregators like http://www.rdny.com, as well as blind Google searching. Friends of mine have also done free aggregators like streetyeasy, and one even just showed up to a building and asked about free listings.
This is useful if you want to rent an apartment, not a specific apartment. Many apartments only go through brokers. I don't think that's a good-enough argument to go with one.
Brokers are the worst. Their incentives are not aligned with yours on anything besides wanting to get it over with asap.
How do brokers have the gall to straight-faced sell people on this stuff?
I pray that technology can disrupt this market.
To be fair, that's occasionally exactly what you want - if you've just moved into town for the first time, for instance, and want to mitigate uncertainty (and hotel expenses) ASAP.
Is there some legal requirement in New York that rentals must go through a broker? I don't know any other city in the country that you probably will pay a broker fee to rent an apartment. It just seems like the real estate industry dipping their hands into the NYC rental market as a completely unnecessary middle man. I wonder if this is because of New York's history of being majority rentals which, until recently, was fairly unique in the US.
Brokers serve the owner, not the renter. While it may seem like the renter is paying the broker's fee, it's really the owner. Compare the rents of equivalent apartments, one with and one without a broker. You'll find that the one with a broker is "cheaper" by approximately the annualized broker's fee. [0]
[0] My own research, randomly sampling Craigslist postings in NYC.
"Todd founded Rent Tech in 1995 using text pagers to alert clients of new listings. Clients would receive a pager after they signed up for the service, and when a new listing came on the market that fit into their specifications, Rent Tech would send them a page about it. Within two months, the two began to look at how to distribute rental listings on the web, which is where all the company's business now takes place. "
[1] http://www.bizjournals.com/sanfrancisco/stories/1999/09/20/s...
How can I be so sure of this?
Easy. RDNY.com has a "to the trade" division, Acmelistings.com which provides NYC real estate brokers and agents with rental apartment listings. About 2,500 agents and brokers use this service. They are aggregating listings from over 1,000 landlords and selling that info to agents to use in renting apartments to their own clients. The rental prices of apartments on RDNY.com are exactly the same, to the penny, as the information fed to brokers through Acmelistings.com.
So there is such a thing as a true no fee apartment. Saving the broker's fee represents a very substantial savings up front - when your expenses for rent and security deposit are highest.
After 21 years supplying no broker fee apartments to thousands of users, they must be doing something right.
Edit: You _can_ find other no-fee aparments but it will in general severely restrict your choices; the odds of looking for an apartment by normal criteria (location, size, condition, amenities, price, etc) and stumbling on a no-fee listing are low.
I remember the cognitive dissonance I was having while in their interview process
Gotta remember to just call a spade is a spade.
It's sort of like the paywall for a newspaper like the NY Times. It cost money to run a business and someone has to pay.
Over the past 21 years, I've seen numerous startups come into the business hoping to have no fee listings supported by ads. But the reality is a horse before the cart problem. Few landlords spend money on advertising. Those that do, only spend money if there is traffic to their buildings and clicks on their ads. A startup rarely has sufficient renter traffic to make advertising a viable model to cover the costs.
The poster above said that companies that come into the business see how much money brokers are making, and so they adopt that model of traditional brokerage.
Actually, they change to that model out of survival. Like I said, advertising won’t necessarily pay the way.
RDNY.com has a subscription model where users pay $49 to access all listings (tailored to a particular search profile). It's the model used by NPR and Public Radio. RDNY's loyalty is to the renters, not the landlords, as they are getting zero money from landlords.
But it's tough convincing renters to pay a little up-front, without any guarantee that they will find the right apartment or qualify to rent. Yet the rewards for those that do subscribe are great. Saving almost two month's of rent in NYC is a LOT of money.
I can tell you that using technology (other than the web and back end databases) is VERY difficult in NYC rentals. That’s because the big problem isn’t the user interface or having an attractive and intuitive app.
The big problem is getting the information from landlords. The vast number of landlords in NYC are small landlords who are usually tech-phobic. There are many landlords who do not even have email!! Tons of landlords don’t have a website. Many of those that have websites don’t display their listings. And many landlords who have websites with listings posted don’t keep them up to date. So there are only so many landlords that can be updated by scraping their websites.
Most landlords update us by email or pdfs, but every landlord has a different format. Some have complete information about each apartment, but most don’t. Most simply give us the address, size, price and that’s it. No pictures, no description, nothing. Some don’t even give us the information on how to see the apartment.
And then there is the problem of trying to keep the access to apartment information up to date and accurate. Supers come and go. Building staffs change. But most landlords don’t bother keeping us updated on their staffing issues.
The bottom line is that updating listings and finding new listings is VERY LABOR INTENSIVE. It takes a staff of people who want to be paid. It is frustratingly slow. Often, you have to chase landlords who gave you a listing but haven’t updated you to let you know whether the listing is still available or not. Or if there has been a price change.
The bottom line is that if you are strictly a tech person, don’t try to automate the business of apartment rentals. You will most likely fail after you’ve put your blood, sweat and tears into it. If you’re mainly a real estate person and you know the business and the players, you’ll probably realize that trying to change the way apartments are rented in New York is a herculean job. Landlords will not change the way they’ve been doing business for 50 years because you think you have a better way of doing it.
But I know some of you will try anyhow.
The problem is there is insane amounts of money chasing a very limited pool of real estate.
My first place in Manhattan was a sublet. Through Craigslist I contacted the person currently on the lease and received an appointment time. I showed up to find 15ish other people there, interviewing in groups of 4. I ended up getting the space. Two days later I banded over first and last months rent a few weeks in advance to moving in to a person I'd only just met, $3,000. The room was just large enough for a twin bed and a dresser, if you stepped over the bed to get to the dresser. And there was someone living in the living room behind a curtain. And this is not at all unusual. And that was just my first place. Got several other crazier stories from my 5 yrs of living in NYC apartments. I loved every minute of it.
Technology can make apartment hunting in NYC more fair and transparent, but not more affordable.
[0] https://twitter.com/perry_huang/status/765818587403554816
I'm not sure what their revenue model is, but I like that they let you get a credit check done once and share it with all property owners, instead of having to pay for each one to do a credit check on you.
"Lol I get that you're only here for 9 months but we only do 12 month leases and we own 70% of the real estate property!".
My personal favorite (actually happened):
"Our software is really shitty and we can't modify the leasing dates!"
Or rather, tech tools in isolation won't unfuck this terrible brokerage situation in NYC. Tech tools in combination with structural economic changes, on the other hand, might actually do the trick.
The startup in the article (Joinery) doesn't sound like they're doing that at all. In fact it sounds a lot like they're inserting themselves as yet another middleman in a market with already too many layers of expensive middlemen.
Better tech and better data stands a chance of getting rid of rampant scam/bait and switch listings, but ultimately the 15% broker fee exists for economic and structural reasons, not technological ones.
So there are two parts of this: can tech fully substitute what the brokers are currently doing, and if so, if doing so is sufficiently profitable for the disruptor.
What to the brokers do?
For owners:
- Manages the day to day operations of a rental unit for small-time absentee investors (rent collection, maintenance, even paying taxes and condo/co-op fees, heck, some of them even attend co-op board meetings for you to lobby for your interests)
- Screens new tenants to eliminate all the unrealistic candidates (low credit, broke, no job, etc)
- Handles the operational aspects of renting a unit (arranging showings, turning the key, salesmanship)
- In uncommon cases: kicks back money to owner if unit is off the market for prolonged periods.
For tenants:
- Knowledge of available inventory, because there is no central listings database.
There are a couple of major thoughts about this:
- The benefits of broker representation accrue to the owner, but the owner does not pay for these services. This makes this middleman hard to displace, because it has no cost to the primary beneficiary in this system, so they are completely not incentivized to make any improvements whatsoever.
- The information asymmetry is by far the biggest chokehold brokers have on the system. Almost all of the benefits provided to owners can be substituted, but the information asymmetry cannot.
Unlike the sales market there is no equivalent to the MLS for rentals, so sites like Trulia and Zumper are consistently at an impossible-to-overcome disadvantage, since must rely on what users submit. There is literally no database that contains a reasonably complete snapshot of all available inventory (one can argue that Streeteasy is the closest, but even then, not realy).
In this environment brokers thrive on insider information. Many represent apartments exclusively (especially true for small-time landlords) and through brokerage and social connections have access to apartments that are not generally known. This is the primary chokehold - without them renters wouldn't even be aware of these units, much less access them.
I think policy can help a lot here - if rentals had to go through a centralized database, it erases the information asymmetry between landlord/tenant/broker and eliminates a very critical inefficiency in the market, not to mention it gives the listing sites a dramatically more even playing field. From this efficiency you can achieve cost reduction, but this is not within the power of a startup to pull off (especially with REBNY lobbying actively against this exact thing).
As for profitability, that's one thing that prevents any real disruption from happening, and time and time again would be "disruptors" live long enough to see themselves become the villain. There's so much money in collecting brokerage fees in NYC, companies that start out fighting brokers more often than not wind up joining them. Hauling home a 8-15% take for every transaction is ultimately much more profitable than, say, selling $50/month subscriptions to some platform.
Not true. The owner "pays" by earning less rent. A broker-managed apartment generally charges less in rent than a non-broker-managed apartment. In the latter case, the owner must handle everything and therefore often charges more, about as much as the broker would have.
Cut the middleman and both sides take back some of the transaction cost, but the market generally becomes less liquid.