How to Avoid a Bad Apartment in New York City

In Freakonomics, we wrote the following:

It is common that one party to a transaction has better information than another party. In the parlance of economists, such a case is known as an information asymmetry. We accept as a verity of capitalism that someone (usually an expert) knows more than someone else (usually a consumer). But information asymmetries everywhere have in fact been badly wounded by the Internet. Information is the currency of the Internet. As a medium, the Internet is brilliantly efficient at shifting information from the hands of those who have it into the hands of those who do not.

One example was real-estate transactions. The more a customer can learn via the Internet about, say, a property for sale and similar properties, the less likely she is to make bad decisions.

That said, there is still a lot of room for improvement. A reader named Sam Bauch describes his encounter with one particular area of information asymmetry in real-estate, and what he’s doing to stop it:

My brother and I moved into an apartment in Queens in the beginning of the summer after I graduated college. We found a two-bedroom, first-level duplex, so it had a basement room. With the first rainstorm, we had over a foot of water in the basement. It ruined a lot of stuff, and we knew right away we would have to move again. We were furious. As we were moving all the water-damaged goods on to the sidewalk, we met another resident of the building. She informed us that the flood problem had existed forever. The previous tenant broke her lease because of the issue, and the couple living across the hall from us had originally signed the lease on our apartment, but had learned about the flood problem and fought their way into the other available unit, using the same broker we would eventually deal with. All of a sudden, the new tile on the floor and halfway up the wall started to seem a little odd. Simply put, we felt like suckers. The real-estate broker had pushed us into signing the lease, telling us he had another potential tenant ready to sign. Thinking about the problem a little bit, we realized it was a simple case of information asymmetry made worse by the incentives placed on the broker.

Property owners are the unambiguous experts for the units they own, and the broker’s incentives align with the owner. It does most brokers no good to maintain a strict quality control on their inventory. The more apartments they have in the inventory, the quicker they can move large quantities of apartment seekers through the process to sign a lease, gaining a commission. Apartment seekers, meanwhile, can gather very little about an apartment they are considering. But those apartment seekers, and anybody living in an apartment in NYC, are experts on their own apartments. They know just as much, if not more, about a unit than the owner from having lived in the unit.

So we thought, ‘Who better to ask about an apartment we’re considering than the previous tenant?’ All we needed was a simple way for apartment dwellers who had met experiences like ours to let the world know. The obvious medium is the internet, and the currency we’re trading is information on bad apartments. To us, this information seems incredibly valuable. Property owners value the information and use it to apartment hunters’ detriment. Apartment seekers should also value this information, as it will prevent individuals from entering contractual agreements they would later regret.

So we created a website, www.BadNYCapartments.com to serve as this information portal. It allows any NYC apartment dweller to share their valuable information about a bad apartment, and then lets visitors to the site search the database to access that information. We’re also culling similar information from anywhere we can find, such as city agencies responsible for landlord maintenance violations, or some particularly bad apartments showcased on YouTube. Whether there’s an accessible metric for determining whether we’re leveling the playing field is hard to say, but we’re excited about the prospect of using some economic tools to try to improve housing stock and restore accountability in the rental market in NYC.

The website is in a very early stage; it will be interesting to see if it can flourish. I can imagine tens of thousands of people wanting to access data on bad apartments, but getting people to upload that data is the problem. What is their incentive?


Shadowrider

I love this idea. I see no reason why it should be limited to NYC. I also thing that reporting on whether landlords give back damage deposits would be of major value.
To get around the threat of lawsuits, I would suggest that posting be anonymous and that the hosting be done on a non US server/website.

Karen

What's with all the commenters with 'CMS' in their names? Sure sounds like a real estate shill to me.

Nikki

"getting people to upload that data is the problem."

Is it? People don't seem to need an incentive to write for Wikipedia, TripAdvisor, Amazon, Facebook, Twitter, blogs and a gazillion other resources. What is indeed a problem, if anything, is getting people to shut up.

uthor

I've seen various sites for reviewing apartments here and there on the internet, but the problem I've had wtih most of them is that only people disapointed with the apartment tended to post. Usually, these posts were about petty annoyances with long gone neighbors. I had no idea if the three bad reviews were a trend or just three bad reviews out of hundreds of satisfied tenents.

deepak

I think people with the negative bias will upload the data but people with neutral or positive view will not upload the data. So we will have asymmetrical information of other type

Kasper

Don t underestimate revenge as a very effective incentive.

If you feel your landlord is cheating you one way or another, public humiliation and financial punishment (lower income due to the reduced information asymmetry) is a nice way to revenge injustice.

JBJ

How can economics students get away with posting stuff such as "financial incentive is needed to get people to do stuff" when the worlds largest website (Wikipedia in over 100 languages) stares them in the face and says "No they don't" plus all the relief organisations and a myriad of groups of people all of whom devote their time (and often money) without expecting anything in return.

Sure they might argue for the payback being emotional (feel good factor) but then we enter the realm of "no feelings please, you should be robots" fantasy.

Any economic student writing the above about need for financial incentives should get a F-, regardless of the rest of their article.

Sam Bauch, Bad NYC Apartments Co-Founder

First, thanks for running this Stephen. It's brought a lot of people to the site and generated a bunch of reports for us. It's also been great to get so much feedback. We always welcome any suggestions on how we could improve this tool and hope to have an open dialogue with our users.

Let me address some of the comments here. The first concern, raised by Stephen and addressed my many other commenters, is that there is no incentive to post. True, we are relying on magnanimity to some extent, helping thy neighbor, but it's not like we're asking users to jump through hoops. My favorite comment in this area comes from LisetteCMS, who wrote a lengthy post arguing that "because all humans act in rational self-interest, almost nobody would actually go online and spend time writing about their experiences buying apartments." It's not difficult to see the irony here. Lisette easily could have reported an apartment in the time it took her to write her post. What self interest is she serving by posting a comment here? None, so far as I can tell. Truth is people love to share stuff on the internet, and that seems to me to be especially true when they are complaining about something.

A lot of commenters raised the idea of a rating system, or allowing positive reviews of apartments as well. We aim not to be an apartment rating website, but more of a red flag website. The value of the site, we think, will come from being able to make a quick check of an apartment for any red flags that might make you think twice. You may still end up renting an apartment you find in our database, and in that case, the information we supply allows you to address the potential problems with the landlord before signing the lease.

Feel free to send us more comments or suggestions at BadNYCapartments (at) gmail.com.

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AustinScottBrooks

It's a great idea to have a place where people can share information about the places they have lived. While it can be immensely helpful to see any negative information about a place that you are considering, the issue of having limited to no information about alternative apartments still exists. People in general are quick to complain. This is why, in retail, when someone has a negative experience, they tell 10 of their friends, who tell 10 of their friends, and so on. How many do they tell when they have a great experience?
I think this site can serve as a good reference, but it certainly does not resolve the overall problem.

FL/NYC chica

For all of you saying that people won't post on this website because there's no financial incentive--you weren't paid to comment, were you? And yet you did.

SavvyRent

Another good resource is SavvyRent.com. Find out what others are paying for their apartments. Compare rents in different neighborhoods and different buildings. See comments by other renters.

Tina Fine Ph.D.

I think BadNYCApartments is a great idea. The incentive for individuals to upload information would be increased if there were a way for the person reporting a bad apartment to gain some power vis a vis the landlord while remaining anonymous. In that respect, aggregating complaints and grouping them by landlord and submitting the information to an agency on behalf of the people who post complaints would be great. Also if possible, site could reach out to others in a building, possibly via direct mail, and ask them to go online and report their problems, thereby getting multiple reviews on issues in a building, that when grouped, may prompt landlords to act quickly.

Gene K.

It is, without a DOUBT, a good idea to do all the research possible when looking for an apartment so as to avoid the pitfalls of the dreaded hunt. Apartments in ny are notoriously expensive and hard to find the right one, so knowing the statistics, at least, will save you some headache. Currently, the average asking price for a 1-bd unit is $2,842 and the vacancy rate is a meager 3.6% (as low as .74% for areas like SoHo), so you know the place will be expensive, but at least you know the general situation of the market within which you are hunting.

The data referenced above can be obtained from the "New York City-Apartment" report at www.reisreports.com