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.