The Manhattan apartment rental market is unique, as anyone who has experienced it will tell you. The very low vacancy rate (high demand) allows for behavior that other markets don’t bear.
The first is the idea of a broker for trivial transactions. Many (most?) apartment buildings require that you go through a broker, paying a fee between 1–2 months’ rent.
This is not a “broker” in the sense of someone who saves you time by shopping on your behalf (though some do that). This is simply a person extracting a toll because they stand between you and the landlord.
I’ve never experienced this in other markets. Heck, if you get 3 or 4 miles outside of Manhattan, brokers become rare.
This is what economists would call a problem of asymmetric information. The “information” in this case is the relationship with the landlord.
(To a lesser degree, they have asymmetric information about apartment availability, though once advertised that becomes hard to protect.)
I would like to find a way to get these folks out of the equation, or at least give renters a bit more leverage on fees. The core of the issue is that landlords are (apparently) comfortable with this arrangement. We need to look at their incentives.
Is the landlord simply trying to save time by delegating the legwork of showing and renting an apartment? Perhaps. But it’s not skilled work — an admin assistant would be perfectly qualified.
Does the broker pay the landlord for the right? This is the only explanation I can imagine that allows this business to persist.
So taking the broker out of the equation requires giving the landlord a financial incentive that replaces the broker bribe.
I propose a bidding market, combined with a tenant-generated apartment database.
Landlords would auction their apartments instead of offering a simple take-it-or-leave-it rent. Bidders would compete not just on monthly rent but perhaps the length of the lease. Credit checks would be built into the site.
On the tenant side, the site would build a (verified) database of apartment experiences. Tenants would share the rent they pay, specifics about the unit and the building, and their dealings with the management — all viewable by other prospective tenants.
Similar to Yelp, of course, but the site would verify tenancy — think Amazon’s “Verified Purchase” reviews. Snail mailing a code would probably be the way to do it.
So: tenants are relieved of arbitrary broker fees, and information asymmetry is reduced. Landlords realize the market value of their apartments.
Would the landlord and tenant sides of the market embrace this?