Yi Xianrong: What risks are exposed to the "explosion" of long-term rental apartments?

Zhongxin Jingwei client August 27 title: "Yi Xianrong: What risks are exposed by the "explosion" of long-term rental apartments? Yi Xianrong (Professor, School of Economics, Qingdao University, Special Expert of Sino-Singapore Jingwei)

Hu Jinghui, former vice president of I Love My Home, recently pointed out when talking about the business model of long-term rental apartments, "Long-term rental apartment explosions must be more powerful than P2P explosions." Hangzhou Dingjia Network Company's long-term rental apartment company declared bankruptcy on August 20, affecting about 4,000 tenants, involving 6 online lending platforms. This is not the first long-term rental apartment company to go bankrupt in The country, nor will it be the last. The reason why the "explosion" of long-term rental apartments is so eye-catching is because it not only exposes the risks behind the "long-term rental apartment + rent installment" business model, but also prompts the industry to reflect on this new business model in the housing rental market.

Why do long-term rental apartments explode?

It is understood that the business model of this long-term rental apartment is that the rental agency company rents from the landlord or the landlord to manage the house by raising the rent, and its lease is generally a long-term lease of 3-5 years, and then rented out after appropriate decoration. Rent is generally paid to landlords on a quarterly or semi-annual basis. In order to solve the pressure of some tenants' traditional model of "one mortgage and pay three", tenants are provided with "one mortgage to pay one", or "two to pay one" services. In this process, the leasing intermediary company introduces a third-party credit institution, which advances the entire rent to the leasing intermediary company; the tenant pays a deposit to the company and repays the credit institution monthly during the agreed lease period; and the interest or service fee generated during the period is paid by the leasing intermediary company to the credit institution. That is to say, these leasing intermediary companies and tenants may sign a loan contract, that is, the company uses the tenant's credit to sign a contract with a bank or online loan platform loan (or rent loan), and prepays the one-year rent to the long-term rental apartment company in one lump sum, and the tenant repays the loan to the bank or online loan platform on a monthly basis.

Taking the long-term rental apartment of Dingjia Network Company as an example, the tenants bind the loan APP through the bank card, and the loan platform pays the rent to the Dingjia at one time, and then the tenant pays the corresponding rent amount of the loan APP every month. Many tenants use online loans without their knowledge in the form of "one mortgage and one payment" of rent. Therefore, the Ding family went bankrupt, and the tenant not only could not get the deposit paid in advance, but also had to repay the loan APP on time every month, and the landlord did not receive the rent that the Ding company should give later.

However, this model is favored by some investment firms. The reason is that the investment company believes that this new type of housing rental business model has good profit prospects, the second is that its financing leverage is high, and the third is that the financing availability is high. So, since last year, a lot of external money has begun to enter this market. On January 16 this year, China's long-term rental apartment leader freely completed a Series A financing of 4 billion yuan, with a valuation of about 20 billion yuan. Among the top 100 real estate developers in China, more than 30 have been involved in the field of long-term rental apartments. Hummingbird House statistics show that as of May 31, the total financing finance of the decentralized brand apartment TOP10 was about 7.5792 billion yuan, while the total financing of the centralized brand apartment TOP10 was about 7.115 billion yuan.

Due to the influx of a large number of external funds, after entering, they can obtain credit funds with high leverage, which has also set off a wave of housing long-term rental apartment companies in many cities in China to "grab houses" at any cost. Because companies that can monopolize housing, it is naturally easy to raise the price of rental housing. However, because the long-term rental apartment companies of the second landlord model have no asset collateral, the financing cost is high, and the operation is good, these companies can obtain huge profits, otherwise, high financing will become the last straw that crushes the company. As early as March this year, Aiyu, an operator with 4,000 long-term rental apartments in Shanghai, was caught in a dispute between tenant complaints and landlords suing due to a broken capital chain. According to reports, the current debt of Aiyu ranges from 130 million yuan to 140 million yuan, of which more than 10 million yuan is owed to tenants.

What problems should be paid attention to in regulating long-term rental apartments?

First, the supervision of the operation mode of long-term rental apartments should be strengthened. Due to the lack of strict financial supervision by the government, some long-term rental apartment practitioners have used this to circumvent financing supervision and arbitrage, just like the early P2P. In this case, the rental market will not only allow the inflow of funds for different purposes, making the market mixed, but also accumulating huge financial risks for the market. For example, long-term rental apartment companies can use tenant credit funds to carry out rapid expansion of related businesses, and they can also divert these funds for other purposes. If these companies are overexpansed but poorly managed, they may break the risk of capital chain breakage at any time, triggering a financial market crisis.

Second, the "rent loan" model needs to be vigilant. The so-called "rent loan" innovation, like the "down payment loan" innovation, has the nature of coercing tenants, but also in a deceptive way to make tenants obey, the benefits of this product belong to financial institutions and long-term rental apartment companies, but the cost and risk are completely borne by tenants and landlords. This so-called innovative product creates serious injustices and infringes on the interests of tenants and landlords, and such financial products should be resolutely banned.

The third is to clarify the service objects of the housing rental market. This long-term rental apartment business model is basically a model of unilateral risk bearing that damages owners and tenants, and once a crisis breaks out, the final financial risk will be borne by the whole society. Therefore, this business model needs to be comprehensively rectified, so that China's housing rental market can truly return to the track of serving low- and middle-income residents. (Zhongxin Jingwei APP)

Yi Xianrong

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