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The assumption that software can solve this problem is simply wrong. It's the regulation change that needs to happen if you don't want that renter pay the broke

The assumption that software can solve this problem is simply wrong. It's the regulation change that needs to happen if you don't want that renter pay the broker "services". For example, a new law in Germany to apply the "who hires pays" principle for brokers in the renting market basically made the renting "broker fee free" for renters. Previously, the landlords would hire a broker that needed to be paid by the renter. Why not, it doesn't cost them anything, and at least they don't need to have a contact with the potential renters. Now, that they have to pay for the brokers service themselves, it's suddenly not that valuable to them.

literallycancer 5y ago
So the landlords just make the rent more expensive to account for having to pay the broker, what changed?
- tut-urut-utut 5y ago
  The rent price depends on supply and demand, not on landlords costs.
  - dspillett 5y ago
    It isn't quite as simple as that in many cases. Kickbacks from brokers and other dubious jiggery-pokery can make quite a difference.
  - bin_bash 5y ago
    Doesn’t it stand to reason that without broker fees the landlord margins would increase bringing more landlords (supply) into the market?
  - einpoklum 5y ago
    That's like saying rent prices depend on the will of god. Retroactively, you can justify this claim regardless of what happened: "It was god's will" or "You had to adapt your price to the demand".
- dspillett 5y ago
  Less admin for the tenant? More up-front pricing (assuming the broker fee was not required to be obviously disclosed) for them too?
- badestrand 5y ago
  Actually the brokers' prices fell drastically in response to this law. Probably because the landlords now have an incentive to take the cheapest broker.
- munificent 5y ago
  It addresses the principle-agent problem[0]. Yes, renters that want a broker may simply raise the rent to pay for it, but doing so affects their own bottom line because either (1) it's harder to find a renter at that higher price or (2) they could have found a renter without a broker and pocketed the higher rent themselves. [0]: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
  - 988747 5y ago
    Both of those things happen regardless of who formally pays the fee: one side of the transaction has a desirable good (apartment) the other side only has money to bargain with, so it's obvious from who's pocket the fee will come from. Many times the buyer would openly raise that argument in negotiations: "You know, I have all those fees to pay, can you lower the rent a bit?". It's not like sellers are completely oblivious to fees paid by a buyer.
    - IggleSniggle 5y ago
      It has a real effect on the advertised price, and landlords are generally in a better position to reduce the cost or eliminate it altogether.
    - joshuaissac 5y ago
      When the person choosing the broker is the same one that pays, it creates competition on fees. The renter cannot choose to change the agent to a cheaper one. They have to deal with whatever agent the landlord has chosen. It works similarly when software is chosen by people who have to use it versus those who do not. IDEs and text editors are usually chosen by the users, so there is competition on usability between different options. Timesheet and other HR software are usually chosen by upper management, and the people actually using them cannot switch, so there is not the same kind of competition on usability. Instead, they compete on other things that make them more appealing to those who can make the decision.
      - heurisko 5y ago
- an_opabinia 5y ago
  > So the landlords just make the rent more expensive to account for having to pay the broker, what changed? Nothing. Clearly brokers are doing something or else people wouldn't pay for them. My theory is the broker fee has positive selection for wealthier tenants, which for every property - low or high rent - makes for an economically better tenant. Raising the rent has the same effect. We care that there's cheap rent because shelter is a basic human right, and we appreciate that spending tons of money on rent couldn't possibly be good in a positivist economic sense, but of course raising the rent also selects for a wealthier tenant. Replacing the brokers with software has a similar effect. If your users feel comfortable using a complicated website with no human beings involved, they are going to be wealthier. This comes up everywhere. For example Oscar selects for a healthier insurance pool by being a complicated app - old people want real human beings to talk to and are turned off by apps, and they are also more expensive for insurance to carry, so it's a "win" for Oscar. Credit card only restaurants with lines make higher revenue because lower-ticket cash paying customers are substituted by higher-ticket credit card paying ones. And the iPhone is a $800 phone versus a $300 Android one, no wonder iPhone users spend 2-5x as much on IAP.
  - lotsofpulp 5y ago
    I am also under the impression that one of the purposes of brokers/agents is to serve as plausible deniability against accusations of discrimination.
    - boringg 5y ago
      It also solves the problem of having to source tenants and do all the legwork around that which is a pain in the ass part of owning property. Especially if you own many properties. It's not unlike the role a recruiter plays for jobs.
  - einpoklum 5y ago
    > Clearly brokers are doing something or else people wouldn't pay for them. In many cases (not talking about NYC here), what they're doing is simply blocking access to an apartment. You see an apartment, you have to deal with the broker / real-estate agent / makelaar. Or - you don't even see it in the first place, since it's only available via an agency. This is similar to setting up a roadblock and collecting a transit tax; or the "troll under the bridge" from folk tales. That being said - In some cases and some places brokers can help apartment seekers filter relevant apartments, and can help convince both the seeker and the landlord to compromise, agree to some arrangements to seal the deal. Another benefit of such type of apartment brokerage is that a broker with a minimum of reputation would not try to scam you (rent contract scams are a thing in some countries); and may be able to exert some pressure if, say, some serious problem is revealed right after you move in and the landlord doesn't want to address it.
- deleted 5y ago
  [deleted]
- udfalkso 5y ago
  This is a fallacy, at least in NY. I asked my last landlord about this. I asked "if brokers can't charge renters their fee will you pay it instead?". He replied immediately, "no way, I'll just ask my nephew to show the apartments instead". I had just paid a 12% fee to a broker a year earlier with this same landlord! Thousands of dollars. The broker did very little for this exorbitant fee, they opened a door for a dozen people maybe, and uploaded a few pictures online. They were simply the gate-keeper and I had no choice in the matter. The only reason landlords deal with them is that it's easier for them to do so, so why not. It's pervasive enough, as a quirk of history, that it's tolerated. They certainly do not provide value that matches up with their fees in most cases. Rents may go up, but it will be only a fraction of the insane fees retail brokers in NY charge. It needs to change.
  - tut-urut-utut 5y ago
    That's exactly what happened in Germany. As soon as the landlords had to pay the brokers out of their pockets, they quickly realized that the "service" is not worth that much for them, so many went without brokers, and the ones that still kept brokers had to pay them much less than before, and the price was related to actual service provided.
titzer 5y ago
The Marklers are such parasites.
pishpash 5y ago
That and the entire rental background check industry. $30-$50 fees for each submission of the same report on what is effectively your own data.
- xadhominemx 5y ago
  It’s necessary in many markets IMO. Otherwise people would just spam applications at every apartment that satisfies their broad filters.
  - maest 5y ago
    So charge per application, with the money going towards first month's rent, if successful.
    - hammock 5y ago
      That's what a lot of places do
    - xadhominemx 5y ago
      That’s how it usually works
      - pishpash 5y ago
        I've never seen it go towards first month's rent, but that's not the point. The money isn't going to the landlord or the tenant, but to the data aggregators.
        xadhominemx 5y ago
        A lot of it is highly manual on the back end, calling and faxing random state agencies. It’s not like it’s a 90% operating margin business or a lot of companies would be getting in and driving pricing down.
        5y ago
TheRealPomax 5y ago
No, in the case of NYT brokers, software would solve the problem of NYC brokers, by putting them out of a job. If you're from Germany, you have nothing to compare these people to, they run a racket that would be illegal there to begin with. They're nothing like the kind of rental agencies in Germany, they are individuals who basically figured out how to scalp entire buildings worth of apartments.
- kennywinker 5y ago
  Op suggested regulation. I.e. making certain practices illegal. You responded: > they run a racket that would be illegal there to begin with. Perhaps making it illegal in nyc as well, as op suggested, is the solution? Rather than letting a tech company replace the scalpers with a scalping monopoly
  - denimnerd42 5y ago
    do you think NYC making a law or regulation is going to lead to less corruption? This is NYC we are talking about after all.
    - seigando 5y ago
      maybe we can find a software solution to the selective enforcement problem. ;)
  - TheRealPomax 5y ago
    And how realistic, exactly, do you think getting regulation pushed through in NYC is, exactly? Unless there is true citizen outrage (and there will never be, given what market we're talking about), you're going to need lobbied buy-in from currently sitting politicians and their successors. So if you're lucky, maybe you'll get something tentative in 2040. In the mean time: software can solve this problem now. Now sounds good.
    - kennywinker 5y ago
      > software can solve this problem now. Software can displace a middle man, and replace it with a monopoly. Once monopoly power is in place, Software will then become more and more expensive until it is as bad or worse than what it supplanted. Investors will get rich, there will be a brief bubble where some people will get a VC-funded good deal, and then nobody else wins.
oconnor663 5y ago
> Why not, it doesn't cost them anything It can't be quite this simple. If your renter is paying $X to you plus $Y to your broker, then their willingness to pay for the apartment was at least $X+Y, and you're leaving at least $Y on the table. In theory there should be a lot of market pressure to shrink Y. So the question becomes, what transaction costs are getting in the way of that? Or maybe, is the $Y actually buying something that's of value to the landlord?
- risyachka 5y ago
  Sure it buys some value for the landlord, but that value is very low and can be replaced by software for 1/100 of the current cost.
- benhurmarcel 5y ago
  In Europe the broker/agency usually takes a flat fee at the contract signature. It's not a recurring payment.
- gbronner 5y ago
  Rent control...
e12e 5y ago
> "who hires pays" principle for brokers in the renting market basically made the renting "broker fee free" for renters. How can that work? Landlord (absent regulation) set the rents as high as they want/can get away with. What's the difference between 100/month rent + 50/month broker fee, and 150/month rent + "zero"/month broker fee?
- netrus 5y ago
  In Germany, the broker fee is a one time payment. That makes for an complicated calculation, as rentals are usually not fixed-term, and people will expect to stay for several years or decades. Is 900 EUR per month + 1,800 Euro one time payment better or worse than 1,000 Euro per month without a broker fee? Most people do not think like that. 900 < 1,000 Euro, end of story. Of course, the real problem was that the landlords did not both to negotiate the brokers fee. There was a maximum broker fee defined by law, and everyone just charged the maximum. Not anymore!
- tut-urut-utut 5y ago
  Landlord already charges as much as they can. Increasing his cost will not magically mean that they can suddenly charge more than they can.
- caddemon 5y ago
  The broker fee IME is usually an extra month of rent due at the time of signing the lease. Because in certain cities the vast majority of apartments will follow this convention, and it's not really something that will be mentioned until you're in the process of formally applying (unless you ask), I don't see it having a market effect in the same way that raising the rent would.
- nicbou 5y ago
  German landlords can't set the rent as high as they want, for starters. At least not in Berlin with the Mietpreisbremse capping how high rent can be relative to the past, and to the neighbourhood.
firestarter223 5y ago
I find that German law idiotic. Of course it costs the landlord something to hire a broker, even if the renter is supposed to pay the fee. It still eats into the overall budget of the renter, that could otherwise have gone to the landlord.
- allendoerfer 5y ago
  You can find it idiotic, but finding a tenant is quite easy in popular places, so instead of finding a way to increase the overall price (which is also regulated), the landlords often just do it themself. In unpopular places, it is hard to increase the price.
iFreilicht 5y ago
I liked the idea of that law, but in high-density areas, it didn't change anything. The renters are now implicitly expected to cover the broker fee for thee landlord. If they don't offer that in advance, they won't get the apartment.
- nicbou 5y ago
  I have never heard of such a thing, but before 2015 Makler fees were ubiquitous. I live in Berlin.
nicbou 5y ago
Yes this law came in 2015 and it indeed made a big difference. I saw zero downsides thus far.

literallycancer 5y ago

So the landlords just make the rent more expensive to account for having to pay the broker, what changed?

tut-urut-utut 5y ago
The rent price depends on supply and demand, not on landlords costs.
- dspillett 5y ago
  It isn't quite as simple as that in many cases. Kickbacks from brokers and other dubious jiggery-pokery can make quite a difference.
- bin_bash 5y ago
  Doesn’t it stand to reason that without broker fees the landlord margins would increase bringing more landlords (supply) into the market?
- einpoklum 5y ago
  That's like saying rent prices depend on the will of god. Retroactively, you can justify this claim regardless of what happened: "It was god's will" or "You had to adapt your price to the demand".
dspillett 5y ago
Less admin for the tenant? More up-front pricing (assuming the broker fee was not required to be obviously disclosed) for them too?
badestrand 5y ago
Actually the brokers' prices fell drastically in response to this law. Probably because the landlords now have an incentive to take the cheapest broker.
munificent 5y ago
It addresses the principle-agent problem[0]. Yes, renters that want a broker may simply raise the rent to pay for it, but doing so affects their own bottom line because either (1) it's harder to find a renter at that higher price or (2) they could have found a renter without a broker and pocketed the higher rent themselves. [0]: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
- 988747 5y ago
  Both of those things happen regardless of who formally pays the fee: one side of the transaction has a desirable good (apartment) the other side only has money to bargain with, so it's obvious from who's pocket the fee will come from. Many times the buyer would openly raise that argument in negotiations: "You know, I have all those fees to pay, can you lower the rent a bit?". It's not like sellers are completely oblivious to fees paid by a buyer.
  - IggleSniggle 5y ago
    It has a real effect on the advertised price, and landlords are generally in a better position to reduce the cost or eliminate it altogether.
  - joshuaissac 5y ago
    When the person choosing the broker is the same one that pays, it creates competition on fees. The renter cannot choose to change the agent to a cheaper one. They have to deal with whatever agent the landlord has chosen. It works similarly when software is chosen by people who have to use it versus those who do not. IDEs and text editors are usually chosen by the users, so there is competition on usability between different options. Timesheet and other HR software are usually chosen by upper management, and the people actually using them cannot switch, so there is not the same kind of competition on usability. Instead, they compete on other things that make them more appealing to those who can make the decision.
    - heurisko 5y ago
an_opabinia 5y ago
> So the landlords just make the rent more expensive to account for having to pay the broker, what changed? Nothing. Clearly brokers are doing something or else people wouldn't pay for them. My theory is the broker fee has positive selection for wealthier tenants, which for every property - low or high rent - makes for an economically better tenant. Raising the rent has the same effect. We care that there's cheap rent because shelter is a basic human right, and we appreciate that spending tons of money on rent couldn't possibly be good in a positivist economic sense, but of course raising the rent also selects for a wealthier tenant. Replacing the brokers with software has a similar effect. If your users feel comfortable using a complicated website with no human beings involved, they are going to be wealthier. This comes up everywhere. For example Oscar selects for a healthier insurance pool by being a complicated app - old people want real human beings to talk to and are turned off by apps, and they are also more expensive for insurance to carry, so it's a "win" for Oscar. Credit card only restaurants with lines make higher revenue because lower-ticket cash paying customers are substituted by higher-ticket credit card paying ones. And the iPhone is a $800 phone versus a $300 Android one, no wonder iPhone users spend 2-5x as much on IAP.
- lotsofpulp 5y ago
  I am also under the impression that one of the purposes of brokers/agents is to serve as plausible deniability against accusations of discrimination.
  - boringg 5y ago
    It also solves the problem of having to source tenants and do all the legwork around that which is a pain in the ass part of owning property. Especially if you own many properties. It's not unlike the role a recruiter plays for jobs.
- einpoklum 5y ago
  > Clearly brokers are doing something or else people wouldn't pay for them. In many cases (not talking about NYC here), what they're doing is simply blocking access to an apartment. You see an apartment, you have to deal with the broker / real-estate agent / makelaar. Or - you don't even see it in the first place, since it's only available via an agency. This is similar to setting up a roadblock and collecting a transit tax; or the "troll under the bridge" from folk tales. That being said - In some cases and some places brokers can help apartment seekers filter relevant apartments, and can help convince both the seeker and the landlord to compromise, agree to some arrangements to seal the deal. Another benefit of such type of apartment brokerage is that a broker with a minimum of reputation would not try to scam you (rent contract scams are a thing in some countries); and may be able to exert some pressure if, say, some serious problem is revealed right after you move in and the landlord doesn't want to address it.
deleted 5y ago
[deleted]
udfalkso 5y ago
This is a fallacy, at least in NY. I asked my last landlord about this. I asked "if brokers can't charge renters their fee will you pay it instead?". He replied immediately, "no way, I'll just ask my nephew to show the apartments instead". I had just paid a 12% fee to a broker a year earlier with this same landlord! Thousands of dollars. The broker did very little for this exorbitant fee, they opened a door for a dozen people maybe, and uploaded a few pictures online. They were simply the gate-keeper and I had no choice in the matter. The only reason landlords deal with them is that it's easier for them to do so, so why not. It's pervasive enough, as a quirk of history, that it's tolerated. They certainly do not provide value that matches up with their fees in most cases. Rents may go up, but it will be only a fraction of the insane fees retail brokers in NY charge. It needs to change.
- tut-urut-utut 5y ago
  That's exactly what happened in Germany. As soon as the landlords had to pay the brokers out of their pockets, they quickly realized that the "service" is not worth that much for them, so many went without brokers, and the ones that still kept brokers had to pay them much less than before, and the price was related to actual service provided.

titzer 5y ago

The Marklers are such parasites.

pishpash 5y ago

That and the entire rental background check industry. $30-$50 fees for each submission of the same report on what is effectively your own data.

xadhominemx 5y ago
It’s necessary in many markets IMO. Otherwise people would just spam applications at every apartment that satisfies their broad filters.
- maest 5y ago
  So charge per application, with the money going towards first month's rent, if successful.
  - hammock 5y ago
    That's what a lot of places do
  - xadhominemx 5y ago
    That’s how it usually works
    - pishpash 5y ago
      I've never seen it go towards first month's rent, but that's not the point. The money isn't going to the landlord or the tenant, but to the data aggregators.
      - xadhominemx 5y ago
        A lot of it is highly manual on the back end, calling and faxing random state agencies. It’s not like it’s a 90% operating margin business or a lot of companies would be getting in and driving pricing down.
        5y ago

TheRealPomax 5y ago

No, in the case of NYT brokers, software would solve the problem of NYC brokers, by putting them out of a job. If you're from Germany, you have nothing to compare these people to, they run a racket that would be illegal there to begin with. They're nothing like the kind of rental agencies in Germany, they are individuals who basically figured out how to scalp entire buildings worth of apartments.

kennywinker 5y ago
Op suggested regulation. I.e. making certain practices illegal. You responded: > they run a racket that would be illegal there to begin with. Perhaps making it illegal in nyc as well, as op suggested, is the solution? Rather than letting a tech company replace the scalpers with a scalping monopoly
- denimnerd42 5y ago
  do you think NYC making a law or regulation is going to lead to less corruption? This is NYC we are talking about after all.
  - seigando 5y ago
    maybe we can find a software solution to the selective enforcement problem. ;)
- TheRealPomax 5y ago
  And how realistic, exactly, do you think getting regulation pushed through in NYC is, exactly? Unless there is true citizen outrage (and there will never be, given what market we're talking about), you're going to need lobbied buy-in from currently sitting politicians and their successors. So if you're lucky, maybe you'll get something tentative in 2040. In the mean time: software can solve this problem now. Now sounds good.
  - kennywinker 5y ago
    > software can solve this problem now. Software can displace a middle man, and replace it with a monopoly. Once monopoly power is in place, Software will then become more and more expensive until it is as bad or worse than what it supplanted. Investors will get rich, there will be a brief bubble where some people will get a VC-funded good deal, and then nobody else wins.

oconnor663 5y ago

> Why not, it doesn't cost them anything It can't be quite this simple. If your renter is paying $X to you plus $Y to your broker, then their willingness to pay for the apartment was at least $X+Y, and you're leaving at least $Y on the table. In theory there should be a lot of market pressure to shrink Y. So the question becomes, what transaction costs are getting in the way of that? Or maybe, is the $Y actually buying something that's of value to the landlord?

risyachka 5y ago
Sure it buys some value for the landlord, but that value is very low and can be replaced by software for 1/100 of the current cost.
benhurmarcel 5y ago
In Europe the broker/agency usually takes a flat fee at the contract signature. It's not a recurring payment.
gbronner 5y ago
Rent control...

e12e 5y ago

> "who hires pays" principle for brokers in the renting market basically made the renting "broker fee free" for renters. How can that work? Landlord (absent regulation) set the rents as high as they want/can get away with. What's the difference between 100/month rent + 50/month broker fee, and 150/month rent + "zero"/month broker fee?

netrus 5y ago
In Germany, the broker fee is a one time payment. That makes for an complicated calculation, as rentals are usually not fixed-term, and people will expect to stay for several years or decades. Is 900 EUR per month + 1,800 Euro one time payment better or worse than 1,000 Euro per month without a broker fee? Most people do not think like that. 900 < 1,000 Euro, end of story. Of course, the real problem was that the landlords did not both to negotiate the brokers fee. There was a maximum broker fee defined by law, and everyone just charged the maximum. Not anymore!
tut-urut-utut 5y ago
Landlord already charges as much as they can. Increasing his cost will not magically mean that they can suddenly charge more than they can.
caddemon 5y ago
The broker fee IME is usually an extra month of rent due at the time of signing the lease. Because in certain cities the vast majority of apartments will follow this convention, and it's not really something that will be mentioned until you're in the process of formally applying (unless you ask), I don't see it having a market effect in the same way that raising the rent would.
nicbou 5y ago
German landlords can't set the rent as high as they want, for starters. At least not in Berlin with the Mietpreisbremse capping how high rent can be relative to the past, and to the neighbourhood.

firestarter223 5y ago

I find that German law idiotic. Of course it costs the landlord something to hire a broker, even if the renter is supposed to pay the fee. It still eats into the overall budget of the renter, that could otherwise have gone to the landlord.

allendoerfer 5y ago
You can find it idiotic, but finding a tenant is quite easy in popular places, so instead of finding a way to increase the overall price (which is also regulated), the landlords often just do it themself. In unpopular places, it is hard to increase the price.

iFreilicht 5y ago

I liked the idea of that law, but in high-density areas, it didn't change anything. The renters are now implicitly expected to cover the broker fee for thee landlord. If they don't offer that in advance, they won't get the apartment.

nicbou 5y ago
I have never heard of such a thing, but before 2015 Makler fees were ubiquitous. I live in Berlin.

nicbou 5y ago

Yes this law came in 2015 and it indeed made a big difference. I saw zero downsides thus far.