Househunters will be asked to bid against one another to “win” a rental property if they use a property auction service that has recently launched in the UK. LetsBid4Lets, which launched to the industry last month, allows letting agents to list a landlord’s rental property in an auction format. Once tenants have viewed the property via the letting agent, they can bid for it online.
All tenants using the site will be pre-referenced by a tenant referencing company before being allowed to bid. References will be valid for 60 days, so if a tenant doesn’t win one property, they will be able to use the same reference to bid on another. If a tenant wins the auction, they can then rent the house for the agreed period.
The concept of bidding for rental properties has already been trialled in the US, with reports that the recently established Rentberry now has 100,000 properties and more than 50,000 users on its site. Unlike LetsBid4Lets, which is targeted at letting agents, Rentberry aims to act as a middleman for landlords and tenants, cutting out agents and reducing fees. Listings, including pictures, description and a guide price, are uploaded by landlords.
Tenants seeking a property view the suggested rent price and the highest rent offer, and then bid an amount that is up to or at the landlord’s target rent. Landlords can then chose from prospective tenants based on their personal information, including credit scores. Renters can also try to outbid each other on the security deposit they are willing to put down for the property. Rentberry has proved controversial, attracting criticism from tenant associations for profiting from the housing crisis and driving up prices.
The same criticisms have been levied at LetsBid4Lets by UK-based tenants groups. The organisation is “yet another tech company trying to cash in on the fact so many people are in desperate need of decent housing”, says Heather Kennedy of tenants’ rights group Digs. Seb Klier of campaign group Generation Rent isn’t impressed either, and fears auctions could push up rents. “Deciding whether you can afford a home should be taken in a considered way, not in the frenzy of an auction,” he warns.
The selling point of these tenant bidding services is that the process is “transparent”. Rather than having to guess at what amount might win over a landlord, you can view exactly what others are willing to pay, and offer accordingly. And in Rentberry’s model, tenants can only bid up to the landlords’ target rent.
However, it does seem likely that in this case landlords would go in with a high target rent, potentially pushing the eventual rent achieved above where it would have reached in a blind market situation. The ability to outbid other renters on the security deposit also seems to go well beyond the actual remit of a deposit, which should ostensibly be an amount that would cover potential damages caused by a tenant, rather than an extra bit of cash to sweeten a rental offer.
In response to suggestions that tenant bidding would push up prices, Rentberry’s founder told the BBC that, on average, agreed rents were 5% below the landlord’s asking price, and final rental prices in the US’s largest cities were 4.3% lower than on other sites. Given that as of June LetsBid4Lets still appeared to be fundraising, it may be a while before it becomes clear how the business model will fare in the UK.
The more pressing issue for renters (and landlords) in England is the question of when the government’s planned ban on letting fees will be introduced (such a ban already exists in Scotland) and what impact this might have on rental costs.