Rentberry, a new website for rental listings and applications, allows landlords to select a tenant from crowds of applicants desperate to outbid each other in San Francisco’s harrowing rental market.

Tenants submit bids for individual units, and can keep track of whether they are outbid by other applicants. Tenants can increase their offers to match or surpass competing bids. The website also shows a demand meter for each listing, which counts how many other applicants are vying for the unit.

Landlords vet prospective tenants for credit scores, references and any other information available through the tenants’ applications. When they find a suitable tenant, landlords can accept the bid with the click of a button, after which the tenant digitally signs the lease agreement and submits their security deposit.

To qualify on Rentberry, leases listed on the website have to be for at least six months and can last up to two years.

The auction-like platform offers a variety of services, including free:

  • listings for landlords;
  • rental applications;
  • credit reports; and
  • background checks.

Rentberry charges a $25, one-time “success fee” from applicants when they sign a lease agreement for a tenancy won through the site. Although the success fee is currently the only charge, Rentberry (with an eye to monetize the service) may eventually charge landlords 25% of their extra rental income generated by the bidding process.

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The company is located in San Francisco, and the website currently serves cities in the Bay Area and New York. Plans for expansion include Dallas and Houston once the website gains footing in its debut areas.

Housing for the highest bidder

Rentberry claims the site benefits both landlords and tenants using the platform. Landlords easily screen tenants by reviewing the credit and background information applicants submit with their bids. Prospective tenants save money by submitting free applications and bids rather than paying fee after fee to apply the old-fashioned way.

So everybody wins, right?

Many Bay Area residents surely disagree.  Meeting the bottom line for most rental listings is difficult enough without the pressure and delay in competing for the highest bid — especially considering 68% of San Francisco residents overbid to buy their homes in the past year and several communities, like Alameda, are calling out for rent control instead of curing the rental housing shortage by pushing new construction.

Simply put, the $450 Rentberry estimates renters will save on application fees just doesn’t make up for the total amount necessary to secure and retain outlandishly priced rental accommodations in the Bay Area. Applicants who save money on application fees may still have to spend that cash on increasing their proposed rental payments when they’re inevitably outbid by another applicant.

Thus, overreaching will likely be rampant among prospective tenants. Landlords will soon discover the winning tenant is unable to keep up the level of payment brought on by an auction environment.

An auction for setting prices intends to match demand with supply, supposedly eliminating those who will not or are unable to compete. Instead, the auction process used to set rents when housing is in such limited supply will drive out individuals that otherwise fill vacant job positions and add to the economic strength of the community.

The slight alleviation of rental application costs and transparency in bidding situations barely put a dent in renters’ experiences in the Bay Area. The real benefit is for the landlords, who attain maximum rents from bidders desperate to knock out the competition when supply of rental housing available is less than minimal.

Additionally, Rentberry’s limitation to the Bay Area excludes major California rental markets, like Los Angeles and San Diego. Several reviewers of Rentberry suggest the placement of the service in the most expensive rental markets like San Francisco is strategic — a means of taking a middleman cut of the Bay Area’s exorbitant rental prices.

However, landlords as middlemen won’t benefit from Rentberry for long. The auction site facilitates the current high-competition rental environment that will soon drive city councils toward finding a solution. When building increases to satisfy necessary urban density buildup and adequately stabilize rental and home prices, sites like Rentberry will become obsolete, and landlords will have to be satisfied with their lower, standard rent.

For now, rental housing in San Francisco and the rest of California’s urban hubs increases in scarcity with each daily arrival to the state the longer zoning restrictions maintained by city councils prevent developers from building to replenish critical housing supply. Skyrocketing rental rates limit turnover as tenants dig their heels in, reluctant to abandon whatever rare unit they’ve managed to snatch for themselves. Until these supply problems are solved, transparency in bidding for rental units does little to assuage the renter’s plight in the community, and serves instead to temporarily stuff the middleman’s pockets.