Next on our Why We Invested series is Brownstone. Brownstone is pioneering affordable community home sharing with pod-style living, which appeals to millions of young adults paying more than 50% of their income toward rent.
Currently, 48% of college students face housing insecurity, and 14% experience homelessness (source). Also, 40% of low-income renters spend more than half of their income on rent. Young renters are experiencing a housing crisis along with increased consumer prices, leading to an inability to afford to live in big cities or metropolitan areas.
“Between 2015 and 2020, the nation’s supply of affordable housing with rents less than $1,000 per month — declined by 4.7 million units” (roughly 25% of units). Affordable units are disappearing faster than developers can build, endangering affordable living for young renters. Due to the decline in affordable living, shared living and multigenerational households have drastically increased over the last few decades. This largely affects low-income renters and young adults early in their careers in metropolitan areas.
The trend with GenZs in big cities is to have shared living spaces for more affordable rent at places with better amenities. Already, 63% would add a roommate to save money. In fact, GenZs say that size, price, and neighborhood are the three most critical living qualities for them. GenZs are willing to sacrifice privacy for higher quality and lower prices when renting a home.
The cost of housing, consumer prices, and education continue to climb. The cost of secondary education and living expenses combined have outpriced many GenZs. As a result, 54% of GenZs are forced to live with their parents.
As noted, the current state of affordable housing is lackluster, and the foreseeable future could be worse. Although Airbnb has done a lot of good for communities and investors, as Airbnb continues to increase in popularity, affordable long-term rentals are converted to short-term rentals, resulting in rent and housing price increases. Even some city officials are stepping in, as deceptive real estate operators use Airbnb to fraud renters and create unhealthy living conditions. New short-term rental laws in New York City could immediately kill 10k AirBnB listings.
Brownstone is solving this issue at a time when the U.S. has i) 8.6 million student renters, ii) 61% of renters in metropolitan areas are priced out of buying a home, iii) there is a housing shortage of up to 6 million homes, and iv) construction prices continue to rise 20% in 2022. These factors are just a few reasons why the Brownstone team has dedicated their lives to solving the affordable housing crisis. On the surface, sleeping in a pod and sharing a dorm-style room with strangers seems like a dramatic way to increase supply, but Brownstone is much more than that.
Brownstone allows lower-income renters to live in higher-end homes at a more affordable rate than a lower-income apartment. The bedrooms, bathrooms, kitchen, and living rooms are shared with all the residents. Each home has its community of vetted tenants based on personalities and living preferences. Brownstone goes through hundreds of applications for renting their pods, which has given them flexibility in choosing great tenants and maintaining 100% occupancy with their first 20 pods over 12 months.
Brownstone’s sleeping pods are set like bunk beds to maintain a high level of privacy, comfort, and room. The pods instantly fit the existing space and require zero construction, leading to less hassle and increased density. It takes the Brownstone team roughly three weeks from closing the lease or mortgage transaction to having it prepped for tenants.
The pods are leased at $500 to $800 per month in metropolitan areas with high rent. For example, the median rent is $2.7k and $3.7k in LA and Palo Alto, respectively, while Brownstone’s rent is between $650-$800. In addition, each home is fitted with smart appliances and a 24/7 direct line of communication with the Brownstone team. As mentioned above, GenZ prefers quality, affordability, and location more than privacy. Regardless of timing or market size, the team is what builds successful companies. The Brownstone team has experienced the pains of homelessness and is on an altruistic mission to give others the human right of a fair shot at affordable, sustainable housing.
James Stallworth, Co-Founder, and CEO, has experience building automated booking systems for co-living houses and personally dealt with housing issues when he couch-surfed and lived in a basement to finish college. James graduated with a B.S. from Stanford, where he directly saw the need for community living in Palo Alto.
Christina Lennox, Co-Founder, and CPO, went from homeless to buying, operating, and developing apartment units. A paradigm shift is on the horizon for the housing market, and Brownstone is leading the charge.
Redbud VC is an early-stage venture capital fund and studio investing monetary and social capital in early-stage tech founders.
Co-authored by Brett Calhoun and William VanAlstine