When Alex Lubinksy unveiled his latest venture, an auction website for rental properties, critics came out swinging with brickbats. Understandably so, given the backdrop of Silicon Valley’s runaway housing costs. Rentberry invites landlords to list a unit and then sit back as tenants outbid each other for a place to live.
“As if life for renters in big cities weren’t hellish enough, a new Bay Area startup promises to make it even more of a nightmare,” Grist, an online environmental news magazine, declared upon Rentberry’s springtime launch.
Observers compared Lubinsky to notorious “pharma bro” Martin Shkreli, the investor who unflinchingly spiked the price of a life-saving AIDS drug by 5,000 percent. Rentberry seems designed for exploitation, The Atlantic’s Kriston Capps remarked, comparing it to a dating site skewed in favor of straight men at the expense of eligible women. “Expect a lot of missed connections,” he forewarned.
“I think that it’s very problematic,” Leah Simon-Weisberg, legal director for nonprofit renter rights group Tenants Together, tells San Jose Inside. “It’s profiting off of a housing crisis, and I think that it just shows how you have to regulate this market because it does lend to so many opportunities to take advantage of tenants. How awful to promote something that aims to get the highest price on something that people need. Can you imagine if someone auctioned milk or medicine? People would be outraged.”
On Facebook, acclaimed author and decades-long San Francisco resident Steve Silberman waxed blunt and breviloquent. “Dear Rentberry: Fuck You.”
Lubinsky—a 33-year-old former investment banker born in Soviet-era Ukraine and raised from his teen years in the South Bay—welcomes the controversy for its tagalong publicity. In an email to San Jose Inside, he included links to some of the critical press, including a Vanity Fair piece predicting that Rentberry will turn apartment hunting into a Hunger Games-like death match.
“There’s a syndrome in Silicon Valley where people hate engineers,” he tells San Jose Inside in a recent interview. “But if there were no engineers, there would be no Silicon Valley. The problem is not us, it’s not startups or the tech industry or the landlords. The problem is actually government.”
The “Google bus haters,” per Lubinsky, misunderstand the benefit Rentberry provides: transparency. Giving renters and landlords a platform to openly negotiate price so everyone can see the other bids, he argues, will level the playing field. Users can also haggle over security deposit and eschew application fees, which add up in a typical apartment search.
“The market will decide,” says Lubinsky, an avowed free-market fundamentalist who graduated from UC Berkeley with degrees in economics, business and Slavic literature. “Equilibrium will happen. All this does is balance supply and demand. People already bid offline, but nobody sees it.”
Since coming online, though, Lubinsky admits the site has driven up rents in competitive markets like San Jose and San Francisco an average of 5 percent above listing price. And while he may have a point about transparency and the fact that his startup alone can’t be blamed for a systemic affordability crisis, some of the language used to promote Rentberry comes off as more than a little tone deaf.
“Renting has become the new economic and lifestyle choice of almost 40 percent of households in the United States,” reads a press release announcing the company’s foray into the tech space. “Currently, landlords and tenants lack trust in each other. Rentberry seeks to change that, potentially even stopping unreasonable bidding wars. Armed with knowledge, tenants will be able to make educated decisions.”
Tenant rights groups dismiss Rentberry’s pitch as spin. To characterize the unprecedented influx of Americans into the renter economy as a “lifestyle choice” ignores the economic collapse that forced so many out of home ownership in the first place, Simon-Weisberg says. And to characterize open bidding as empowering consumers ignores the fact that the market overwhelmingly favors the landed.
“Silicon Valley has innovations to be proud of, but this is basically an innovation for unscrupulous landlords,” says Daniel DeBolt, a spokesman for the Mountain View Tenants Coalition. “Fortunately, not all landlords are engaging in price gouging, but the ones who are, are wreaking havoc. They don’t need any help.”
In the decade since the housing bubble peaked and popped in a ruinous crash, longtime homeowners have recovered thanks to growing equity and mortgage payments shrunk by super-low rates. But the nation’s burgeoning class of renters has lurched into a grind of stagnant pay and surging costs that force one in four to spend more than half their income just to keep a roof over their heads.
Nationally, the share of rental households grew from 31 percent in 2005 to 37 percent—a 50-year high—in 2015, according to the U.S. Census Bureau. Meanwhile, homeownership fell to a 48-year low. Locally, foreclosures and new college graduates have crowded the job market and heightened demand for rentals. Santa Clara County’s geography, growth, affluence and striking income inequality only amplify the problem.
“And [then] you have Rentberry, seeking to further normalize the bidding up of rent prices,” DeBolt says. “Just because you can make money off the housing crisis, it doesn’t mean you should.”
Lubinsky points out that Rentberry could theoretically have the opposite effect in a down market. If a landlord has trouble finding a tenant, prospective renters could submit bids below the listing price.
“America is not just San Francisco,” he says. “In some places, the market may force landlords to accept a lower price because that’s as much as people are willing to pay.”
DeBolt says that's a fair point, except that the website rolled out in some of the most expensive cities in the country. The threat of a bidding frenzy, he adds, underscores the effect of the Costa-Hawkins Act, a California law passed in the mid-1990s that prevents local governments from curbing unlimited rent hikes on newly vacant units.
“Unfortunately, state law prevents our rent control laws from halting the bidding wars that Rentberry wants to encourage,” says DeBolt, who’s lobbying for a ballot measure that would bring rent control to Mountain View. “The reason why Rentberry’s business model isn’t illegal anywhere in California is because of the Costa-Hawkins Act.”
Rentberry and variations on the rent-auction theme may be only partial contributors to the affordability crisis. But by capitalizing on the status quo, DeBolt says, the startup has shined a light on the lack of protections for tenants in a punishing market.
“It shows why we need to put safeguards in place,” he says, “and why we need to push for a serious campaign against Costa-Hawkins.”