“The Innovator’s Dilemma” is a fantastic read for anyone in the business world (not just entrepreneurs). There are a number of takeaways from the book that apply to what has already occurred in the Real Estate industry, but for the purpose of this post, I will talk about the market that I know best – apartment rentals – and explain my understanding of where we are and why there has yet to be a truly disruptive technology to change the playing field for an old and tired business model.

The book makes multiple references to sustaining technology vs. disrupting technology. It is my belief that most of the focus, energy, and VC money that has been directed towards startups in the apartment rental space thus far, has been spent on sustaining technology. In Christensen’s example of the Disk Drive industry, most of the early innovators focused on capacity of the drives and each year they made incremental improvements on how many megabytes a drive could hold.  In apartment rentals, startups have mostly focus on faster and more transparent access to apartment listings. In other words, sustaining technology. The process by which a renter transacts an apartment has hardly changed as a result of this innovation. Still, millions of dollars have been poured into companies that are racing to aggregate and plot listings on a more user friendly interface, so that end users (renters) can find the apartment of their choice faster and more accurately (inaccurate and duplicate listings are being curbed thanks to modern innovation).

None (to my knowledge) have rethought the process by which a renter goes about renting an apartment, which is where there lies a truly disruptive opportunity. I think we can all agree that there are lots of pain points that renters still have, no matter how beautiful a UI, or how accurate listings are on a site, there is a dire need for disruption in apartment rentals.

Have any ideas or hacks to share that might actually disrupt this industry?

Congratulations on your victory, now please do your part to fix the apartment rental situation in Boston.

I am generally a believer that a free market economy will fix most problems in business and consumer issues, but in the case of renting apartments in Boston, I now strongly believe that regulation is necessary to save renters (and real estate agents) from the unjust practice of charging rental brokerage fees to renters.

Let me explain.

The standard practice of listing an apartment goes something like this – give your rental listing to a privileged group of real estate agents and management companies, allow them to post the listing all over the internet multiple times and in multiple places, and then when they come to you with a qualified renter, have that renter pay them for their work. On the surface this seems fair, and years ago it was when a renter’s first stop was their local real estate office to find an apartment. In those days renters would gladly fork over a fee for finding and helping them secure a place.

However, in 2013 a renter’s first stop is the internet and they only tend to seek the help of a real estate agent in their search for one of two reasons: they want their help finding a place (i.e. the old school method) because they either don’t have the time to scour online listings or are unfamiliar with locations etc, or they had no other way of viewing and eventually renting that amazing listing they found online without going through the agent attached to the listing. The latter is more common practice for Bostonians who almost always begin their search online. In this case, the renter is charged a one month fee by an agent they did not choose to hire, but rather were forced to work with because it was their only access to the apartment of their dreams. This is sleazy business, and although agents get a lot of the blame, it really rests on the landlords who have gotten away with the practice of listing apartments with someone and proceeding to not pay them for their service.

STOP THE MADNESS!

The city needs to pass a law that forbids the practice of charging brokerage fees to prospective renters. There is no other way for this to change in the near term. Landlords and management companies are happy to continue to ask for free marketing from agents, and as long as that is the case, the Boston apartment rental market will remain prohibitive and uninviting to innovation, not to mention unjustly expensive for renters.

This will benefit all parties involved. Renters will have the CHOICE to hire and pay for the services of an agent as a locator to save them time and provide expertise, or to (like most Boston renters) go it alone and use the internet to find apartments of their choice – fee free. Agents will get clients who actually CHOOSE to work with them, rather than disloyal renters who came across them (and 10 other agents) online and are just calling about one place. Landlords will see innovative products emerge to give them more of a choice in terms of deciding how to successfully advertise and rent their apartment.

The only other city in the country that I know of that has a similarly murky rental situation is New York City – and we should beat them to the punch on this issue.

Who’s with me? If you agree and/or would like to get involved to see this change actually happen, please write in the comments or send us a message!