Brad Hargreaves, who co-founded General Assembly to re-think vocational education for a fast-changing and tech-laden job market, is switching from the world of work into housing.
He’s started a new company, Common, that’s offering flexible shared housing by the room in major U.S. cities. They took $7.35 million from Maveron with participation from Lowercase Capital, Slow Ventures, 500 Startups and several individual investors. Jason Stoffer, general partner at Maveron, joined the company’s board.
The goal is to ease the process of finding housing and shared communities in uber-competitive markets like New York City.
“How do you create a community-driven alternative to what’s available today, which is basically signing your own lease to take your apartment or going on Craigslist and living with people you don’t know?” Hargreaves said. “We’re creating a third option with shared housing.”
Tenants can rent by the bedroom, while Common handles everything from community events to a weekly cleaning service and regular deliveries of shared supplies like coffee, tea and paper towels. Ultra-fast wi-fi is included.
The application process bypasses many of the headaches of New York City market like brokers or requirements where tenants might need 40 times the rent in income and two years of tax returns proving it. On the real estate side, they’re partnering with developers and investors who have bought whole vacant buildings outright. They give their partners a stable income stream without the busy parts of property management and tenants relations.
The company is tackling the New York rental market first with initial properties around Bedford-Stuyvesant and Crown Heights, which are both historically black neighborhoods in Brooklyn.
“We’re looking to build relationships with the communities,” he said. “We don’t want to create moon bases or isolated communities in changing neighborhoods. I think a lot of it will involve working closely with small businesses.”
While there are positive sides to “co-living” with shared kitchen space and common areas being less isolating than the standard 1-bedrooms or studios developers are financially incentivized to build, it can easily dip into ethically questionable territory.
There is limited land in these high-profile cities and without sufficient housing stock growth to match population growth, there are constant pressures to subdivide units into ever smaller and smaller spaces. For example, Negev, a co-living community in San Francisco, has gotten heat for illegally converting low-income housing into space for twenty-something tech workers.
And while subdivisioning has been a problem for low-wage worker and immigrant communities for years, we’re starting to see it happens for white-collar workers. Throughout the Bay Area, there are dozens of “hacker hostels” where engineers are paying $1,200 or more for bunk beds in shared rooms.
“Our general rule is one person to a bedroom,” Hargreaves said. “We don’t have any doubles or triples or shared rooms and that’s just a customer experience decision for us.”
On the other side are the business risks. Campus, a startup founded Thiel Fellow Tom Currier, was working on a similar concept with leases for large shared houses in the Bay Area. They were raising about $5 million in funding last year, but just announced that they were going to fold their nearly 30 houses because they were unable to make the company an “economically viable business.”
Hargreaves says Campus’ mistake was to sign short-term leases, while his deals have five to 15-year-long terms.