Property Auction Startup Rentberry Angers Tenants

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.”

Jennifer Wadsworth is a staff writer for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

34 Comments

  1. Nothing wrong with this at all.

    It’s no different from Ebay where someone lists a hot item and people bid on it. The seller is looking to make as much as they can. If this is not cool to you, you don’t have to bid. Supply and demand determines the price of the goods.

    Renting, like any business are in it to make money. They are not a charity.

    • I absolutely agree with you! Last time I rented – I had to bid without knowing what other offers were submitted! I am pro transparency!

    • Your comparison is wrong. Consumer goods on eBay are not equivalent to basic human needs (e.g., shelter).

    • Its fundamentally different to ebay. When you are renting, you are paying because of the infrastructure in the area, like train stations. So you are paying the *owner* because the *government* invested money into the area.

      So, Bob buys an apartment 10 years ago when there was enough infrastructure and is now cashing in on excessive rental payments because the government can’t keep up building infrastructure to meet demand.

      Sure, we need people to invest in rental apartments. But when the system gets so broken that people are forced to pay excessive rentals… It sounds like Bob is getting rich off the governments failures.

      • I’d pay more to stay away from the riff-raff, noise, and other problems that come along with government infrastructure!

  2. Slum lords have to love this because well they are slum lords who just want to make money. This a cheap site, would love to know alex’s cut.

    • toby1981- Excellent point indeed. And yes, there are plenty of slum lords out there, believe me, I know. All you have to do is Google tenant reviews to see it for yourself.

  3. Does the bidding have to be in dollars alone or can a bid be augmented by something else of value to a landlord (and his/her existing tenants), like the sum of a prospective renter’s credit rating and I.Q. score? A reliable and intelligent tenant, even one paying less than top dollar, will more often than not prove more profitable in the long run.

    • FINFAN

      I couldn’t be more ashamed of you right now. Suggesting that IQ and credit history should be given any consideration at all by a landlord is almost as ridiculous as suggesting that relative intelligence and a track record of responsibility and an employment history be given any consideration at all. Outrageous! It is heretical to the “affirmative action” religion of the 70’s. Didn’t you learn anything?!

      No, Finfan, what matters is that landlords be required, by law, to extend housing affordability based on relevant diversity factors such as race, gender, prior (real or imagined) societal oppression, drug addiction, mental illness and homelessness. The best way to end outrageous rents in Silicon Valley is to allow homeless people to turn their government subsidized affordable housing units into “Airbnb’s

      Geesh, do I have to think of everything?!

      • Okay, but how would the law treat a prospective renter whose history was that of a responsible and intelligent person but who claimed an emotional identity of an underserved, unreliable moron? Would his declared identity be respected and win him the apartment — as it would should he identify as a transgender abomination, or would he be tasked for proof of his worthlessness by producing eviction papers, a booking sheet, a Mercury News subscription receipt, a medicinal marijuana card, or a pro-Hillary bumper sticker? Also, assuming he were to hold to his parasitic masquerade for the duration of the application process, would that be enough to qualify him according to progressive criteria or would he be required to do something to satisfy gender and ethnicity questions, like don a XXL pink pinafore or throw a Black Lives Matter brick at a cop car?

        • Ok, now we’re getting somewhere. If our applicant were to start out as a home owner but always felt as if they were actually a trans-renter apartment dweller then we should “cut off” the offending mortgage and accept that, as a “trans-renter” he or she should be allowed to live anywhere this identity crisis made him or her feel most comfortable with themselves, as long as the place had a unisex bathroom so that the only question then would be whether to leave the seat up or down.

          Let us never forget, as well, that in Silicon Valley, affordable housing is only for the homeless, those who can be “compassionately” government subsidized. Citizens (if I am allowed to use the term) who work and pay the taxes that enable the subsidy should be happy to commute an hour or more to work or to sleep in their cars (as self-respecting homeless people used to do), parking their vehicles in their employer’s parking lot, or take up affordable residency under an overpass, during the work week and going home on the weekends.

  4. When some of these Silicon Valley engineer types can afford ridiculous rents because of their unfathomable wages (for what they actually do; most of them are not doctors or space shuttle pilots) then, of course, rents will go up. One should not blame businesses like Rentberry for trying to make a buck. This is Silicon Valley! One of the few places on Earth where a person can become a millionaire writing one novel little piece of code or inventing one little app-game depicting chickens pooping on small targets.

    Don’t get me wrong, I’m a flaming capitalist but it will be very interesting to see what will happen, over time, once all the “little people” in the service industry and the blue-collar tradesman all leave the area because they can’t afford to live here. Who will Joe Yuppie call when he needs a mechanic to change the oil on his BMW, or when he needs a plumber to fix his toilet with its heated seat, or when he needs a waitress to serve his spaghetti along with his $200 bottle of wine?

    Maybe rents will drop back down, at least temporarily, and nothing will come of it or maybe, like the cops and fire fighters have done, the “little people” will leave the area for good and never return but it would be hilarious to me if we start issuing H1B visas to plumbers, welders, construction workers, auto mechanics, waitresses, and fry cooks.

    • J.S. Robillard- “like the cops and fire fighters have done, the “little people” will leave the area for good and never return but it would be hilarious to me if we start issuing H1B visas to plumbers, welders, construction workers, auto mechanics, waitresses, and fry cooks.” You won’t be the only only one laughing at the irony of it all.

    • FYI – “Cops and fireman” have salaries in the $150,000 – $250,000 range, depending on amount of overtime worked. That is commiserate with typical high-tech engineer wages.

      • Ted,

        Do you even know what the word salary means? Look it up. SJ officers, even at top step, make nowhere near the salary range you cited. Officers who earn a salary plus a sum equal to fifty or even one-hundred fifty percent of that salary do so by working overtime hours, often as ordered, to make up for critical staffing shortages. Many officers would prefer not to work overtime, would prefer to have time for their families, friends, and school, but due to the gross incompetence of this city’s leaders they find themselves denied the right to go home at the end of their ten hour shifts, denied the right to their off days, denied the right to use their compensatory time as they choose, and denied any departmental concern for the physical and psychological toll that accompanies excess overtime.

        If you’re convinced these cops are so well-compensated then please explain the reason that, for several years now, the majority of police officer job openings have gone unfilled?

      • Oh take this tired bs and go away. The average police salary is well below $150K. Even at 30 years most cops don’t make that. Even with incentive pay, most cops don’t make that. If there is OT available and they work it be damn grateful for that — it can be (up to a point) cheaper for you as a taxpayer than hiring another body — they don’t have to work it. The small percentage that do work enough OT to get that kind of $$ , it takes a *damned* lot of hours being a target for the bitter and willfully uninformed.

    • > Who will Joe Yuppie call when he needs a mechanic to change the oil on his BMW, or when he needs a plumber to fix his toilet with its heated seat, or when he needs a waitress to serve his spaghetti along with his $200 bottle of wine?

      JSB:

      As a “flaming capitalist”, you should know the answer: the free market is marvelously efficient, automatic, and self-adjusting.

      It there as a shortage of plumbers or mechanics, i.e. if demand exceeds supply, the wages of plumbers or mechanics will go up. Plumbers and mechanics from other areas, attracted by higher wages, will move to Silicon Valley, and increase the supply. When supply equals demand, the market wage for plumbers or mechanics is set.

      No need for the Obama Labor Department, or Cal Berkeley economics department to do a study to figure out the correct wage for plumbers or mechanics. All done, silently, automatically, while you sleep. No need for speeches, community organizers, demonstrations, or petitions to state or local government. It just happens.

      And, by the way, the same marvelous price finding and efficiency works for public safety workers as well. If, as is often reported, San Jose has a shortage of police officers, the free market is trying to tell you something: police officer pay and benefits offered by San Jose are BELOW MARKET. If San Jose police officers FIRED their union negotiators and DEMANDED MARKET RATE pay and benefits, they would probably get a raise!

      • California bans strikes by public safety officers like police and fire so no they would not get a pay raise because cities have the upper hand. The only stick these employees have to use is the fear of the public.

        • > California bans strikes by public safety officers like police and fire so no they would not get a pay raise because cities have the upper hand.

          Ella:

          I don’t think you understand how the free market works.

          A strike doesn’t achieve market rate pay. it only achieves a rate of pay set by bureaucrats. Bureaucrats can and do set pay rates that are BELOW market rate. Exhibit A is SJPD.

          If the CIty of San Jose offers pay and benefits that are below free market rate, no qualified candidates will accept the jobs because they will have better opportunities elsewhere.

          MANY, MANY SJPD officers have made this point on this forum over, and over again.

          When an employer offers below market pay and benefits, qualified candidates in the labor pool WILL NOT SHOW UP!

          It’s EXACTLY the same thing as all qualified candidates “going on strike”. They don’t have to belong to a union, they don’t have to take a vote, they just know that they don’t want to show up.

          You might call it a “reverse flash mob”. Instead of everyone appearing at the same time, everyone DISAPPEARS at the same time.

          • Maybe you are the one who is not quite understanding. A free market for goods and services requires the buyer to decide if the product is: good enough to pay a larger amount of money for the name brand, or settle for the “made in china” knockoff. The seller has no reservations toward convincing the buyer that his/her product is the one that he/she should be buying (based on the fact that the seller wants profits, and needs to make a living too).

            If we were to offer a service to the public based on ability to pay, I would charge the engineers, doctors, lawyers (and City politicians) the absolute most I could. Because there is NO competition. In the Police and Fire world, there is no “made in china” signs, and EVERYONE gets the same quality of treatment and care because that is what decent societies do for each other.

            The day we decide to manipulate public services in the same manner as businesses, we are truly losing sight of why public services exist in the first place. Our unions are in place to PROTECT us from that type of thinking, and to allow us a fair and living wage in the cities we serve. Do you understand now?

  5. As a landlord, I always receive price offers, or even 1-year upfront rent offers. People do make money in SF, so why they can’t afford paying extra.

  6. If they manage to grow and implement new features (payments, open house scheduling, etc.) they can be the next Zillow

  7. When you can just sign an agreement online and track all of your payments – this is what I call convenience.

  8. Jennifer:

    Is Rich Robinson banned from SJI?

    We miss clubbing our favorite progressive baby harp seal.

    Since Milo Yiannopoulos is banned from twitter, and Rich is tweeting the glory of Hillary endlessly, maybe we could work out a compromise to keep the universe in balance. Make Milo a columnist on SJI.

    Now I realize there might be some discrepancy in message volume, but I think Milo’s incisiveness and outside the PC box thinking would easily offset Rich’s tow-the-line-inside the Hillary pablum box recitations.

  9. BOHICA:

    > Do you understand now?

    Nope.

    I only hear you saying that EACH officer candidate is special, and EACH officer candidate needs special pay, and the union will tell us when we’re paying enough.

    FYI. EVERYONE thinks they’re special.

    Nothing new here.

  10. Can you imagine the government telling you what you have to sell your house for instead of what you might rent one for? It wouldn’t make any sense.

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