I came across this tweet this afternoon while I was sitting down to write about the intersection of real estate & technology and it had me thinking; why is the apartment rental process so archaic compared to Airbnb?
The traditional leasing process has (at the minimum) 2 parties: the renter and the Landlord. The renter can be anyone from a 19-year-old college student in Columbus, OH to a 55-year-old empty-nesting couple who moved from the suburbs to downtown to enjoy all of the amenities that a city has to offer. Sometimes there is a Guarantor involved if the renter doesn’t have sufficient assets (annual income of 40x the rent in cities like NYC) but most markets outside of NYC do not require this.
In the words of Dror Poleg, “why does it take 30 seconds to find, pay and move into an apartment on Airbnb while it takes 30 days to find, may, and move into an apartment through a traditional leasing process?”
Despite apartment hunting being such an archaic process, the research process has been modernized over the last 10 years with platforms like Streeteasy, Trulia, and Zillow helping apartments find renters and vice versa, brokers still hold many of the keys to the best listings in NYC. Unfortunately, these brokers come with a price that can add up to one month’s rent on the low end or 15% of the annual rent on the high end. Brokers can be indispensable, however, because they often have inside knowledge on the reputation of the Landlord, the quality of the building or if their previous clients have had problems with certain amenities in the building.
This inside knowledge is ripe for disruption through a rating system, similar to Airbnb’s platform. When staying in a hotel, it is easy to look online at different ratings, reviews, and anecdotes. The same is not true for apartment buildings (yet).
While a standalone site would be difficult to manage, an integrated booking and review site similar to Airbnb would provide the renter with the assurance that the unit that they would be committing to was vetted by previous dwellers while at the same time giving the Landlord multiple reviews on the renter’s ability to pay, trustworthiness and credibility as a good neighbor.
Another part of the renting process that is much easier on Airbnb is the process of paying a security deposit. Traditionally, renters have to put up anywhere from 1–3 months of a security deposit when moving into a new unit, which is a huge burden for many low-income renters.
To combat this issue, platforms like Rhino and The Guarantors erase the need for a security deposit while still ensuring that Landlords can collect compensation for damages at the end of the term. Both Rhino & The Guarantors’ ability to eliminate thousands of dollars in upfront payments ensures that renters can move from apartment to apartment with ease, which would offer a much more positive renter experience for all.
Overall, renting an apartment unit has to change, especially with how many offices are pivoting to remote or hybrid work. I can envision a future where snowbirds aren’t just the 65+ who go to Florida in the winter and the northeast in the summer — remote workers in their 20’s and 30’s could do the same if signing a 6-month lease was as easy as booking an Airbnb.
Shorter-term leases are often at higher rents, which tenants pay because of the flexibility, and Landlords charge because they are guaranteeing themselves less rent. If renting these apartments were more fluid, the Landlords would be able to make more money, the consumer would get more flexibility, and everyone would be held more accountable to maximize their renter/Landlord rating.