News Brief: Seattle City Council attempts to outlaw economics

From the Seattle Times: Seattle City Council votes to impose moratorium on rent-bidding websites

The Seattle City Council voted Monday to impose a one-year moratorium on rent-bidding platforms, which allow landlords to take competing bids from prospective tenants and then sign leases with the highest bidders — a little bit like eBay, but for apartments.

The council began looking at the platforms after the board of directors of the Associated Students of the University of Washington approved a student-senate resolution calling on the city to ban them.

The student group’s resolution late last year named two platforms, RentBerry and Biddwell, that have been active in Seattle.

By allowing landlords to easily take bids, the platforms can drive up the cost of housing, and that isn’t welcome in a city where “apartment values are already high, driving some students into homelessness,” the resolution said.

Additional coverage on GeekWire: Seattle bans rent bidding in latest attempt to keep disruptive tech from compounding housing crisis

What’s driving up the cost of housing is the basic economic imbalance of not enough supply to meet demand. People are moving to the Seattle area faster than we are building housing for them.

The solution is not to ban rent-bidding websites. The solution is to build more housing.

This is a misguided, ignorant, and foolish move by the Seattle City Council.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

44 comments:

  1. 1
    Eastsider says:

    I have a hunch that on eBay most buyers with winning bids are getting good values. I also don’t see new car dealers auctioning off their cars to buyers if such practice is profitable. Same for new Rolexes, new iPhones, and the new Samsung! So the Seattle City Council action is actually against lower rents…

  2. 2
    Deerhawke says:

    At times in the past (2000 to 2007 and 2012-2015) when would-be renters far outnumbered the number of units available, this would have been an interesting technology for landlords to use to get the rent bid up to the maximum possible.

    Right now, there is a glut of rental housing so it is useful for landlords to just get somebody to rent the unit at some price. It is something that could now be used by tenants to the the best deal possible. So why is the city council against it?

    Let’s see, maybe the next thing they should forbid is multiple offer situations in the for-sale market. I can just see Mike O’Brian saying that what Seattle needs is not just rent control but price controls because both have been so terrifically successful in the past.

  3. 3

    Okay, those of you who know me undoubtedly know that I think Seattle’s government is by far and away the most least effective, least intelligent, and most counter-productive government within the State of Washington if not the world, but they do have their first apply, first accepted ordinance (which is stupid).

    https://www.seattle.gov/Documents/Departments/CivilRights/Fair%20Housing/FAQ_FIT_FINAL_1-12-17.pdf

    Given that, I don’t see how these auction sites could possibly comply with that law.

    As to the particular idea of auction sites for rentals, this is just another tech idea that only works in certain markets. Techies do not understand real estate.

  4. 4

    Free Enterprise Controls Rents Anyway

    If a handful of rich elite are going to”temporarily” use web sites to fight for temporary location scarce apartments; the rental market would be doomed anyway. If ya got that much cash you’ll buy a house in the suburbs for much less [not rent forever]…renters have always been the average paid classes mainly anyway. Ya know the hamburger flipper waged folks.

    Seattle’s high tech will save the high rent conundrum from 2018 property tax cost surges? No hope there at all today, even open border far left Progressive Zuckerberg has the FBI shutting him down for illegal personal information abuses. This is big too and yes, I don’t have a Facebook account, the FB web site wants more personal information than I’d give my personal attorney.

    https://www.cnbc.com/2018/03/20/ftc-reportedly-to-investigate-facebooks-use-of-personal-data.html

  5. 5

    By Eastsider @ 1:

    I have a hunch that on eBay most buyers with winning bids are getting good values. I also don’t see new car dealers auctioning off their cars to buyers if such practice is profitable. Same for new Rolexes, new iPhones, and the new Samsung! So the Seattle City Council action is actually against lower rents…

    I think it depends on the product/market. If you had a new car model that was in short supply an auction system would probably work well for the dealer. But not for cars where they have more than 5 models just sitting on the lot.

    Also, I really question your eBay statement. Sellers probably post there because it’s a good way to get money for worthless junk.

  6. 6

    RE: Kary L. Krismer @ 3
    Local Governments Should be Run Like Companies

    You get fired if someone else can do your job better. Lots of firing too.

    That would clean the useless deep state out.

  7. 7
    Eastsider says:

    By Kary L. Krismer @ 3:

    As to the particular idea of auction sites for rentals, this is just another tech idea that only works in certain markets. Techies do not understand real estate.

    Why not let the market decide? If it is a bad idea, it will die naturally. Tech has brought us Uber and Airbnb that benefit consumers. The rental marketplace may prove to lower rents for tenants.

  8. 8

    RE: Kary L. Krismer @ 5
    EBay replaces realtors???

    LOL, Ardell, don’t worry, it will never happen.

  9. 9

    By Eastsider @ 7:

    By Kary L. Krismer @ 3:

    As to the particular idea of auction sites for rentals, this is just another tech idea that only works in certain markets. Techies do not understand real estate.

    Why not let the market decide? If it is a bad idea, it will die naturally. Tech has brought us Uber and Airbnb that benefit consumers. The rental marketplace may prove to lower rents for tenants.

    I don’t have a problem with letting the market decide, I just don’t see it working in other markets. If three adjacent buildings each have two vacancies, why would someone go to an auction site as opposed to just checking out the available units in person?

    My point is more that some techies seem to think that if you can create an app for something that it’s a good thing. Even Uber, although probably undoubtedly good for riders is not necessarily a good thing for drivers and congestion.

  10. 10
    Matt P says:

    RE: Eastsider @ 7 – AirBNB is good for only a small subset of consumers who travel and landlords and is absolutely horrible for the vast majority of the world. Read up on the problems caused in most major tourist destinations.

    Housing is a basic human right and AirBNB takes units out of the housing market and puts them into the vacation market without the regulations put on a hotel.

  11. 11

    [Sorry for the double post–I accidentally posted this in the “old” thread, and would like feedback.]

    The NWMLS is switching to a new mobile app for agents, called Homesnap. It also works for consumers, but without the “agent only” information. So far I’m not impressed, but I’d be interested in the opinion of others. This is about the third app the NWMLS has used for agents, and the first one wasn’t too bad, the second one (Homespotter) nearly worthless.

  12. 12
    Matt P says:

    By softwarengineer @ 6:

    RE: Kary L. Krismer @ 3
    Local Governments Should be Run Like Companies

    You get fired if someone else can do your job better. Lots of firing too.

    That would clean the useless deep state out.

    RE: softwarengineer @ 6 – Since when do companies fire people and replace them with better workers? Sure, companies are constantly looking for new employees, but I’ve never heard of any company that fires someone because there is someone better out there. There is almost always someone better but you get what you can afford that can do the job at a reasonable level for that salary not the best at any salary.

  13. 13

    RE: Matt P @ 10 – It’s clearly bad for affordable rentals, and also probably affordable houses for sale. And it can be a disaster for resident owners in condos.

    But hey, there’s an app! It must be good!

  14. 14
    Erik says:

    RE: Kary L. Krismer @ 13
    The Sherman antitrust act is a federal law that makes it illegal to make any kind of arrangement that is instended to restrain fair trade.

  15. 15
    Erik says:

    RE: Kary L. Krismer @ 13
    Checkmate

  16. 16
    Eastsider says:

    By Matt P @ 10:

    RE: Eastsider @ 7 – AirBNB is good for only a small subset of consumers who travel and landlords and is absolutely horrible for the vast majority of the world. Read up on the problems caused in most major tourist destinations.

    Housing is a basic human right and AirBNB takes units out of the housing market and puts them into the vacation market without the regulations put on a hotel.

    How is Airbnb ‘horrible for the vast majority of the world’? It is horrible for hotels I would agree. But it lowers cost of travelling for everyone. It makes the market more efficient and therefore more productive.

    What does basic human right have anything to do with prices? Should we regulate home prices and rent then? Have you ever hosted a homeless people in your home? How about walk the talk for a change?

  17. 17
    Eastsider says:

    By Kary L. Krismer @ 13:

    RE: Matt P @ 10 – It’s clearly bad for affordable rentals, and also probably affordable houses for sale. And it can be a disaster for resident owners in condos.

    But hey, there’s an app! It must be good!

    You have no proof whatsoever that Airbnb is the reason behind high home prices and rent in Seattle. But hey you are Kary! It must be true!

  18. 18

    By Eastsider @ 17:

    By Kary L. Krismer @ 13:

    RE: Matt P @ 10 – It’s clearly bad for affordable rentals, and also probably affordable houses for sale. And it can be a disaster for resident owners in condos.

    But hey, there’s an app! It must be good!

    You have no proof whatsoever that Airbnb is the reason behind high home prices and rent in Seattle. But hey you are Kary! It must be true!

    Does it reduce the supply of either? Unless AirBNB and such are not actually involved with any houses in Seattle, then it does! And as a result both rents and prices are higher. Or are you a denier of the most basic economic theories?

    But note I didn’t say it was THE reason for higher rents/prices, just that it is a contributing factor. On the topic of affordable housing, Seattle could to a lot without spending a dime (ignoring litigation costs) by simply making the operation of these companies illegal. That would be simple and effective, notwithstanding Erik’s legal opinion.

  19. 19

    RE: Kary L. Krismer @ 11

    The app is not “for” agents. It is “for” consumers. Agents can use it and access more info on it than consumers, but it is a BPP – Broker PUBLIC Portal and basically why NAR scrapped the bigger, National (AMP) plan after dumping $12 Million into it in favor of the local markets setting up their own BPPs. Per Goldberg, the mission is to “build strategic partnerships rather than try to compete with technology vendors,” In this case Homesnap.

    It is a step backwards for Agency and other areas who have implemented it say no one uses it. But the test is to have consumers try it and critique it, not agents.

    On the plus side it is the first attempt by this mls to have a decent public portal.

  20. 20
    Eastsider says:

    RE: Kary L. Krismer @ 18 – You are making a mountain out of a molehill. Amazon probably brings in more people in a month than the size of Airbnb inventory in Seattle. Airbnb is unlikely to be among top 10 factors contributing to high housing / rental cost here.

  21. 21
    seaturtle says:

    Uneducated people should read up on economics. Never mind, if they do, they wouldn’t have grown stale at the government.

  22. 22

    RE: Ardell DellaLoggia @ 19 – Well it’s both, for agents and consumers. But you do bring up a point. I was addressing the mobile app. I think they also have a desktop presence, but I haven’t tried that. I’d be shocked if it were anywhere near as good as the top 4-5 broker sites.

    The Homespotter app was such a bad app I’d sometimes use my phone’s browser to access the NWMLS website–using a 5″ screen. I don’t know that this new app will change that, I suspect I’ll still need to go to the regular website.

  23. 23

    By Eastsider @ 20:

    RE: Kary L. Krismer @ 18 – You are making a mountain out of a molehill. Amazon probably brings in more people in a month than the size of Airbnb inventory in Seattle. Airbnb is unlikely to be among top 10 factors contributing to high housing / rental cost here.

    You’re going to have to point me to the post above where I in any way tried to quantify the effect.

  24. 24

    By Kary L. Krismer @ 22:

    RE: Ardell DellaLoggia @ 19 – I think they also have a desktop presence, but I haven’t tried that. I’d be shocked if it were anywhere near as good as the top 4-5 broker sites.

    I just checked out their website. They managed to make Zillow and Trulia look like good sites. And it seems to have a lot of the same sorts of features designed to suck money out of real estate agents.

    Edit: I just realized I should post a link: https://www.homesnap.com/

  25. 25
    Ross says:

    By Kary L. Krismer @ 18:

    By Eastsider @ 17:

    By Kary L. Krismer @ 13:

    RE: Matt P @ 10 – It’s clearly bad for affordable rentals, and also probably affordable houses for sale. And it can be a disaster for resident owners in condos.

    But hey, there’s an app! It must be good!

    You have no proof whatsoever that Airbnb is the reason behind high home prices and rent in Seattle. But hey you are Kary! It must be true!

    Does it reduce the supply of either? Unless AirBNB and such are not actually involved with any houses in Seattle, then it does! And as a result both rents and prices are higher. Or are you a denier of the most basic economic theories?

    But note I didn’t say it was THE reason for higher rents/prices, just that it is a contributing factor. On the topic of affordable housing, Seattle could to a lot without spending a dime (ignoring litigation costs) by simply making the operation of these companies illegal. That would be simple and effective, notwithstanding Erik’s legal opinion.

    Airbnb increases the total supply of housing on the market, since it *adds* many bedroom units in people’s homes that would otherwise sit vacant. Therefore it decreases the cost of housing, albeit with a bias towards short term rentals. The market tends to be pretty efficient to fill demand and maximize value; some of the inventory that was previously hotels may convert to offer longer term stays due to the downward pricing pressure of AirBNB. The normal analysis of airBNB’s impact is too simplistic. But it’s pretty clear that AirBNB has increased total supply of housing.

  26. 26

    RE: Ross @ 25 – I would agree that you need to separate out those renting out part of their house to those renting out their entire house, but the idea that those temporary visitors are effectively adding to the supply is a bit of a stretch. The supply of hotel rooms sure, but housing, nope.

    BTW, I’d also distinguish those who rent out all of their house, but only for a few months a year, assuming they live in the house the rest of the time.

  27. 27

    RE: Kary L. Krismer @ 24

    I agree it is not likely going to replace anything that consumers use, but the NWMLS Public Portal to date has been so exceptionally lame that anything is an improvement to that. Still not a game changer by any means. But better than the trees with a tiny search field.

  28. 28
    sleepless says:

    I keep wondering with the people out of labor force rates at multi-decade high and construction costs keep rising, why all those “unemployed” don’t move to skill trade. It must pay pretty good nowadays. I am pretty sure with the last few years boom in construction and demand they must have been picked up some skill?

  29. 29
    Ross says:

    By Kary L. Krismer @ 26:

    RE: Ross @ 25 – I would agree that you need to separate out those renting out part of their house to those renting out their entire house, but the idea that those temporary visitors are effectively adding to the supply is a bit of a stretch. The supply of hotel rooms sure, but housing, nope.

    Short term rentals (what you are calling hotel rooms) is a subset of overall housing. So total housing inventory goes *up* with airBNB, just the mix is different. It’s politically unpopular because short term rentals tend to benefit out of city visitors (non voters) and perhaps penalize long term renters.

    But the analysis is not as straightforward as just saying that the mix goes from long term to short term rentals, as some short term housing may also convert to longer term rentals once pricing is affected. Market forces adapt to demand.

  30. 30

    This is a really bad piece of reporting. Apparently the reporter has been living under a rock for a very long time. Not only has our inventory been low (lower than reported in the piece), but agents trying to get people to sell is hardly something new, or even related to this market.

    http://www.king5.com/article/money/markets/real-estate/realtors-asking-people-to-sell-thats-how-tight-the-seattle-market-is/281-530528298

  31. 31

    RE: Matt P @ 12
    LOL Boeing Went Through Many CEOs Like Tampons in a Year

    Remember the Dreamliner Development Disaster? Outsourced schedules destroyed by foreigners…the 787 is a plastic plane and Mulally quit Boeing so he wouldn’t get his deserved BLAME for the cracks. Haven’t seen sales figures on that plastic plane safety engineering disaster either….no ones flying ’em I guess. The fake news zipped its mouth shut on the 787….LOL

  32. 32

    RE: Kary L. Krismer @ 30
    Yes Kary

    Kansas has the same problem for home sales, for different reasons. The unemployment there is a bit better than Seattle, but the lower property taxes means tailoring back the local budgets. IOWs…the state needs CASH infusion to boost sales. Irregardless, the Flippers send me post cards every week; begging me to sell. Its a bargain sales place with no taste for high unit prices. A landlord’s dream.

  33. 33
    David says:

    ANYTHING that creates rent control is GOOD for my property values! Go Seattle Go!

  34. 34
    wreckingbull says:

    By Matt P @ 12:

    By softwarengineer @ 6:

    RE: Kary L. Krismer @ 3
    Local Governments Should be Run Like Companies

    You get fired if someone else can do your job better. Lots of firing too.

    That would clean the useless deep state out.

    RE: softwarengineer @ 6 – Since when do companies fire people and replace them with better workers? Sure, companies are constantly looking for new employees, but I’ve never heard of any company that fires someone because there is someone better out there. There is almost always someone better but you get what you can afford that can do the job at a reasonable level for that salary not the best at any salary.

    It’s a common, but diminishing practice. It’s rather stupid, so I am glad to see it on its way out.

    https://en.wikipedia.org/wiki/Vitality_curve

  35. 35
    Matt P says:

    By wreckingbull @ 34:

    By Matt P @ 12:

    By softwarengineer @ 6:

    RE: Kary L. Krismer @ 3
    Local Governments Should be Run Like Companies

    You get fired if someone else can do your job better. Lots of firing too.

    That would clean the useless deep state out.

    RE: softwarengineer @ 6 – Since when do companies fire people and replace them with better workers? Sure, companies are constantly looking for new employees, but I’ve never heard of any company that fires someone because there is someone better out there. There is almost always someone better but you get what you can afford that can do the job at a reasonable level for that salary not the best at any salary.

    It’s a common, but diminishing practice. It’s rather stupid, so I am glad to see it on its way out.

    https://en.wikipedia.org/wiki/Vitality_curve

    RE: wreckingbull @ 34 – But that is not the same as firing an employee because there is someone better out there at their job.

  36. 36

    RE: Matt P @ 35 – I hate the way the site does quotes. None of the material there was anything I wrote, but my name still appears because SWE was responding to something I wrote.

  37. 37
    wreckingbull says:

    RE: Matt P @ 35 – That’s exactly the point of rank and yank.

  38. 38
    pfft says:

    By Eastsider @ 7:

    By Kary L. Krismer @ 3:

    As to the particular idea of auction sites for rentals, this is just another tech idea that only works in certain markets. Techies do not understand real estate.

    Why not let the market decide? If it is a bad idea, it will die naturally. Tech has brought us Uber and Airbnb that benefit consumers. The rental marketplace may prove to lower rents for tenants.

    Did you just use Uber as an example? You weren’t being ironic? I’ve seen too many studies showing uber drivers make less than min wage. Airbnb is a better actor but there have been growing pains.

  39. 39
    pfft says:

    By Matt P @ 12:

    By softwarengineer @ 6:

    RE: Kary L. Krismer @ 3
    Local Governments Should be Run Like Companies

    You get fired if someone else can do your job better. Lots of firing too.

    That would clean the useless deep state out.

    RE: softwarengineer @ 6 – Since when do companies fire people and replace them with better workers? Sure, companies are constantly looking for new employees, but I’ve never heard of any company that fires someone because there is someone better out there. There is almost always someone better but you get what you can afford that can do the job at a reasonable level for that salary not the best at any salary.

    We don’t have enough money to run local governments like they were companies. In the corporate world you fail spectacularly and get ten of millions of dollars and free healthcare for life when you retire(meaning get fired).

  40. 40
    pfft says:

    Just googled.

    https://www.usnews.com/news/business/articles/2018-01-30/report-slams-airbnb-in-nyc-for-raising-cost-of-housing

    There’s New Research Behind the Contention that Airbnb Raises Rents
    ALASTAIR BOONE AUG 2, 2017
    A preliminary analysis of 100 U.S. metro areas suggests Airbnb bears at least some responsibility for soaring housing costs
    https://www.citylab.com/equity/2017/08/where-airbnb-is-raising-rents/535674/

    Airbnb May Boost Home Prices
    http://realtormag.realtor.org/daily-news/2017/10/25/airbnb-may-boost-home-prices

    Airbnb Probably Isn’t Driving Rents Up Much, At Least Not Yet
    https://fivethirtyeight.com/features/airbnb-probably-isnt-driving-rents-up-much-at-least-not-yet/

    Airbnb is driving up the rent in your urban neighborhood
    https://www.theguardian.com/commentisfree/2016/oct/17/airbnb-rent-unaffordable-elizabeth-warren-neighborhoods

    What surprises me is that even after the Great Recession and the near death of our banking sector people still have blind faith in markets. The Fed under Alan Greenspan thought banks and market would self-regulate. How did that go?

    Greenspan Concedes Error on Regulation
    http://www.nytimes.com/2008/10/24/business/economy/24panel.html

  41. 41

    By pfft @ 40:

    What surprises me is that even after the Great Recession and the near death of our banking sector people still have blind faith in markets. The Fed under Alan Greenspan thought banks and market would self-regulate. How did that go?

    What does any of that have to do with faith in markets? That is exactly what standard economic theory would predict. Economics doesn’t say everything will work out rosy (e.g. monopoly conditions).

  42. 42
    Jake says:

    By pfft @ 38:

    By Eastsider @ 7:

    By Kary L. Krismer @ 3:

    As to the particular idea of auction sites for rentals, this is just another tech idea that only works in certain markets. Techies do not understand real estate.

    Why not let the market decide? If it is a bad idea, it will die naturally. Tech has brought us Uber and Airbnb that benefit consumers. The rental marketplace may prove to lower rents for tenants.

    Did you just use Uber as an example? You weren’t being ironic? I’ve seen too many studies showing uber drivers make less than min wage. Airbnb is a better actor but there have been growing pains.

    So Uber drivers making less than minimum wage means the market isn’t working? Econ 101 says it’s work just fine (or did you sleep during that class?).

  43. 43
    Jake says:

    And… Airbnb is increasing rents, increasing home values (due to higher rents, people are buying houses, condos, etc. JUST TO RENT OUT), and displacing long term renters (in desirable neighborhoods). No question. I know people making DOUBLE the rental revenue they made with long term tenants.. granted these are places close in to Downtown Seattle/ CBD or West Seattle.

    But, this article is about the Seattle City Council trying to control market forces… they will fail. And that’s OK with them, since they aren’t out to improve Seattle, just improve Seattle Tax Revenue. Ask yourself, as I do daily, why are so many city workers making six figures, while I’m busy swerving to avoid potholes on my drive to work (follow the money)?

  44. 44

    By Jake @ 42:

    So Uber drivers making less than minimum wage means the market isn’t working? Econ 101 says it’s work just fine (or did you sleep during that class?).

    Actually, it’s likely an economic example of imperfect information. Many Uber drivers don’t realize the total cost of their participating in the Uber system, and thus think they are getting paid better than they are. That would mean more of them are doing it than should be, which means they will be getting paid less.

    Uber is not quite as bad as the first part of Treasure of the Sierra Madre, but it is clearly an area where the drivers might not realize the true amount of their net pay.

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