Australian technology companies that process rental applications for the real estate industry appear to be pulling back their platforms, as consumer backlash grows about the fledgling industry’s allegedly “opaque” practices.
Key points:
- Consumer advocacy group Choice has released a report into so-called property technology
- It is calling for greater clarity on how tech companies are protecting data and compiling tenancy scores
- One major tech company has told the ABC it is winding back some of its services
A report out today from consumer advocacy group Choice concludes that Australia’s real estate industry is becoming increasingly reliant on third-party apps such as 2Apply, Snug and Ignite to process rental applications, as well as manage properties once tenanted.
Proponents of this trend say it helps Australian renters apply for properties in a faster and more efficient way. That is because their apps allow people to create central profiles and upload documents, rather than individually apply for rentals directly with real estate agencies.
One of the apps, Snug, claims its use has halved the time it takes renters to apply and property managers to process applications.
However, Choice argues convenience has a downside.
Its report concluded the rental shortage was leaving people with little choice but to hand over great swathes of information to these companies to secure properties, despite concerns about data retention, applicant profiling, rental bidding, and unnecessary fees.
“There’s certainly many commercial relationships going on,” Choice consumer data advocate Kate Bower told ABC News.
Diana Robledo-Ruiz and her partner recently hit the rental market, after their lease was terminated.
Every inspection they went to in Melbourne had queues of people forming outside. The couple worried about ending up with nowhere to live.
“It was very scary. It was very hard,” Ms Robledo-Ruiz said.
Each time the couple applied for a rental property, the individual real estate agency managing it would prompt them to upload their applications to third-party websites, including Snug and 2Apply.
“[These apps] wanted our passports and our pay slips,” Ms Robledo-Ruiz said.
After several knockbacks, Ms Robledo-Ruiz and her partner took another step that made them feel especially uncomfortable.
Both Snug and 2Apply were prompting them to pay for background checks to boost their tenancy profiles or “stand out from the pack”.
2Apply was even telling the couple that their applicant status would be capped at four out of five stars unless they paid for a check.
“It felt very wrong, like you had no option but to do it,” Ms Robledo-Ruiz said.
The couple ended up spending about $80 for background checks across the two platforms. Even that did not yield a rental.
Eventually, Ms Robledo-Ruiz went into an application for an apartment in Melbourne’s south that they had been rejected for previously. She adjusted their offer to above the listed weekly rent, and said they would pay 10 months in advance.
Their application was approved.
“It also feels very unfair. We had the disposable income to pay for those things. But what about other people that don’t have it?”
Companies reigning in tech after criticism
Choice’s Kate Bower said one of the greatest issues with the rise of property technology was a lack of transparency about how these apps were judging people’s applications or passing on information to real estate agents.
Choice heard accounts of discrimination during its investigation but found it difficult to prove.
Linda Przhedetsky is a researcher at UTS who studies renting technologies.
The academic found during an investigation with another media outlet last year that Snug appeared to be giving people a higher score on their applications if they offered more rent than the listed price.
When replicating this investigation this month for ABC News, Dr Przhedetsky no longer found offering more rent was an influential factor.
“This indicates that the industry is on notice,” she said.
Snug was contacted about Dr Przhedetsky’s findings.
While it did not confirm a change to its algorithm, a spokesperson told ABC News that Snug “actively discourages rent bidding”.
“There is no advantage to an applicant’s Snug Match Score by offering higher rent or purchasing a background check,” the spokesperson added.
The spokesperson also acknowledged that rental bidding was banned in most states.
The owner of 2Apply, which Diana Robledo-Ruiz said she successfully offered a higher rent through in Melbourne, said it did not use algorithms or artificial intelligence.
“2Apply is a customisable application form and the amount of data requested from applications is determined by agents (our clients) and property owners, not us,” a spokesperson for Inspect Real Estate (IRE) said.
“IRE does not use AI or algorithms to score rental applications, nor do we support or encourage rent bidding.”
2Apply getting rid of its star rating system
2Apply’s owner confirmed it was changing some of its services.
“The star rating system is being phased out of the 2Apply process,” the IRE spokesperson said.
“The star rating system was not designed for use by agents. It was designed for renters to allow them to assess the progress they had made in completing their application.”
ABC News understands IRE has stopped offering background checks in several markets.
“There is no obligation on renters to purchase a background check to use 2Apply or to submit an application through 2Apply.”
Meanwhile, News Corp’s REA Group confirmed that it offered background checks for $29 when people applies for rental properties through its popular website, realestate.com.au.
A REA Group spokesperson said this was “completely optional” and it did not prioritise applications to landlords that had paid for background checks.
Real estate body welcomes end of star ratings
The Real Estate Institute of Australia’s national president Hayden Groves welcomed the decision by some companies to wind back on offering background checks or rating applicants.
“We are aware that tenants are feeling desperate, and they will do anything to secure a lease,” Mr Groves said.
He said while these apps “can be a useful tool” that agents should be cautious about relying on them. Mr Groves, who is a real estate agent himself, does not use any of these third-party websites at his independent agency in Fremantle.
“We do it the old-fashioned way,” he said.
“There is some great benefits of rental technology but it has been pushing the boundaries.”
Choice is also concerned about data protection, especially after hacks on Medibank, Optus and Latitude Financial.
“People are being pressured to hand over much more data than they would in a traditional paper application,” the group’s Kate Bowers said.
REA Group, Snug and 2Apply’s IRE all said they took cybersecurity seriously.
REA Group said it removed “sensitive attachments” such as ID documents after 21 days on its website, while IRE said it made people’s profiles “inaccessible” after 60 days.
Meanwhile, Snug’s spokesperson said it was actively lobbying state governments to wind back the physical copies of documents that needed to be uploaded for applications, and instead accept partial scrambled ID numbers.
The attorney-general’s office told ABC News that individual real estate agencies with a turnover of less than $3 million annually do not have to comply with the Privacy Act. It said data retention laws were currently being reviewed more broadly.
“The Australian government is committed to ensuring Australia’s privacy framework is fit for purpose, supports an innovative economy and responds to new challenges in the digital era,” a spokesperson said.
“Recent significant data breaches have demonstrated the potential impacts of a cyber security incident, particularly when identity documents are accessed.”
REIA’s Hayden Groves said real estate agents did not need any more “red tape” and property technology appeared to be “self-regulating”.
