A New Formula for the Rent-Splitting Problem

We’ve addressed the rent-splitting problem before. Now, Harvard astrophysics grad student Jonathan Bittner is seeking to solve the problem with a rent calculator to help roommates approximate fair prices in this “market.” The web tool uses a formula designed by Bittner (informed by a survey of his friends) to calculate how much each renter should pay based on room size, windows, closets, but also more detailed elements such as noise from street and whether the room has an awkward layout. Bittner writes on his site: “The idea is that you should pay the ‘market’ rate for these amenities (or get a market discount for annoying things) without having to think too hard…I like formulas, I like surveys, I like fairness, and I wanted to make something on the web. There’s something both fun and funny about using a mathematical way to decide what is fair.”

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  1. Sam says:

    Very interesting factors, but has anyone considered other factors that aren’t related to the space, but the contributions of the roommates to the apartment? For example, what if one roommate finds an apartment, negotiates and significantly lowers the price of apartment and then finds another roommate to cohabit the apartment with him? Should he share the savings he negotiated with incoming roommate? What if a roommate does all the billing, pays the bills upfront and manages all the dealings with the apartment? What if a roommate’s furniture contributions to the apartment are a lot higher in value than those of the other one? I think these should all be taken into account when writing any formula about calculating fair prices.

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  2. ryan says:

    how is it that, in neither this post, nor the prior linked post, any of you freakonomists brought up the simplest and fairest way to split rent – an auction? starting with the ‘best’ room, everybody bids until the highest WTP renter gets it. then, subtract that rent from the total, and start the bidding for the next room at the average remaining price. no one can complain, because everyone ultimately chose their rent (with the constraint that the total rent actually needs to be paid).

    we did this in college, and not only was it a fun way to spend a few hours, i also ended up with the smallest room (which was basically a closet) at an incredible markdown, which would have been considered totally un’fair’ if we were drawing up rent prices beforehand and divvying up.

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  3. Jkim says:

    The best solution is for people to bid for the most coveted room in an auction system.

    A formula ignores individual preferences.

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  4. Emily says:

    Sam, I’ve got to disagree with you, especially when it comes to furniture contributions. Unless roommates are doing damage to the furniture (in which case you’ve got a separate issue), it shouldn’t be factored into the rent. Capital purchases should either remain the property of the person contributing them, or other roommates should pay a cost up-front to share ownership (if, for example, they plan to sell the furniture and split the proceeds when they all move out).

    I also think that something like negotiating a rate up front is a sunk cost to the person who negotiated.

    Finally, when it comes to managing the dealings with the apartment, that’s an arrangement that should be made outside of a calculator for per-room rates. If a person lives with 4 other people, and thinks he spends about $20 worth of his time dealing with apartment stuff per month, he should simply request that he pay $20 less and everyone else pay $5 more.

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  5. steve says:

    I have done the same for my house based on floor area of the house, split according to how it is shared, i.e. 4 share the living areas, 2 share 1 bathroom while the other 2 have their own bathrooms. I came up with it because someone’s partner moved in to their room so had to work out their share of the whole place. actually worked pretty well for our existing rents too.

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  6. Ulysses says:

    How about just not being such a penny-counting cheapskate?

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  7. Steven says:

    The calculator works great for me. I live with two other guys, and our rooms are all of different sizes. The calculator gave us results to within 3% of how we actually decided to split the rent at the beginning of the year.

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  8. Larry Waybright says:

    Weighted averages based on real contributions does sound reasonable to me.
    I would not find it reasonable for one room mate to pay all the monthly costs until the other(s) have already paid the one who writes the checks their share. There are inexpensive power consumption devices that can determine how much of the power bill should be adjusted based on how much an unusually power grabbing hobby adds to the basic electrical and other metered services amounts to a fair share, too. These calculations must be adjusted as data is collated over time.

    The “finders fee”, for lack of a better phrase can be a one time cost adjustment but must be paid upfront because a room mate may move out before enough time has passed to amortize those costs.
    The program’s formulas can be made to reflect these factors in the pre-agreed parameters.
    It is unfair for the person who brings the most assets which everyone uses equally, to absorb all the depreciation. That should be factored in.
    Anyone who participates in sharing the same space must agree what the formula is first. Simply dividing the bills equally but not having to pay anything for the valuable assets and wear and tear on the property should be prorated by what each brings to the common areas of the house hold.
    It still would be cheaper than bearing the entire costs of an abode alone.

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