Toronto’s red-hot real estate market is getting even hotter and it’s spilling over into the rental market.
Reports of rents doubling have prompted fresh political debates over the issue of rent controls. Meanwhile, online rental search tools are getting increased attention —in Toronto and elsewhere—as a way to either make a tight market easier to manage, or as a factor that could put even more upward pressure on rents.
Ontario premier Kathleen Wynne has denounced rising rents as “unacceptable,” saying that the argument for a lack of rent control on new properities “doesn’t hold any water” with her. Her Liberal government is promising to soon bring in broader tenancy changes, which will include rent control.
The issue is contentious, and also confusing for tenants caught in the middle. This week, CIBC economist Benjamin Tal released a report arguing that rent controls actually create a rental property shortage. He argues that a lack of rent control on new properties encourages the construction of more rental units.
Tal advocates a free enterprise system where landlords charge what the market will pay, which would send market signals that convince others to build more rental properties. That, in turn, keeps rent down, he says. “Even the very mention of rent control as an option is having a chilling effect on developers.”
So the debate sits—rent control is necessary to keep rent at an affordable rate, or it’s bad policy that creates a rental property shortage.
But there are some companies who are taking advantage of the current rental market’s inefficiencies. Bidwell, an apartment rental service based in Vancouver, is working to target both landlords and tenants through online bidding. The two-year-old company covers the Toronto, Vancouver and Calgary rental markets, and says it has 2,000 members to date.
Last year, Vancouver mayor Gregor Robertson raised his concerns the service could drive rental prices even higher. But Biddwell insists its business is to create a platform where tenants and landlords negotiate a rental rate that works for both parties.
The business sector, referred as “landlord tech,” is getting attention in other countries as well. San Francisco-based Rentberry offers its service in U.S. markets and is getting critical news coverage from tenant advocates as it launches in Sydney and other cities in Australia where real estate and rental prices are overheated. The services facilitate screening and rent payments, in addition to offering a bidding platform.
On Biddwell, would-be tenants upload a resume, and then browse and apply to listed properties. Landlords can review their applicants, pick out desirable candidates, and negotiate a price that suits them.
“What we found was that there was a huge opportunity to create a solution that addressed both sides of the equation,” says Biddwell CEO Jordan Lewis. “Tenants did have an interest in negotiating their rent, and landlords wanted to remove the guessing game when it comes to coming up with their price.”
Lewis, who used to manage several rental properties himself before founding Biddwell, says he knew the platform would be something owners were interested in, but stresses that he believes it’s a good solution for tenants as well. Biddwell encourages tenants to consider the process like “a job hunt,” and asks them to “put their best foot forward.”
According to Lewis, 47% of the platform’s users are tenants: “What we kind of hope to achieve is an even distribution where both tenants and owners are able to negotiate, just like the sales side,” he says.
Lewis acknowledges the different conditions of the cities that Biddwell currently operates in, but says that the company is designed to work with different regulations. He acknowledges, for instance, that Toronto has fewer tenant protections for buildings built after 1991, but insists that that doesn’t necessarily change how Biddwell operates in the city.
“Even though it’s in our name, bidding is like a swear word in our company,” he says. “We’re not trying to create an environment where tenants are being exploited and forced into these bidding wars.”
And, he insists, the platform adds value by screening tenants and doesn’t always drive prices up: “Time and time again we see offers being accepted that aren’t the highest offer.”