In 2010 a small, obscure New York State political party grabbed a lot of viral attention with a video by its candidate for the governorship, Jimmy McMillan. McMillan’s party name and his message are one in the same: “The Rent Is Too Damn High.”
The RITDH movement did not win the governorship, nor has it ever won any office, possibly because it is a bit of one-note political movement. Still, it is hard to say it is wrong on the facts, at least in most places in the U.S. Rents in America rose by 64 percent between 1960 and 2014 (adjusted for inflation), while real household incomes only increased by 18 percent, according to census data analysis by real estate platform Apartment List. The national average rent reached an all-time high of $1,405 last June, a 2.9 percent year-on-year increase from 2017, according to data from Yardi Matrix, and is expected to log another increase with the data to come in about a month.
And of course, depending on the area — think megamarkets like New York, San Francisco, Boston or Los Angeles — that $1,400 “average” is higher still. Monthly rent in San Francisco on a studio generally starts at around $2,500, and while Manhattan or Brooklyn show a lot more range, the lower end of that range starts at around $2,700. To live hyper-desirable neighborhoods (think SoHo, Tribeca or Park Slope) $3,500-$4,000 a month rent is considered pretty normal.
Too damn high indeed.
And the problem, StayTony Founder Tony Diamond noted, isn’t just the monthly payments themselves — high rents essentially make renting in some cities nearly impossibly expensive for people looking to relocate to them. Because, he noted in an interview, the cost of moving into an apartment isn’t about handing the new landlord the first month’s rent on move-in day, from a financial point of view. New tenants in most markets can expect to pay first month’s rent, last month’s rent and/or a security deposit that is usually equivalent to one month’s rent. In high-demand markets where rent passed the $2,500 mark on average, move-in costs start in the $5k-$8k range and tend to skyrocket from there.
“And that just gets you into the door, the apartment is empty when you walk in so that means one is either choosing to purchase things to fill it, or moving things into it — and that’s now more costly,” Diamond said.
This creates a catch-22 for workers, particularly millennial workers who generally lack the kind of savings or well-established credit histories to smooth out these types of high upfront cost processes. Millennials might be able to land a job or work opportunity in a new city, he said, very likely a high-cost hub like Los Angeles or Atlanta — and thus have a chance to radically upgrade their income. But if they don’t have the $8K-$10 in cash or credit access necessary to move, they can’t afford to make more money through relocation.
The StayTony concept looks to act on that upfront cost pain point on two fronts — one familiar, one a bit less so.
The familiar track is offering up short-term housing mostly geared toward business travelers and other corporate types. The goal product has been described as something akin to an upscale Airbnb, or a boutique hotels meets corporate housing. Diamond himself noted the firm’s most common renters are “Airbnb refugees” who are “tired of playing Russian Roulette” with apartment for medium-term stays.
On the housing side, the StayTony advantage is quality and location.
While corporate condos have a reputation for being rather drab and utilitarian, the StayTony aesthetic is most commonly likened to a boutique hotel — with studio and one-bedroom units that tend to feel more homey and hip than average, with hand-painted wallpaper, designer furniture and luxury linens. One month is a required booking, and the average tenure of stay, the site reports, is about three months.
On the location side, StayTony properties in Los Angeles and Atlanta (the only two cities the firm is currently operating in) appear in highly desirable, high price tag locations such as Hollywood, Midtown Atlanta and Beverly Hills.
But what has gotten the firm a lot of attention of late isn’t the quality of housing units it offers, but the unique way it has partnered with POS financing firm Uplift to allow potential tenants to creatively finance their rent.
The big problem for many young professionals, Diamond noted, is that upfront costs of moving kill opportunities before they get started. The financing product the firm has developed with Uplift, on the other hand, allows a tenant to finance one to three months worth of rent on an apartment, to be paid back in even automatic installments over the next 12 months — without a hard credit pull. Tenants who pay their loans back within six months can often get interest-free financing. The move-in cost, instead of several thousand dollars, is simply the first installment payment on the loan. So an apartment that rents for $2,600 per month would have a move-in cost around $240.
“People already finance one-time life events like weddings, medical procedures, and vacations all the time. We thought, why not finance the life event of relocating to a new city or moving for a temporary job assignment?”
For many, the answer to that question will be cost. StayTony apartments, with their boutique hotel attention to detail and prime locations, often have high price tags, where $2,600 is a low-end price. Higher-end price tags come in closer to $5,500 a month. StayTony might be a great solution for young professionals moving to high-cost cities to start high paying jobs — but an aspiring starlet heading to Hollywood hoping to wait tables until she’s discovered might be better served by Craigslist.
But young professionals need better options, Diamond said, and in a world where high-skill professionals are increasingly joining the gig economy and working long-term contracts, a solution that allows them to benefit from opportunities in a financially manageable manner is an innovation the entire workforce can benefit from.
Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.