There is an app for everything, and the latest horror is "Rentberry," which allows prospective renters to outbid each other on rental properties. How could this possibly go wrong? The company claims that it's facilitating the rental process, which many of us know can be a nightmare, especially in tight markets, but what it's really doing is contributing to the very tightness of these markets.
We shouldn't entirely blame Rentberry, though — it's just trying to take advantage of an existing issue. People want housing, looking for housing is a pain, and in cities like Miami, New York, San Francisco, and Los Angeles, the number of available units and their affordability are not keeping pace with the people who need a place to live. As SFist's "Apartment Sadness" column testifies, people are growing extremely desperate for housing and in some cases they're being priced out altogether.
Historically, the rule of thumb was that people should spend less than 30 percent of their income on housing. Not everyone is on board with that rule, like Chris Matthews at Forbes, who seems to think that we should be spending much more. Research into cost-burdened households, however, belies his argument: People who are spending too much money on rent cut health care expenditures along with buying food, paying utilities, and meeting other basic needs.
When it comes to things like investing in educational development for children or even, oh horrors, having fun now and then, these families are at an even greater disadvantage, and of course many are not saving money, either. One has to ask why we should be tolerating the rise in cost-burdened households while the savings rate in the United States is decreasing, because the two are pretty obviously linked — as is the growing amount of debt, including personal and education-related debt, carried in the United States.
Yes, the rent is too damn high
According to Zumper, New York and San Francisco both have a median monthly rent in excess of $3,000. Other metropolitan areas like Miami, Los Angeles, Oakland, San Jose, Seattle, Chicago, Boston, and Washington D.C. also have extremely high rental costs. And while renter incomes are recovering from the recession, most of that gain is in people making more than $75,000 annually — middle and lower class Americans are still struggling with wage depression, even with minimum wage increases creeping across the country.
In fact, low wage earners are being driven out of California (and other expensive regions) because they cannot afford to live there, which means that the state is looking at a labor shortage. Meanwhile, high income earners are moving into the state to take advantage of employment opportunities in the tech industry — and in biomedical research, aerospace, and numerous other high paying fields. The same pattern is playing out in high-cost metro areas around the country.
Millennials, the highly mobile and agile workforce taking advantage of these opportunities, are highly confident about housing and regional affordability, and they're taking advantage of low interest rates to snap up houses even as overall owner-occupied housing rates are on the decline. Ferocious bidding wars on sale properties are driving properties well above list price, and it's the same kind of attitude that Rentberry is hoping to tap into by allowing landlords to list properties and watch renters compete, selecting from those with the best credit records and references.
That's always been the way of the rental market, and there's always been some level of bidding going on in hot markets, but Rentberry formalizes it. The app is using an existing phenomenon and enabling it, and the people who stand to benefit are those with the most economic privilege — they may not be able to afford to buy, or may not be interested, but they have the clout to bid up on rental housing.
Meanwhile, low-income renters lose out, waiting months and years on affordable housing lists — and "affordable housing" is being redefined in some urban areas as local governments come to understand that previous benchmarks were too low.
How do we fix a problem like the housing crisis?
Everyone needs, and deserves, a safe, clean, pleasant place to live. That's clearly not happening right now, and the solution to the problem is a complicated one. Rental properties and sale homes alike are subject to market demands, and a casual capitalist view of the matter says that high rental rates and sale prices indicate that there's a market for high-value housing and it should be left alone. However, that viewpoint doesn't account for the growing group of housing seekers who are completely priced out of the market, and their potential social contributions.
Some are proposing increased development to put more units on the market, which is certainly one obvious response. If you want to increase housing availability, build more housing. Unfortunately, a lot of that housing is expensive, luxury housing built to accommodate demand, and even in regions with inclusionary zoning laws, not enough of that housing is designated for affordable living.
When I talked to one aggressive development advocate, Sonja Trauss of SFBARF (San Francisco Bay Area Renters Federation), she opined that getting more units built was the primary concern, and that flooding the market could push prices down. Is that really the case? In the long term, perhaps, but in the short term, it could drive prices up, because wealthy buyers are looking for housing in a market where properties can go on the market and close well above asking price within a week. This doesn't seem to suggest that the demand for such housing would rapidly decline if there was more of it. Vacancy rates are extremely low right now, and while more units are obviously going to change this picture, a market correction could take years.
Better wages and benefits are an obvious approach to the problem too: If housing is too expensive, people should be making more money so they can afford it. As housing costs have risen, wages have remained fairly stagnant, which is a consistent problem — wages do not pace inflation. However, it could also create an ugly staggered feedback effect. If wages go up and people are empowered to pay more for housing, will an increase in costs follow?
Providing better structural supports for low-income renters is a critical element to the puzzle as well. Rental subsidies also aren't keeping pace with inflation, and the number of renters eligible for assistance isn't in line with the level of help needed. In areas with lots of housing stock and overall low rents, this might not be such a big issue, with median income being sufficient for most people to afford housing. In urban areas with extremely hot markets, though, that's not the case.
Cracking down on discrimination against subsidized renters — "No Section 8" is ubiquitous in rental listings — is also an important component to housing policy reform. Similarly, the government needs to acknowledge that low income people may have adverse credit either as a result of having limited credit history, or struggling to balance debt thanks to high costs of living in their area. Something needs to counteract that issue, providing reasonable credit screening without leaving low income people in the cold.
Cities like San Francisco and Oakland are known for their aggressive defense of tenants' rights, but that's clearly not going far enough. Rent control and limits on percentage increases from year to year may be a start, but renters are still vulnerable to eviction (including notorious Ellis Act evictions in California). Additionally, practices like collecting security deposits well in excess of the law are common, with renters having no choice if they want to successfully find housing, and landlords often deduct all or part of a security deposit upon moveout without providing adequate documentation of the expenses they're claiming. It may cost $10,000 to move into a $3,500 apartment, which is a lot to have lying around on hand.
More radical elements are lobbying for freezes on housing costs, reflecting frustration among working class tenants along with the vanishing middle class. Aside from the legal and logistical impossibilities of such a move — any attempt at freezing rents would likely immediately end in court, whereupon it would be struck down — it doesn't address the deeper issues here. Class inequality is an issue that's not going away, and the imbalance between rent and income is a symptom, not the problem. Were everyone to be making fair wages paired with benefits and a robust social safety net, they could be affording their rent, personal needs, and more, and they could be saving money for the future as well.
If we want to see this iteration of the housing crisis come to an end, we need to accept that it's a crisis much larger than how much it costs to rent a one bedroom in Manhattan.
Photo: Quinn Dombroski/Flickr