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IAE Response – Apartment hunting in NYC

This is a picture of people standing in line to view an apartment in New York City. Finding an apartment in New York City is notorious for being expensive and competitive with a lot of spoken and unspoken rules. I think the I-D-E framework would be a good way to analyze the process.

Idea:

  • People should be able to rent a place to live
  • Landlords should be able to find tenants to rent to

Arrangements:

  • Landlords have open houses for people to view their apartments
  • Landlords set the rent prices of their apartments based on the market
  • People apply to rent apartments
  • To apply, Renters need to prove their income to be 40x the listed rent, have a good credit score, prove they have savings in a bank account, pay for a security deposit upfront, and pay an application fee

Effects:

  • Limited housing options make renting an apartment competitive
  • People secretly offer over the listed rent price or more money to brokers to get a leg up on competition
  • Real estate brokers are able to add extremely expensive fees because people are desperate
  • People need to spend over their budget to afford rent because the lack of inventory drives prices up
  • Landlords are not maintaining their apartments and buildings because they know people are desperate
  • People are giving away very personal information when they submit their applications (their income, bank statements, credit history, etc.)
  • People are frequently scammed
  • Real estate brokers are very rude and demanding

An arrangement I would change is to add more rent stabilization laws so that people can have more affordable housing. I would also require landlords to always pay the brokers fees so that people aren’t scammed as often.

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