Proptech firm denies rental bidding allegations

The firm’s program — which serves as an intermediary between renters and real estate agents where prospective renters can apply for properties — was particularly under fire for its Snug Match Score feature. 

Prospective tenants who registered for the firm’s platform are assigned a Snug Match Score that can go as high as 100 points to help determine an applicant’s compatibility with a rental property.

This feature is highly promoted by Snug as a way to empower renters and help owners “find the best fit for a rental property” by allowing rental property owners to “express their preferences for their property” while enabling renters to “personalise their application”.

But the report stressed that the company’s use of renters’ data is “far from transparent”, given that renters are mostly in the dark about how the score is calculated. 

To emphasise how opaque the firm’s algorithm is, the report cited Snug’s FAQ, which stated that the Match Score is based on “property owner preferences, property data, rental application attributes, renter profile completion and market conditions” — with no specific details on how each criterion bears weight on the overall rating. 

Most importantly, the report claimed that one factor makes the score significantly increase: by offering a higher rent. 

Following several tests of the firm’s scoring system using two real listings in Victoria, the report stated that an aggregated increase in the weekly rental payment offer resulted in a directly proportional rise in the Snug Match Score. 

The results of the tests prompted some experts to come to a conclusion that Snug is potentially facilitating rental bidding or the process of negotiating the price of a rental by advertising a property within a “range” or without a fixed price.

Across the country, several states, such as Victoria, Queensland and Tasmania, have made regulatory interventions to block the practice. 

However, there are also markets where there is no legislation against the practice, including NSW, the ACT, the Northern Territory, and South Australia. 

Notably, even areas that have a ban on the questionable process still have legal loopholes. For example, in Queensland and Victoria, soliciting rental offers above the advertised price is illegal, but a higher rent offer may be accepted if it is made “unprompted”.

Linda Przhedetsky, a researcher from the University of Technology in Sydney, said the Snug Match Scores might be “incentivising renters to offer above the advertised price”.

Commenting on the report, Ms Przhedetsky further stated the Match Score was “potentially discriminatory”. 

“There is no transparency about how the Match Score is calculated,” Ms Przhedetsky said. 

“We don’t know if their Match Score is calculated fairly. We don’t know how their algorithm is using renters’ data.”

In a swift rebuke, Snug released a statement to deny the investigation’s findings, which it called “highly speculative, unsubstantiated and contain highly suggestive assertions which are likely to mislead the public about the actual service Snug provides”. 

The firm said that its program did not facilitate rent bidding; rather, it underlined that the platform is designed to address these issues and problems that come with the “old way” of managing applications. 

“In an old-style application, people may perceive price as a primary factor, and while it can be easy for property managers to select tenants on that basis, our research shows property owners value affordability, good references and longer term tenancies,” the firm’s statement showed. 

It also highlighted that despite the Snug Match Score being a key feature of the program, it is “just one indicator within a complete rental application that property managers may consider when presenting selected tenants to the owner”. 

“Our platform is designed to discourage the kind of rent bidding that is already happening despite being illegal in some states, and to prioritise factors such as start date and lease term in matching tenants to owners,” the firm added. 

On a parting note, the company declared its commitment to making changes as needed to help end rent bidding.

Regulatory crackdown on rental sites on the rise  

As of writing, there is no official statement from regulators if an investigation would be launched into Snug in the wake of the report.

During the time of the report’s release, a spokesperson for Consumer Affairs Victoria stated that while it could not comment on individual businesses, the regulator took cases of potential rental bidding “very seriously”.

“It is an offence for a rental provider or their real estate agent to ask for or invite offers of rent higher than the advertised price,” the spokesperson said. “Consumer Affairs Victoria will investigate potential breaches and take further action where necessary.”

Notably, this is not the first time that Snug has been in the crosshairs of a regulatory crackdown. 

At the start of November, Tasmania, Western Australia, South Australia, and NSW regulators said they were considering taking action after an ABC investigation into real estate websites that pressure rental applicants to pay for their own background checks.

According to the report, 160 real estate agencies have used the 2Apply platform to field applications for over 1,700 properties across capital cities and most major regional centres.

The platform urges rental applicants to “stand out from the pack” by paying for their own background checks.

While tenants can say “no” to shouldering the costs, declining to pay can hurt their applicant rating at four out of five stars. 

Rental application platforms — including realestate.com.au and Snug.com — were also called out for charging a fee for a background check against data company Equifax’s National Tenancy Database.

In response to the issue, the software group behind 2Apply, Inspect Real Estate, and News Corporation’s REA Group — which owns realestate.com.au, Snug, and Equifax — all denied claims of illegal activity, stating that payments they received for background checks complied with all relevant laws.

Parties involved also stressed that tenants had a choice about whether or not to pay for their background checks.