Market Design BEI

7/31/2019 Market Design BEI

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Housing Market in Lausanne

The market of short term and long-term housing in Lausanne is not well organized; this is mainly because the

number of foreign students in Lausanne is growing as do the city. There are different websites that offer places

but without efficiency and rental prices are growing up. What we propose in this project is to organize the

market of housing by joining lenders and tenants in organized public auctions. We settle groups forparticipants in order to make fair auctions.

Problems in the current market

Below, we specify some renting problems that exist now in the market and the way they can be solved with

our auction.

One of the major problem is that people ask for preferences (the owners mainly prefer girls,

French speakers, also some specific nationalities). Organizing an auction offers equal opportunities to

everyone.

The web-sites that distribute the existing offers in the market are mainly written in French, sothe site would provide offers that have to be written in two languages (English, French). For instance,

the standard options of the apartments will be written in these languages (the optional part of the

description will be written at the preference of the lender/seller).

Agencies ask for fees from tenants/lenders, sometimes before the agreement is made

(between tenant and lender for example). Our solution will not ask for such fees, although a fee will

be paid after the agreement will be made. As an initial stage we think that this fee could be erased in

the first stage of the implementation of the project, in order to have more participants.

Another problem is that sites are not updated frequently and may contain old information

that is not available anymore. After the auction, if the apartment is not longer vacant, the apartmentdisappears from the offers database (the information will be consistent and the server will not be

filled with inaccurate information) and the tenants application for a house is deactivated.

On the existing sites, each lender asks for different documents and requirements. This is not

flexible and is time consuming, as the tenant should prepare different applications for each room. A

standardized format where a fixed number of documents/requirements are asked for both the tenant

(ID, e-mail, etc) and the lender (standardized pictures, description) would make the application faster

and fairer.

In the description of the apartments there is an option to put additional information about

the property (for instance, information about neighbors and services, stores, hospitals, etc)

The government does not have control of the housing and the law protects more the lenders than the

tenants. By having the support of the government we make people trust our project and use our site.

If the project is just implemented for students accommodation, the support of the University (EPFL,

UNIL) could be enough.

Some people have an access to private information about availability of the apartments and

sometimes the tenant selection process is not public, in this case the auction makes everyone equally

informed.

Another advantage of the auction is that it states true prices for the apartments with such

differences as view from the window, the amount of sun entering the house, the location relative to

WC, the dimension of the kitchen etc. For instance, FMEL offer fixed price for all rooms, but someone


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can afford paying a little more to have such opportunity and the auction give a chance to adjust prices

for these conditions.

The auction sets reasonable price for an item if there are many participants (if there are few

people they can negotiate previously to make an agreement about the price). Hence, we run the

auction every two weeks (and more frequently on August and September) in order to provide fairprocess of establishing the price.

One person has the possibility of participating to at most 5 auctions, because otherwise she

will not take it seriously. In this way, she will apply only for the specific apartments she is interested

in.

Facts about Lausanne

We present some statistics of the mobility and houses in Lausanne (All numbers are taken from the official

government sites1

, apart from the points where it is additionally specified).

The number of residents in Lausanne at the end of June 2011 were 135 4322. The change of population during

2000-2010 was 10.5%, from which 9.1% through migration.

Concerning the housing, the number of residents per room is 0.6. There were built 2.9 new housing units per

1000 residents (in 2010).

The number of available flats in canton Vaud in 2011 was 11,093 which represent 32,393 rooms, to see the

details see table1 in the appendix.

Therefore, the total number of free rooms available in Vaud is 32,109.

The statistics of dwellings in Lausanne during 2000 was:

Total #rooms

Total number of dwellings 69,993 199,261

Permanently occupied 61,660 179,115

Lived temporarily (HT) 6,840 16,661

Unoccupied 1,487 3,479For more details Table 2 in Appendix

From these dwellings 57,031 were rented and the mean per meter squared was 14.18 francs.

1 http://www.bfs.admin.ch/bfs/portal/en/index/regionen/regionalportraets/waadt/blank/key.htmlhttp://www.pxweb.bfs.admin.ch/Dialog/Saveshow.asp

Source des donnes : Ville de Lausanne - Contrle des habitants

2 http://www.scris-lausanne.vd.ch/Default.aspx?DomId=1612


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The number of non-furnished empty flats in Lausanne behaves during the last 10 years as in the next figure:

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

1998 2000 2002 2004 2006 2008 2010 2012

Table 3 of Appendix to see the details

From the figure above we can observe the lack of empty places in Lausanne. During 2011 there were around78 empty dwellings and the percentage of vacant housing in 2011 was 0.12%.

The following figure shows that the non-permanent population is mainly represented by young peoplebetween 16-35 years old.

The percentage of change in population during last year was 1.48% in average, meaning 10,557 people (given atotal number of 713,281 of people living in canton Vaud). The immigration has been growing through the lastyears, mainly foreigners arrived and Suisse people departed (Table 4). In addition, we notice that the 82%arrived during September and October.

Considering the new arrivals and the available housing in Lausanne we consider that the market is notcomplete and people with a dwelling have to be m

Statistics of Students

There are two large Universities in Lausanne, EPFL and UNIL, but also there are many private schools such as

Business School Lausanne and cole htelire de Lausanne. In the Table below we summarize the School


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number of students and percentage of foreign students. In UNIL we group the students of joint programs with

other institution like the programs of HEC (Faculte des Hautes tudes commerciales).3

Master PhD Foreign Students

EPFL 6,325 2,117 36% 74%

UNIL 9620 1806 18% 60%

BSL 100 50

EHL 186 86

EPFL received 2,356 new bachelor & master students in 2011 from which 52% were foreigners and 495 PhD

students from which 79% were foreigners. In the case of UNIL they received 3279 new students during last

year.

The number of foreign students in EPFL has been growing as we show in the next graph:

0

500

1,000

1,500

2,000

2,500

3,000

1998 2000 2002 2004 2006 2008 2010 2012

Bachelor & master

PhD

Total Foreign students

Enrolled students

Table 5 in Appendix to see the details.

Current market

There are many websites and estate agencies in Lausanne, we analyzed a survey of them to settle the currentmarket and to find which problems could be solved.

a) FMEL (Fondation Maisons pour Etudiants)The website is in English and French, although some descriptions are just in French. They present multiple

options of rooms, contracts, leases and fees.As a student you can register and apply for a room.The description of the rooms are not standardized, they dont show basic characteristics of place such assurface in m2 neither pictures of rooms, studios or flats.The selection of the people who gets a place is not public. There are places that are available and thereare not published.

b) www.unil-epfl-logement.chThe website of EPFL and UNIL offer rooms and studios which belong to private lenders. Each lender fills astandard form and optionally they can add more descriptions and pictures.

3http://www.unil.ch Key Statistiques

EPFL, Key statistiques


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The tenant can choose between flats and dependent rooms and order his preferences by price, location,number of rooms.The main problem is that the offers of flats and rooms are not update, so people who look for a roomwaste time e-mailing and lenders with old announcements would receive a bunch of mails for a room thatis not available. The web-site does not present the offers in a standardize format and you cannot makeparallel comparisons between rooms. Almost all the offers are in French and the website does not offer

other option of language.

c) Comparis.ch gathers all the advertisements of the 17 largest Swissproperty market placesat a glance.You have the option to buy/rent a house, specify the town, the limits of the price, the type ofaccommodation and the number of rooms in the flat, the starting data of availability, the living areaand some standard (balcony, terrace, fireplace, dishwasher, washing machine, lift, parking place, petsallowed, suitable for wheelchair) and optional requirements (lake view).

They manage around 53500 advertisements, from which in Lausanne there are 1050.Publication date, price, move-in date, comparis points and other options can sort the results.Advantage:

1. The option of requesting by mail a price alarm when the price of the flat has changed.2. The option to add to favorites the room you searched for, from the description of the rooms

page.3. Standard description: available date, address, rent requested, size of the apartment.4. Optional description: additional details.5. Information about how much do the neighbors pay and for what type of flat.6. The option to compare private liability insurance and a tax calculator.7. Info in English.8. Provide the data at which the announce is published

Disadvantages:1. Does not provide pictures mandatorily.2. Optional description in French.3. The data basis is taken from different sites, so it may be not consistent because of possible

duplicates.

Design

Participants:

The main feature of the project is that we will joint lenders and tenants into an organized market. Both parts

have to register into the database.

The form of tenants includes Name, Surname, email, telephone, address, etc. In addition, tenants have toprovide a proof of income (salary, salary of their parents or scholarship attestation), contact information of a

person who will support the tenant in case of any difficulty; in the case of students, they have to provide their

enrollment certificate. Students have to sing in, with their gaspar account for EPFL and similar for other

schools, before the auction.

The lenders form, includes contact information, general information about the place for rent (standard format

that will be showed in different languages). Detailed pictures of the place (room(s), corridor(s), WC, kitchen,

street view). The lender can include comments or additional information of the place.

We consider FMEL as a participant in our market, given that the prices of FMEL are competitive for students,

the private lender have to compete in prize and quality. In the case of FMEL places, we are planning to

establish a fixed term of 1 year for each, to maintain the liquidity of the market.
http://en.comparis.ch/immobilien/immobilienportale.aspxhttp://en.comparis.ch/immobilien/immobilienportale.aspxhttp://en.comparis.ch/immobilien/immobilienportale.aspxhttp://en.comparis.ch/immobilien/immobilienportale.aspx


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Market dynamics

We identify four groups of people for the auction, bachelor and master students, PhD and non-

students.

The purpose of our solution is that prices of the flats sold in the auction should be fair (pay similar

price for similar quality, number of rooms and type of contract).

We set a centralized system where lenders are going to propose offers and tenants search for a room.

A sealed-bid second price auction is going to be organized, such that: in one auction enter flats with similar

features, such as number of rooms, but also similar qualities like surface, number of bathrooms, furnished/not

furnished, balcony, terrace, parking place, etc. We are going to give points for each characteristic and so we

put in the same auction flats with similar number of points (that we consider should have similar prices).

In each auction, there will be several markets, each for one specific lender. As an example, two

lenders, John and Marta have two, respectively one flat with two rooms and similar features. Therefore, we

put them in the same auction. We will have two markets, one for the two flats of John and one for the single

flat of Marta, in which tenants will enter and bid. The auction is second price, so tenants will bid with their

estimate of the price for the flat and at the end, the person that have bid the highest price will receive the flat

at the second price offered (second after the highest).

The tenants have the possibility to enter an auction as a group. We provide a forum, where they can

discuss and meet each other in order to apply for a flat for the entire group. They are going to bid as one single

tenant.

The lenders have the possibility to ask for a guarantee from the tenant, that the tenant should pay in

one-week term. This is a proof of seriousness that we and moreover, the lenders, request from the tenants. If

the guarantee is not paid, the lenders accommodation will enter in the auction the next week ( or the

following auction organized).

After the tenants depart, we ask for a feedback of the room they have rented, in order to give a fair

renting of that house (not only the appreciation of the lender himself).

Although it is the most used, we think that the English auction is not proper for our case, given that

the bidders will pay more and more to receive the house, the prices will not converge to the fair ones. Our

purpose is to solve the allocation of houses problem, but also drag down the prices to the fair ones, as now

they are speculated.4

The auctions are organized from two to two weeks, and possible, during August and September, moreoften, one week, as the demand for houses grows in that period. We chose this period, because if they wouldbe more often, would not gather enough tenants and also enough lenders. We need more tenants to competeand to offer a good and fair price that will satisfy the lender. We need also many lenders, in order to competebetween them and to offer a satisfying low price enough for the tenants.

One tenant can participate in maximum five auctions at one date, because otherwise he will not takeit seriously. He can enter an auction and forget about it, or bid unserious high prices on flats where lenders donot ask for a guarantee, just to make a joke.

By organizing an auction, the preferences problem that exists now will be solved, given that all the

people will be treated equally. In addition, they are going to be equally informed, by sending them an e-mail,

4 Swiss Federal Statistical Office-Rental prices, 2003
http://www.bfs.admin.ch/bfs/portal/de/index/themen/05/06/blank/key/einfuehrung.htmlhttp://www.bfs.admin.ch/bfs/portal/de/index/themen/05/06/blank/key/einfuehrung.html


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one week before the auction they are going to enter. The tenants will receive also information about similar

houses as their favorites if they want.

The system updates the information fast, in the sense that after we match one flat of a lender with

one tenant, both will remain in the system, but the information will be deactivated, until the flat become free

again and, respectively, the tenant is looking for a new accommodation.

The system is designed in four languages: French, German, Italian, and English, so that both Swiss

people and the foreigners have equal opportunities to find the room they prefer. This feature is realized for

standard information. Additional information is written in preferable language (for example, if a French

speaker lender wants to rent his house to a French speaker, he will give optional details about the apartment

in French).

Our solution will need to be promoted in order to gain confidence, so we are going to ask for the

support of the government or EPFL/UNIL. We will gain first the students. Then, we estimate that the tenants

will move to our market, given that the prices will be lower. The lenders will have to move also to our market,

given that the demand will not exist anymore in their market.

Example of implementation.

We have 200 flats, 20 with 1 room, 10 with 2 rooms, 10 with 3 rooms and 15 with 4 rooms. We

provide a score to each flat, considering its characteristics and the lenders selects in a group of prices

according to the minimum rent they can accept. Then from the 1 room flats received a score between 1-10

and range of prices 500-700, 10 of them between we fixed the range 700-900. We make one auction for the 1

room flats with range 500-700. In this auction we have ten markets, each of them for each flat. For all the

others, we apply the same algorithm (we put in different auction flats with different number of rooms and

different qualities). The idea is that the estimated prices of all the flats that enter in one auction to be the

same. The table below shows the implementation:

Auction

number

Number of flats in the auction and

description of them (number rooms + score)

Estimated

Price

Auction 1 10 flats - 1 room 1-5 500-700 CHF

Auction 2 10 flats - 1 room 1-10 700-900 CHF

Auction 3 5 flats - 2 rooms 1-5 800-1000 CHF







Advantages.

The prices will be fair. The sealed-bid second price auction offers the tenants the possibility to bid theprice they can afford to pay. Prices will not grow up, like they would do if the tenants would startcompeting between each other. Also, a fair price is also given by choosing the second highest price tobe paid. Moreover, given that FMEL houses will also enter the auction and people have a goodestimation of how much they value, the competitors will have to set their limit of prices accordingly(the lender chooses the minimum price).

The auction offers equal opportunities to each tenant, so the preferences problem is solved.


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People can find faster a place to stay, given that they can bid individually and also join a group to bidtogether for an apartment.

The lenders will be happy entering our auction. Many tenants will enter the auction (we establishauctions from two to two weeks and also we assume we will reach many people in our market), sothe prices offered will be very diverse, such that the second highest will be very probable a prettyhigh one, that will satisfy the lender.

The tenants will be happy entering our auction. Many lenders will compete, so they will offer enoughlow prices to satisfy the tenant.

Drawbacks.

The lender cannot specify the price that he would prefer for his house. However, this is solved byestablishing minimum prices that tenants can bid for the room (also maximum prices are set).

The lender cannot be sure that the person who won the auction is trustable for his room. We cansolve this problem by establishing apartment visits with the presence of both tenants and lenders in

order to offer the possibility for the lenders to know the possible tenants and also, to give their

approval for each tenant. If they do not want, they may ask us to forbid one person to enter in the

auction. However, the reason should be very good and fair, because we want to offer equal

opportunities to everybody (so for example, preference for nationality/gender cannot be considered

by us as a fair reason).


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Appendix

Table1.

Nb. of rooms in a flat Number of flats Number of all rooms in all flats

1 2153 21532 2853 5710

3 2986 8967

4 1643 6588

5 761 3830

6 341 2082

7 148 1085

8 99 856

9 49 522

10+ 60 600

Table 2

Total 1 piece 2 piece 3 piece 4 piece 5 piece 6 piece + Total rooms 1 r 2 r 3 r 4 r 5 r 6 r +

Total numberof residential units 69,993 10,025 19,139 22,474 10,943 4,708 2,704 199,261 10,025 38,278 67,422 43,772 23,540 16,224

Permanently occ upied 61,660 7,523 16,814 20,515 10,056 4,317 2,435 179,115 7,523 33,628 61,545 40,224 21,585 14,610

Livedtemporarily(HT) 6,840 2,018 1,882 1,653 739 324 224 16,661 2,018 3,764 4,959 2,956 1,620 1,344

Unoccupied 1,487 478 443 306 148 67 45 3,479 478 886 918 592 335 270

Table 3

Total Logementsde 1 pice

Logementsde 2 pices

Logementsde 3 pices

Logementsde 4 pices

Logementsde 5 pices

Logementsde 6+

2000 534 222 147 130 24 9 2

2001 279 131 84 43 14 6 1

2002 80 27 23 18 8 3 1

2003 151 42 31 41 19 13 5

2004 161 51 19 41 27 18 5

2005 165 32 41 50 28 10 4

2006 169 55 27 43 25 13 6

2007 227 73 54 45 38 13 4

2008 41 13 13 5 5 3 2

2009 75 16 23 22 6 6 2

2010 121 31 28 28 21 7 6

2011 78 28 13 22 12 0 3


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Table 4

Mouvements migratoires(1)

selon l'origine et le sexe, commune de Lausanne,

2000-2010

Suisses Etrangers Total

Hommes Femmes Total Hommes Femmes Total Hommes Femmes Total2000 - 145 - 297 - 442 117 383 500 - 28 86 58

2001 - 166 - 182 - 348 499 383 882 333 201 534

2002 - 309 - 440 - 749 716 787 1 503 407 347 754

2003 - 424 - 591 - 1 015 810 764 1 574 386 173 559

2004 - 428 - 565 - 993 646 642 1 288 218 77 295

2005 - 417 - 518 - 935 310 368 678 - 107 - 150 - 257

2006 - 387 - 417 - 804 418 502 920 31 85 116

2007 - 261 - 289 - 550 604 701 1 305 343 412 755

2008 - 265 - 193 - 458 1 649 1 450 3 099 1 384 1 257 2 641

2009 - 157 - 324 - 481 1 745 1 752 3 497 1 588 1 428 3 016

2010 - 180 - 273 - 453 474 627 1 101 294 354 648

Market Design BEI

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