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Betteridge's Law applies here: no. Or rather, tech tools in isolation won't unfuck this terrible brokerage situation in NYC. Tech tools in combination with str

Betteridge's Law applies here: no. Or rather, tech tools in isolation won't unfuck this terrible brokerage situation in NYC. Tech tools in combination with structural economic changes, on the other hand, might actually do the trick. The startup in the article (Joinery) doesn't sound like they're doing that at all. In fact it sounds a lot like they're inserting themselves as yet another middleman in a market with already too many layers of expensive middlemen. Better tech and better data stands a chance of getting rid of rampant scam/bait and switch listings, but ultimately the 15% broker fee exists for economic and structural reasons, not technological ones.

jessriedel 10y ago
Could you elaborate? Better tech and data have killed middlemen in lots of other industries, e.g., travel agents. The middlemen exist as matching services and hoarders of info.
- SideburnsOfDoom 10y ago
  I can't speak for NYC, only London, which also has severe housing issues. The basic problem is a shortage of affordable supply of something that is long-term and immobile. So better search tools can't on their own fix that supply issue.
  - davidf18 10y ago
    My comment to the original post explains the systems issues which has to do with "economic rents" caused by politics used to create artificial scarcity of housing to benefit landlords over renters.
- potatolicious 10y ago
  Tech can displace middlemen if the tech itself fully substitutes for what the middlemen are doing, and the market dynamics support replacing them. So there are two parts of this: can tech fully substitute what the brokers are currently doing, and if so, if doing so is sufficiently profitable for the disruptor. What to the brokers do? For owners: - Manages the day to day operations of a rental unit for small-time absentee investors (rent collection, maintenance, even paying taxes and condo/co-op fees, heck, some of them even attend co-op board meetings for you to lobby for your interests) - Screens new tenants to eliminate all the unrealistic candidates (low credit, broke, no job, etc) - Handles the operational aspects of renting a unit (arranging showings, turning the key, salesmanship) - In uncommon cases: kicks back money to owner if unit is off the market for prolonged periods. For tenants: - Knowledge of available inventory, because there is no central listings database. There are a couple of major thoughts about this: - The benefits of broker representation accrue to the owner, but the owner does not pay for these services. This makes this middleman hard to displace, because it has no cost to the primary beneficiary in this system, so they are completely not incentivized to make any improvements whatsoever. - The information asymmetry is by far the biggest chokehold brokers have on the system. Almost all of the benefits provided to owners can be substituted, but the information asymmetry cannot. Unlike the sales market there is no equivalent to the MLS for rentals, so sites like Trulia and Zumper are consistently at an impossible-to-overcome disadvantage, since must rely on what users submit. There is literally no database that contains a reasonably complete snapshot of all available inventory (one can argue that Streeteasy is the closest, but even then, not realy). In this environment brokers thrive on insider information. Many represent apartments exclusively (especially true for small-time landlords) and through brokerage and social connections have access to apartments that are not generally known. This is the primary chokehold - without them renters wouldn't even be aware of these units, much less access them. I think policy can help a lot here - if rentals had to go through a centralized database, it erases the information asymmetry between landlord/tenant/broker and eliminates a very critical inefficiency in the market, not to mention it gives the listing sites a dramatically more even playing field. From this efficiency you can achieve cost reduction, but this is not within the power of a startup to pull off (especially with REBNY lobbying actively against this exact thing). As for profitability, that's one thing that prevents any real disruption from happening, and time and time again would be "disruptors" live long enough to see themselves become the villain. There's so much money in collecting brokerage fees in NYC, companies that start out fighting brokers more often than not wind up joining them. Hauling home a 8-15% take for every transaction is ultimately much more profitable than, say, selling $50/month subscriptions to some platform.
  - xapata 10y ago
    > the owner does not pay for these services. Not true. The owner "pays" by earning less rent. A broker-managed apartment generally charges less in rent than a non-broker-managed apartment. In the latter case, the owner must handle everything and therefore often charges more, about as much as the broker would have. Cut the middleman and both sides take back some of the transaction cost, but the market generally becomes less liquid.

jessriedel 10y ago

Could you elaborate? Better tech and data have killed middlemen in lots of other industries, e.g., travel agents. The middlemen exist as matching services and hoarders of info.

SideburnsOfDoom 10y ago
I can't speak for NYC, only London, which also has severe housing issues. The basic problem is a shortage of affordable supply of something that is long-term and immobile. So better search tools can't on their own fix that supply issue.
- davidf18 10y ago
  My comment to the original post explains the systems issues which has to do with "economic rents" caused by politics used to create artificial scarcity of housing to benefit landlords over renters.
potatolicious 10y ago
Tech can displace middlemen if the tech itself fully substitutes for what the middlemen are doing, and the market dynamics support replacing them. So there are two parts of this: can tech fully substitute what the brokers are currently doing, and if so, if doing so is sufficiently profitable for the disruptor. What to the brokers do? For owners: - Manages the day to day operations of a rental unit for small-time absentee investors (rent collection, maintenance, even paying taxes and condo/co-op fees, heck, some of them even attend co-op board meetings for you to lobby for your interests) - Screens new tenants to eliminate all the unrealistic candidates (low credit, broke, no job, etc) - Handles the operational aspects of renting a unit (arranging showings, turning the key, salesmanship) - In uncommon cases: kicks back money to owner if unit is off the market for prolonged periods. For tenants: - Knowledge of available inventory, because there is no central listings database. There are a couple of major thoughts about this: - The benefits of broker representation accrue to the owner, but the owner does not pay for these services. This makes this middleman hard to displace, because it has no cost to the primary beneficiary in this system, so they are completely not incentivized to make any improvements whatsoever. - The information asymmetry is by far the biggest chokehold brokers have on the system. Almost all of the benefits provided to owners can be substituted, but the information asymmetry cannot. Unlike the sales market there is no equivalent to the MLS for rentals, so sites like Trulia and Zumper are consistently at an impossible-to-overcome disadvantage, since must rely on what users submit. There is literally no database that contains a reasonably complete snapshot of all available inventory (one can argue that Streeteasy is the closest, but even then, not realy). In this environment brokers thrive on insider information. Many represent apartments exclusively (especially true for small-time landlords) and through brokerage and social connections have access to apartments that are not generally known. This is the primary chokehold - without them renters wouldn't even be aware of these units, much less access them. I think policy can help a lot here - if rentals had to go through a centralized database, it erases the information asymmetry between landlord/tenant/broker and eliminates a very critical inefficiency in the market, not to mention it gives the listing sites a dramatically more even playing field. From this efficiency you can achieve cost reduction, but this is not within the power of a startup to pull off (especially with REBNY lobbying actively against this exact thing). As for profitability, that's one thing that prevents any real disruption from happening, and time and time again would be "disruptors" live long enough to see themselves become the villain. There's so much money in collecting brokerage fees in NYC, companies that start out fighting brokers more often than not wind up joining them. Hauling home a 8-15% take for every transaction is ultimately much more profitable than, say, selling $50/month subscriptions to some platform.
- xapata 10y ago
  > the owner does not pay for these services. Not true. The owner "pays" by earning less rent. A broker-managed apartment generally charges less in rent than a non-broker-managed apartment. In the latter case, the owner must handle everything and therefore often charges more, about as much as the broker would have. Cut the middleman and both sides take back some of the transaction cost, but the market generally becomes less liquid.