Friday, December 7, 2018

Disrupt landlords

This is a slightly modified version of opening comments I made to the recent AHURI conference Disrupting the housing market in a session called 'New technologies, ethics and regulation'. Check out all the presentations here:

L-R: Sidesh Naikar, DSS; Nerida Conisbee, REA Group; Leo Patterson Ross, TUNSW; Prof Chris Pettit, UNSW City Futures. Photo Credit: AHURI


I frequently find myself arguing both against particular disruptions that show up, while wishing for serious disruption in our housing sector which is failing so many. In my few minutes I’ll make some observations about why we aren’t getting what we need.

We need to examine each change to our housing system with eyes open. It can be obvious to examine who benefits or suffers from change, but sometimes we can forget to also examine the impact of retaining the status quo.

We rightly point out that rent-bidding apps like Rentberry are not nearly as transparent as they claim and forces tenants to compete with other tenants to pay the highest rents possible. What we can miss is that allowing a real estate agent to set the rent based on what they think the market will bear is definitely untransparent and forces tenants to compete with other tenants to pay high the highest rents possible.

Similarly with online platforms which allow ever greater information to be gathered – they allow discriminatory behaviour. But it is na├»ve and demonstrably wrong to think that pen and paper applications and face to face viewings don’t also facilitate this.

The problem is with our competitive private rental market, which encourages people to use pre-existing biases as a shortcut to choosing a tenant, rather than the particular apps themselves.

It can also be easy to identify issues only within the frame of how a disruption is impacting the system without acknowledging the pre-existing systemic issues the disruption may highlight or exacerbate. This has been an ongoing issue in studies but particularly in media reporting around short-term letting.

In many ways, this relates to the democratisation of data - it is rarely put in the hands of practitioners or people with lived experience who ask different questions of the data.

Most data concerning the private rental sector in Australia has been created by and for the real estate industry, to aid investors who seek to enhance their investment decisions. The data is held in the hands of people who seek to profit from either holding the data or from the decisions which can be made from the data.  Controlling the data helps control the narrative which is a key tool used by all those in power – this is why rent increases are often reported in positive ‘growth’ terms rather than a negative phenomenon of loss.

The government and NFP sectors are not immune from this either, holding great data sets which are not made available to the public, or are made public only after being sanitised and asked the questions which are safe to ask from the data holder’s perspective. Given both the importance of providing shelter, as well as the degree of subsidy the public provides governments, community orgs, private investors and academics, there should be no reason why data created with the benefit of those funds shouldn't be as open as possible.

So, what do we need to do? So far disruption in Auatralian housing has ultimately designed to maintain the status quo. assist landlords and investors not tenants. it's interesting that Airbnb and Uber, as much as they are problematic otherwise, both set out to disrupt the service provider, hotels and taxis, not the traveller or the passenger. In Australia, tenancy disruptors like TrustBond, Snug, and others try and present as being for tenants, but I believe they realised that the power rests heavily with the service provider and since they don't have a plan to disrupt the physical supply of rental housing, they have sought to either reduce service provider costs without any benefit flowing to end user or eke out essentially private taxes from end users. This is particularly been the case with alternative bond loan products which claim to replace cash bond but actually protect current landlord interests by maintaining their current costs and risk profile, while extracting a fee from the end user tenant to access the product.

We need to disrupt landlords, of all sorts. The disruption needs to happen at three levels – first the current legal and social framework needs rewiring by either people or governments. We need to rebalance the relationship between landlords and tenants and recast the provision of housing as an essential service to be delivered to the people who need it when, where and how they need it. This will be the great disruption for many landlords. While we do that, we open up the data and let people ask the questions that need to be asked of our housing system. Those two things open up opportunities for disruptors, whether for profit or not, to seek to improve tenants lives, rather than just joining in the pile-on of people seeking to rake money off them.

4 comments:

  1. Great reflections on who benefits from disruption and a weird truth about disruption actually serving to maintain the status quo.

    However, I think there's a bit of false equivalence with AirBnB and Uber. With Uber, most cars have a very low utilisation rate. So Uber gives car owners a chance to utilise their car in an additional way that increases the overall availability of transport options (the car would otherwise not be in use).

    AirBnB does this too in the case of a spare room that becomes available to the short-term rental market and in this case, as you say, it benefits travellers while disrupting hotels. But AirBnB doesn't just increase capacity, it also transfers capacity. Certainly in some cases there is a transfer of capacity from the long-term rental sector to the short-term sector. This probably results in *lower* overall utilisation, because the long-term tenant occupies the property 24/7 but a short-term property would have a higher vacancy rate potentially.

    This doesn't change your fundamental point but I think it is relevant that AirBnB doesn't just disrupt hoteliers, it also disrupts renters. While it might be all the same for travellers, for people looking for a long-term tenancy, capacity has shifted out of the market.

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    1. All true, an yes really my point was just that Airbnb didn't intend to disrupt renters - to the extent that they do is an unintentional side effect and has much more to do with our weak renting and planning laws than Airbnb itself. That doesn't detract from the need to regulate and mitigate those effects, but again I would advocate that effective regulation will really come from rejigging renting and planning laws to prioritise the supply of homes (as opposed to properties). You could ignore Airbnb's existence entirely and still come up with a system which very effectively regulates any negative impacts if the focus was on the home.

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  2. While I don't disagree with your statements about open data, can you suggest a specific private data set and how it could be used to benefit tenants?

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    1. There are a couple of things worth unpacking there - some datasets are privately held and either not accessible or only accessible through cost, which I'm suggesting should be opened up given the level of subsidy with which they are created. These might include data held by public housing and community housing providers, which could be used to improve the services and policies provided if external people were able to scrutinise the data. They also include rent advertisements which are held by the websites and sometimes made available but only in very limited ways. More availability and rigourous study of that data would lead to better understandings of the renting sector. Individual tenants may also be able to better contest unfair rent increases.
      There are also datasets which are not currently collected, but could be - for instance, how many evictions occur, and more broadly, the reasons tenancies come to an end. This is a big missing in government policy making.

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