Arantza Pena Popo/Insider
When my roommate and I stumbled across an online listing for a spacious, reasonably priced two-bedroom apartment in Manhattan's East Village, we figured it was too good to be true. At an open house a few days later, we confirmed that it had practically everything we wanted: soaring ceilings, beautifully aged hardwood, and windows facing a tree-lined street that let in ample light. We were sure there had to be a catch.
The owner of the apartment, a soft-spoken former banker named Phil, delivered the blow: He had already gotten several offers for the place, including one for $100 a month more than the asking rent. A bidding war was brewing.
Phil emailed later that week to say that he had received our application — along with 17 others. Rather than adopt a first-come, first-served approach, Phil proposed a "Vickrey auction": Everyone would have until noon the next day to email him a blind bid, but the highest bidder would only have to pay the second-highest amount.
"This format allows the winner to have comfort that they are paying a fair price that at least one other party is willing to pay," Phil wrote.
Small comfort, indeed.
As my roommate and I agonized over our bid, crunching the numbers on how high we could reasonably go, I couldn't help but wonder how it had come to this. While multiple offers have long been a part of homebuying, renters don't stand any chance of making a similar return on their investment. Yet one of the enduring legacies of the COVID-era housing market may be the proliferation of bidding wars for rentals. The bruising ordeals, while perfectly legal, have stretched tenants' budgets to the limit.
Bidding wars have periodically reared their ugly heads during overheated stretches in New York City's housing market. But the rental frenzy has spread to cities such as Chicago, Boston, and Austin, where previously they would have been unthinkable. And while things have cooled down since the mania of 2022, in places where available rental inventory remains low, the bidding wars just won't die. Early this summer, an estimated 5% of rentals in Boston were still going above asking price, and in Brooklyn, the figure was recently closer to 16%. Today, pretty much any decently priced rental in Chicago either rents quickly or ends up getting offers for more than the listed amount, Rikki Mueller, an agent there, told me. When I told one New York City rental agent about my recent bidding war, in which the winning bid ultimately stretched several hundred dollars over the initial asking price, he was unfazed.
"That's actually not bad," he said. "I've been in situations where it went $1,500 over."
The country's housing shortage has created a generation of renters wracked by the fear of missing out. We rush to packed open houses, stand in line, and shell out more money than the landlord is asking for because we know — or at least have been conditioned to believe — that someone else is willing to do the same. At every step of my apartment hunt, the message was clear: Being first in line may not be enough.
'I couldn't lose another place'
David Harris, a broker with Coldwell Banker Warburg in New York City, issues a standard warning to clients before they begin their apartment search: You need to be ready to move quickly, and you might have to bid above the asking price.
But sometimes, people just need to learn firsthand.
Over the summer, Harris began working with a client relocating from California who was looking for a one-bedroom apartment in Brooklyn. The client's first choice ended up going to someone who offered roughly $1,000 over the monthly asking price — "an obscene amount of money," Harris said. Then it happened again. And again. By the fifth application, Harris' discouraged apartment hunter didn't wait for a bidding war to materialize; he started one himself, offering $250 above the listed monthly rent of $3,500 without ever seeing the unit in person. The strategy worked.
Harris remains on the fence about bidding wars in the rental game — from a renter's perspective, he said, it's hard to fathom paying well above what was initially advertised.
"For me, that's a bit much. You have to really love this apartment," Harris told me. "But you know what? There were people who had seen so many places and lost out on so many, they were just tired. I've heard people say, 'I just couldn't do it anymore. I couldn't see another place, I couldn't lose another place. I just had to take it.'"
Bidding wars are not a new phenomenon in New York City. Frances Katzen, a longtime broker with Douglas Elliman, told me they generally pop up at the height of a real-estate cycle when people are willing to pay "sugar-high prices." But the frequency with which the auctions infiltrated apartment searches over the past few years has felt different. In the roughly three-year window that the appraiser Jonathan Miller has been tracking the rate of bidding wars in the city, about 15.4% of rentals have gone for above the asking price. Miller doesn't have hard data prior to 2021, but he estimates the figure would average closer to 5% over the past 20 years.
They want to create this psychological fear of people missing out. Everybody just goes into a panic.
Once waved off as an unfortunate reality of the cutthroat New York City market, bidding wars have also spread to other cities. Across the country, a swell of housing demand — the result of recent grads moving out of their parents' houses, remote workers upgrading to bigger spaces, and roommates striking out on their own — collided with a shortage of rental inventory. And it turned out a lot of these people were in search of the same kinds of places. I was shocked to read that rentals in my hometown of Austin had become bidding battlegrounds — one Realtor estimated that suburban rentals were going for 35% above asking in the first quarter of 2022. Renters in the once "weird" city described being advised to bid a few hundred dollars over the listed monthly rent from the get-go. Agents in Los Angeles, Chicago, and South Florida reported a similar phenomenon.
"When you have a situation like we have in Chicago, where a lot of people are looking for the same things in the same price ranges, it creates almost inevitable bidding wars," Mueller, the agent who focuses on rentals there, told me. "I've told this to many people this year: 'There are literally not enough apartments that fit this specific wish list, because everybody else has this wish list.'"
'FOMO' takes over
Landlords are well within their rights to seek the highest rents possible. If someone's willing to pay $1,000, or even $10,000, over the asking rent, then the free market has spoken, right? But some brokers employ every tactic available to heighten the drama and juice prices.
According to agents I spoke to, the more manipulative members of their industry start by intentionally underpricing a unit to ensure there's plenty of competition from the beginning. Then they host a single, crowded open house — ideally one with a line that stretches down the street. During this feeding frenzy, prospective tenants are likely to spend more time eyeing their competition than actually inspecting the unit.
"They want to create this psychological fear of people missing out," Stan Broekhoven, an agent who often represents people relocating to New York City for work, told me. "Everybody just goes into a panic: 'We really like this apartment, we're going to offer more than they're asking.' So agents are deliberately creating these situations."
Even the ostensibly helpful parts of the process can feel designed to induce FOMO. Sites such as Zillow and StreetEasy, New York City's most prominent apartment-search website, let you browse photos of rentals and connect directly with the brokers representing the units. They also let you know, with dismaying precision, exactly how many other people have expressed interest in the unit you're lusting after. The sites make it easier to find units, but they also amp up the stress level. Some well-meaning agents told me they also advise apartment hunters to write a short letter to the owner of a unit they like to share a little more about themselves and why they love the place. The hope is that maybe something will strike a chord and tip the scales in their favor. But at the end of the day, "money talks," Broekhoven told me. "That's really the oldest truth."
Mercifully, the peak of bidding wars is in the past. The national rental market has slowed considerably since last year — the median asking rent in September was up only 3.2% year over year, according to Zillow, compared to a 10.6% annual increase last year. Many renters may have simply reached the limits of what they're willing to pay, while an influx of new apartments is creating more options for tenants. A growing number of landlords are handing out perks like free months of rent or free parking to lure people to their units. At the same time, it's impossible to paint the rental market in broad strokes. If you're searching for an apartment in Salt Lake City or Las Vegas right now, you might have an easier time than in Boston or Chicago, where rents in September jumped by more than 5% year over year, among the highest figures in the nation. Neighborhoods, and even blocks, can vary wildly in their desirability and competitiveness.
Still, it's hard not to worry that we've opened Pandora's box when it comes to bidding wars. Now that they've broken out in places where they were unheard of, it's possible the fights will return if new apartment construction fails to keep up with demand.
My bidding war comes to an end
In hindsight, it's clear that our desired unit in the East Village checked all the boxes for a bidding war: It was priced well below similar apartments in the area, practically guaranteeing there would be fierce interest. It was located in a popular area of Manhattan, near the subway and plenty of restaurants. There was no broker involved, meaning we wouldn't have to pay a hefty broker's fee. Our chances of winning the fight for the apartment seemed slim at best.
About 20 minutes before bids were due, my roommate and I settled on a number that seemed both outrageously high and certain to fall short of more desperate offers. I've faced my fair share of rent increases. But this time, I didn't need a landlord to tell me how much extra I'd be paying each month — I'd taken care of that part myself. We sent Phil an email with our bid and waited for a response.
A few hours later, I got a text from my roommate: "What the fuck." I rushed to check my email, expecting to see that we'd been outbid by an unconscionable sum. There was indeed a message from Phil listing out all the bids in descending order. For simplicity's sake, he'd only included offers that had gone more than $100 over the monthly asking rent — there were 10 of them. In a surreal twist, ours was at the top.
I've heard people say, 'I just couldn't do it anymore. I couldn't see another place, I couldn't lose another place.'David Harris, New York City agent
The whole point of a Vickrey auction is to get bidders to reveal the maximum amount they'd be willing to pay. In our case, the bidding war had driven up the monthly rent by nearly $500. As I scanned the list of offers, I wondered how the other bidders were processing this same information. The second-highest bid, which is the amount we'll be paying each month, was exactly $123 less than our winning offer. They'd added $77 — maybe a lucky number? — to what would have otherwise been an even figure. Another bidder took a page out of the game show "The Price Is Right" by attempting to beat out other offers by $1.
That afternoon, my roommate and I hopped on a Zoom call with our new landlord. When we were pursuing the apartment, we'd tried anything that we thought might give us an edge. We arrived early to the open house and made small talk with Phil, hoping to leave a good impression. In an email with our applications, we included a few lines about our jobs and our stellar track record as tenants. But during the video call, Phil asked us if we'd been able to make it to the open house — he didn't remember seeing us there. In the end, the money was all that really mattered.
Or maybe that's not entirely accurate; timeliness matters, too. Phil revealed that shortly after the auction closed, someone had reached out to offer $700 above asking for the apartment, sight unseen. The bid was $100 more than what we'd submitted, but Phil had chosen to honor the rules of the auction.
I felt a strange mix of emotions after our win. There was shock and joy at the realization that our apartment search was over. I was thrilled at the prospect of moving into an apartment that could actually fit a couch, something I couldn't say of our old place. And yet, I couldn't help but feel complicit in driving up Manhattan prices further. It's one thing to grudgingly submit to paying higher rents; it's another to have a hand in setting the new high-water mark.
Shortly before finishing this story, I called Phil again to ask why he'd chosen a Vickrey auction. He told me a friend had once mentioned to him that big tech companies like Amazon and Google use the format to run auctions for their ads, and it sounded like a good way to get as high a price as possible while limiting buyer's remorse. We chatted for a few more minutes — Phil is a friendly and attentive landlord, but the irony of discussing pricing strategy with the guy I'd be sending a huge chunk of my salary each month wasn't lost on me. I asked him if he was surprised that the bids had gone so much higher than what he'd originally asked for. He hesitated.
"It did exceed my expectations," Phil said. He went on to tell me that he generally tries to price his units on the lower end to gain traction on sites like StreetEasy. "And then people like the place, they kind of fall in love with it. And so that also is part of the strategy."
What's clear to me now, more than ever, is that our modern housing shortage leaves us with a bunch of bad choices. Bidding wars may feel distasteful, embarrassing, and unfairly favor those with the means to drive up already exorbitant asking rents. But the primary alternative — a first-come, first-served approach — has its own drawbacks. If you can't get off work to race to an open house, or if you're a few minutes late in getting that application in, you're out of luck. For each path a landlord might choose, there will be a dejected group of renters who are sent packing.
"There isn't a really good answer here," Mueller told me. "The answer is to have more inventory that's affordable, that has the features that people want. That's a harder solution."
James Rodriguez is a senior reporter on Insider's Discourse team.