Our Daily Bleg: The Old Roommate/Rent Dilemma

Conor Hunt, an I.T. consultant in Chicago, writes with a dilemma that, while common, seems to be always unsatisfactorily solved.

Two friends — a merchandising analyst and a law student — and I are attempting to split up rent of a three-bedroom apartment with two common bathrooms. All rooms have their pros and cons, with the major differentiators being closet space and sheer square footage:

Room No. 1: 15 ft. x 15 ft.
Room No. 2: 12 ft. x 12 ft.
Room No. 3: 20 ft. x 8 ft.

Rent is \$2,200 per month and the apartment is approximately 2,200 square feet.

Simple math would show that one would pay per square foot, but that goes out the window with the ranking intangibles, and the fact that no one necessarily wants the big room.

The roommates threw out these prices:

No. 1: \$800/month
No. 2: \$710/month
No. 3: \$690/month

So given their prices over the course of a year, Room No. 1 would have to yield \$1,080 and \$1,320 more in value than room Nos. 2 and 3, respectively. That’s an insanely high premium for a little more square footage and a closet! It is still just a bedroom, after all.

How do you recommend solving this situation?

I am sure Conor and his friends will welcome any suggestions you have. I am not sure why Room No. 3 is considered worse than Room No. 2 even though it is larger, but I’m sure there’s a reason. In advising Conor, feel free to consider a few of our own suggestions:

1. Just settle it on a coin flip or, better, Rock Paper Scissors.

2. Rotate rooms every three months.

3. Price all rooms equally but tax Room No. 1’s occupant higher for household goods, or cooking/cleanup chores.

4. Give the smallest room to the guy least likely to have sleepover guests.

5. All three roommates hold hands over open flame; whoever lasts longest gets room of his choice.

K@

Here's an idea:
Start with the most desirable room. (No. 1?) Have the roommates bid on it in \$ per month. Whoever is willing to pay the highest premium gets it. Then have the other two roommates bid on the second most desirable room. (No. 2) again, the one willing to pay the biggest portion of the rent get it. Then, the last roommate gets the last room and pays whatever is left of the rent.

Steve

Each of the rooms should be allotted the same rent. However, first choice and second choice of rooms should carry a premium. The friends should have an auction for choice of rooms. The winner of the first choice of rooms pays the premium to both other friends. The winner of the second choice of rooms pays the friend that is forced to take the remaining room.

Scott

Ask each roommate to rank his choice of rooms based on the prices listed above. If you get lucky, everyone will have a different first choice; if not, the most popular room needs to be more expensive and the least popular room needs to be cheaper. Sort of a roundabout way to get to the auction-type result, but it might be more palatable.

Dennis Rice

My roommates and I faced this option a few years back, and I think it's being made overly complicated here.

Plan A: Ask, does anybody want the big room at the higher rate? Yes? Here you go. No? On to Plan B.

Plan B: Agree to draw straws and accept the outcome.

"Taxing" the person with the bigger room for non-room-related things doesn't really make sense to me.

David

Perhaps each student bid on each room with the sum total of their bids having to equal \$2200. Highest bid wins the room at that price. I'd need to sit down with a piece of paper to be sure, but I think the total should always equal or greater than \$2200. You should also be guaranteed at least two 'winners'

Any extra rent goes into a common party fund? Or utilities if you are sensible :P

-Dave

Levi

If you were to split the rent evenly, everyone pays \$733.33.
If you were to go by sqft, you would split common area sqft evenly and then add on sqft of each bedroom. This works out to:
1.)\$782
2.)\$701
3.)\$717

That results in the mentioned steep premium to the larger room. However, if you average the sqft number with the even split number (\$733.33), it dampens the premium.
1.)\$757.66
2.)\$717.16
3.)\$725.16

or more practically:
1.)\$760
2.)\$715
3.)\$725

Rob

Step 1: Send a question to freakanomics asking for suggestions about how to best divide the rent for an apartment.

Step 2: Read through the comments and decide which method of splitting the cost appears to be the fairest.

Step 3: Divide cost accordingly.

Andy MacNamara

A free-marketer's delight: run an auction.

Have each roommate submit a bid for the rent on each of the three rooms. Presumably, each will be willing to pay more for a favored room, and if someone is completely unwilling to live in a particular room, they will submit \$0 for that room.

The winning bidder for each room gets that room, subject to adjustment: if the total of the winning bids exceeds the total rent, each roommate's rent would be reduced pro rata; conversely, if the total of the winning bids is less than the total rent, each roommate's rent would be increased accordingly.

If they are willing to change rooms on a periodic basis (as suggested above), you can capture changes in preferences and situation by re-running the auction periodically.

David Amann

Dutch Auction.

Step 1. Each person writes the most they would pay for room 1. Highest bidder whatever the second bidder bid +\$5. No bid can be less than 1/3 of the total rent.

Step 2. Remaining 2 roommates write the most they would pay for room 2. Highest bidder pays whatever the second bidder wrote + \$5. No bid can be less than 1/2 of the rent remaining after subtracting room rent.

Last roommate pays remaining rent.

EXAMPLE: (Modified to make math easier)

Total rent for apartment is \$2400 a month.

Abe, Bob, and Charlie must write the most they'd be willing to pay for rent for the most desirable room. They write down this bid without knowledge of the other roommates' bids. They have to bid at least \$800.

They bid the following:

Abe: \$950
Bob: \$895
Charlie: \$850

Abe wins the bid, but only needs to pay \$5 more than Bob's bid. So Abe's on the hook for \$900 a month.

Remaining rent is now \$1500 a month. Bob and Charlie need to bid on room 2. They must bid at least \$750.

Bob: \$800
Charlie: \$775

Bob wins the second room. He pays \$5 more than Charlies bid. He's on the hook for \$780.

Charlie now pays: \$720 for room 3.

Problem solved! Envy-free.

Dave

Try the following algorithm, which is easier than an auction as it requires no interaction between the participants:

1. Each person divides up the total rent between the rooms such that at those prices they would be indifferent as to which room they get.

2. Pick an assignment of people to rooms which would maximise the total rent paid, if each person were to pay the amount they decided was fair for their room.

3. The total rent paid under this scheme will always be at least the total required for the building (this isn't hard to prove). Take any surplus and divide it equally among the participants by discounting each person's rent by the same amount.

This way, everyone gets a room at a price that is at least, and often better than, fair in their own eyes.

Dave

I should add that the above method is basically just a generalisation of the old 'I-cut-you-choose' method for dividing the last piece of cake between children.

Andy

The past two houses I've lived in, we used the bidding strategy. So far, it has eliminated any bitterness over perceived disparity in room quality or prices.

Michelle

My vote is to charge the same percentage of income so that the total \$2200 bill is paid. It's only fair.

More seriously, how does the "two common bathrooms" thing work? Assuming both are full bathrooms (with a shower/tub), people keep their stuff in one place. The roommate with his own bathroom should be charged for the convenience - I'd say between \$100-\$150 per month.

Of course, I say this as a germophobic female. I may value my personal tub more than Conor & his friends.

Cage match.

kbon

Everybody silently splits up 100 points to the rooms as he/she prefers. The highest bidder on each room gets the room. Share the rent according to the points spent.

frankthetank

We had the same situation for my current apartment. All being finance guys we had a friend oversee an auction via conference call. We bid off the biggest one between the three of us, and then the second between the remaining two rommates.

AlexInParis

There's a board game that may have already solved this sort of dispute (http://www.boardgamegeek.com/boardgame/1041). One of you, decides what each room is worth, and then allows the other two to pick their rooms.

A bit more complex than the classic: I cut the cake, you choose your piece.

Julie

Usually there is some reason why one person would want one room over another. Hopefully, these reasons will be different for everyone and you can work out a satisfactory situation that doesn't require complicated formulas. For example, in the house I live now, I have the bigger room, and it is attached (through glass doors) to the office. I use the office more, thus it makes sense. My roommate, for her "sacrifice", got the garage. Conveniently, she needs to store work equipment in there, so it just makes sense. We both pay the same rent.

jacob

do a closed bid auction.

each places a sealed bid for the room they most want. if 2 people or 3 bid on the same room it goes to the highest bidder. repeat process for the remaining 2 people and the room they most want. 3rd guy gets the last room at whatever portion of the rent is left.

don't allow someone to game the system by rejecting bids lower than rent/3.

if anyone has significant furniture that can be a credit onto their bid.

Lobbyist

At one point my husband (then boyfriend) lived in a 3 bedroom condo with only one roommate. It had a master bedroom with its own bath and two smaller bedrooms that shared a bath. Niether he nor his roommate wanted to pay more rent than the other so they both inhabited the smaller rooms, leaving the bigger better master bedroom and bath empty! It baffled me. I tried to get my husband to let his roommate have the other room -- he said no, then he would have to pay more. So then I said, you take it then and he said -- no then I would have to pay more. I found the situation crazy!