A controversial Silicon Valley start-up that lets tenants bid against each other for rental properties will launch in Australia this year, amid fears it will jack Aussie rents up higher.

Alex Lubinsky, co-founder of the San Fransisco-based “apartment hunting” app Rentberry, says the platform will bring transparency to the Australian rental market, but tenant advocates say the tool tries to push the market as high as it can go.

The app hosts online auctions for rentals, allowing tenants to submit offers and custom renter profiles to landlords in order to secure a property.

The platform, which has been compared by some as the “eBay of renting”, lets tenants see how much others are bidding and allows landlords to choose the best offer.

But Mr Lubinsky said landlords will not always chose the highest rent, instead using the site’s built-in credit check and referencing system to determine the tenant for them. The idea, he said, is that good renters with excellent credit history will be able to broker a discount with a landlord, based on their strong profile. Mr Lubinsky likened the platform to a car dealership, where those with good credit could get a better deal on a loan.

Rentberry is estimated to go live downunder in the next few months, launching first in Sydney, then Melbourne and the rest of the country.

The Australian launch is part of a global expansion for the start-up, which Mr Lubinsky said had already received $1.57 million (US$1.2 million) of funding, injected from major venture capital investors.

Australia was a target market for the app because there were several investors from Australian shores, who told the company Aussies would “love the concept”.

‘Something which Australia needs badly’

“They are the ones who said the auctioning and custom-offer submissions essentially are something which Australia needs badly,” he said. “They said it should be very big in Australia, people will love it.”

Rentberry caused a stir when it launched in the US last year, with criticism that the app would drive prices up further, especially in expensive markets such as San Francisco.

“There is always controversy when there is something new – some people act with fear [because] they still have not understood it,” he said. “When Uber came out, people said it was stealing taxi jobs, they don’t have insurance, many things, but we all know now [these] companies bought huge positive change.”

Mr Lubinsky said a market like Sydney – the most expensive place to rent in Australia – needed transparency. “By transparency I’m not necessarily saying higher prices, no absolutely not, what we showed in the US is that we actually save money of about 5.12 per cent for tenants.”

But Tenants Union of NSW senior policy officer Ned Cutcher said rental auctions were an issue because bidding happened behind the scenes. The platform claimed to be an open and transparent process, he said, which was a direct response to that issue.

“From that perspective, people might look at it and say ‘maybe that’s alright’, but I think it still misses the point of what’s dangerous about rent auctions, which is that it has the potential to really push the cost of renting even higher than it already is,” Mr Cutcher said. “Rents are a function of the market and this is a tool that tries to push the market as high as it can go … It’s not actually asking tenants to set the price, it’s asking tenants to bid up the price.

“What it does is that it takes the possibility of one tenant being played off against another tenant in the dark out of the equation,” he said. “They’d be able to see where the highest bid is and they’d actually be able to see that it’s real.”

But Mr Cutcher said the union’s preference would be for rental auctions to be made illegal. “Bidding wars are really only designed for one thing – and that is to push prices up.”

Mr Lubinsky said his lawyers had told him the platform would be legal in Australia, but Mr Cutcher added that though it would be okay for a tenant to make a higher offer, a landlord legally could not ask the tenant to raise their offer. This might fall afoul of the law already, he said, but that was certainly not clear and would needed to be tested in the courts.

Tenants Union of Victoria policy officer Yaelle Caspi agreed rental bidding would further inflate the market in a competitive market.

“With so many tenants desperate for a home, it is likely that tenants will offer more than they can afford in an attempt to get ahead,” Ms Caspi said.

“Rental bidding privileges tenants with more to spend and makes it harder for low-income tenants to compete for properties. This is particularly concerning at the lower end of the market where affordable housing is already so scarce.”