While northern China experiences massive cooling and snowfall these days, many young people are facing the plight of losing their homes. They rented their apartment from Danke Apartment, an internet housing rental company, which fails to transfer the rent paid by the tenants to the landlords because of its capital chain rupture.

How Danke Apartment Works

First thing first, I need to clarify the operating pattern of internet housing rental. At present, internet housing rental companies can be divided into three types: (1)those who own apartment buildings or houses and rent the property directly to the tenants; (2)those who work as an information exchange platform and make a profit by brokerage fees; (3)those who rent the property to tenants on behalf of the landlords. Danke Apartment belongs to the third type. It signs commission contracts with the landlords and signs tenancy contract with the tenants. During the tenancy term, Danke will take on all chores about the apartment. The bills–including but not limited to utility, Internet connection, property fee, repairment–are paid through Danke’s app, then Danke’s apartment managers will pay the bills and send repairmen. Thus the tenants don’t have to–and mostly will not–contact the landlords or the property management company.

When users sign the tenancy contract, they are asked whether they want to pay the rent every month or every year.  There is a discount on the latter to encourage the users to pay a year’s rent in one go. After collecting the money from the tenants, Danke pays the landlords monthly, so it holds a huge amount of money in their capital pool. Danke uses this money for advertising, paying salaries and recruiting property owners as their new clients.

Some tenants cannot afford the annual price, so they choose to pay monthly. But the truth is that Danke will use the information provided by the users to apply to a lending company for a loan equal to one year’s rent. The tenants then pay back the loan monthly. And now, when the tenants are ‘kicked out’ from their apartment, they are still required to pay back the ‘rental loan’, for the debtor-creditor relationship is between them and the lending company. If they refuse to do so, their credit score will fall.

 

Housing Rental Company and the Internet

Danke in Chinese means ‘eggshell’. According to its founder, the name means a small but warm home for young people. Danke’s market position is affordable apartments leasing targeting the young, especially university graduates and white-collar workers. Danke’s target user group highly overlaps with the most active Internet users in China, for which its propaganda strategy values the use of the Internet. It places ads on social media platforms such as Weibo and Zhihu (an online Q&A community like Quora), whose main users are between 20 and 29 according to Baidu Index. The ads emphasis Danke’s convenience and reliability, which seem rather ironic at present.

Danke also pays much effort in cultivating and maintaining a sense of community. With the help of the Internet, finding out everyone’s interest, available time and collecting their reviews becomes easy. By holding various kinds of activities, Danke builds a tenants’ community not only a crowd in an online chat group but also a group of people with emotional connections and a sense of belonging. That is what you can never get from an offline rental agency.

To sum up, internet housing rental companies benefit a lot from ICT. Firstly, they have more convenience in exchanging and gathering information than traditional housing agencies. Secondly, ICT makes the experience of searching desirable apartments more pleasant, for the tenants can search keyword or by the map and set filter conditions. Last but not least, they build and make use of the trust of consumers. According to Jason Rutter in From the Sociology of Trust Towards a Sociology of ‘E-trust’, the trust to e-commerce is build by actions in four areas: community, flow, brand identity and personal experience. Taking full advantage of ICT, Danke targets advertising to build a brand reputation, holds offline activities to cultivate a community, thus makes themselves seem trustworthy.

However, the break of the ‘eggshell’ reminds us to consider whether the Internet rental agency company is really reliable. Danke works like a mesne landlord, but far more powerful because it holds the money and the contract. It acts as a mediator between the landlords and tenants, thus makes the money flow opaque. From early September 2020, Danke began to default payment of decoration, repairment, utility bills and finally the rent. Covid-19 must be one reason, but probably not the only one. It has not been proved whether it invests the money to any financial product, which dries up the capital flow. Moreover, Danke does not fulfil its obligation of keeping the users informed. Yang, a Danke’s tenant in Beijing, told the reporter of Securities Daily that she signed the contract without knowing how the ‘rental loan’ works because she believed in ‘the big corporation’. How to get the consumers fully informed? It is not simply clicking the ‘I agree’ checkbox, but completely knowing what kind of risk they are facing and how their money will be used. Nili Steinfeld’s study suggests that most of the Internet users skip reading the term of service though it contains illustrations of how their personal data will be used. Steinfeld found that the users tend to read the text more carefully if it is presented by default, rather than hid behind a link. Other factors such as the length, complexity, usage of terms and font-size also make a difference (Angulo et al., 2011, Milne and Culnan, 2004, Nissenbaum, 2011, Tsai et al., 2011, Antón et al., 2003). Therefore, by manipulating these factors, the company has the ability to discourage its consumers to read the terms and contracts.

Since the bankruptcy of OFO, ‘Internet+’ corporations majoring in the rental business — from bikes, phone chargers to apartments — have begun to apply the ‘absorbing funds–invest it to somewhere else–make financial income‘ mode.  And the results have always been undesirable. They have a lot of money at their disposal, but not enough real assets. So if things go wrong, the financial chain can easily break and lead to serious consequences for the customers.

Internet housing rental is a new market and has its unique advantages. But it needs more regulations, such as limiting the debt-ratio and changing the means of payment.

 

Sources of images:

[1]蛋壳公寓商业模式面临大考 多地房东上门解约租客收到搬离通知-新华网 (xinhuanet.com)

[2]timg (1024×768) (baidu.com)

[3]timg (600×368) (baidu.com)

[4]https://www.danke.com/huodong/fdjbj

[5] a4d18f6d574f8a8.jpeg (1080×607) (cnbetacdn.com)

 

References:

[1]蛋壳公寓商业模式面临大考 多地房东上门解约租客收到搬离通知-新华网 (xinhuanet.com) 

(Business model of Danke Apartment faces a big test, landlords in many cities come to tenants’ doorsteps to terminate contracts, tenants receive notice to move out)

[2]资本还能陪蛋壳公寓(DNK.US)玩多久？|蛋壳|美股|长租公寓-智通财经网 (zhitongcaijing.com)

(How long can capital play with Danke Apartment?)

[3]卧底5000人蛋壳公寓维权群，情况比预想中糟糕 – 最新消息 – cnBeta.COM

(Going undercover in 5000-people Danke Apartment rights defending group, I found that the situation is worse than expected)

[4]市值超24亿美元，蛋壳公寓IPO：手握40万间出租房 (qq.com)

(With a market capitalisation of over $2.4 billion, Eggshells IPO: 400,000 rental units in hand)

[5]蛋壳公寓暴雷 我们的实习生家被抄了_IT新闻_博客园 (cnblogs.com)

(Danke Apartment in risk, the home of our trainee is confiscated)

[6]Steinfeld, Nili. (2016). “I agree to the terms and conditions”: (How) do users read privacy policies online? An eye-tracking experiment. Computers in Human Behavior. 55. 992-1000. 10.1016/j.chb.2015.09.038.

[7]J. Angulo, S. Fischer-Hübner, T. Pulls, E. WästlundTowards usable privacy policy display and management—The primelife approach. S.M. Furnell, N.L. Clarke (Eds.), Proceedings of HAISA 2011: The fifth international symposium on human aspects of information security & assurance, University of Plymouth, Plymouth (2011), pp. 108-117

[8]G.R. Milne, M.J. CulnanStrategies for reducing online privacy risks: why consumers read (or don’t read) online privacy notices. Journal of Interactive Marketing, 18 (3)(2004), pp. 15-29, 10.1002/dir.20009

[9]H. Nissenbaum. A contextual approach to privacy onlineDaedalus, 140 (4) (2011), pp. 32-48, 10.1162/DAED_a_00113

[10]J.Y. Tsai, S. Egelman, L. Cranor, A.AcquistiThe effect of online privacy information on purchasing behavior: an experimental study. Information Systems Research, 22(2011), pp. 254-268

[11]Rutter, J 2001, ‘Sociology of Trust Towards a Sociology of `E-trust’‘, International Journal of New Product Development and Innovation Management, vol. 2, no. 4, pp. 385-399. <http://www.cric.ac.uk/cric/staff/jason_rutter/papers/eTrust.pdf >

Nov 22, 2020