The next big issue in the political realm, particularly at the local level, could very well be housing affordability. In an increasingly-urban U.S., home prices are creeping up all over — though the recent debate over a “head tax” on tech companies shined a light on the homelessness epidemic in Silicon Valley, even places like Chattanooga and Charlotte are trying to figure out how to contend with increasing costs.
Take Atlanta, for example. The “Silent Crisis” of housing affordability has struck hard in a city that for two out of the last three years has seen the worst income inequality in the U.S.
Let’s break down some hard numbers: the average line cook makes $23,970 annually, as reported by the Bureau of Labor Statistics in 2017. Housing standards indicate that a basic measure of affordable housing is 30 percent of a person’s pre-tax monthly salary.
Given those numbers, that cook — who is working a respectable, full-time job — would have to find an apartment or house for under $600 (taking taxes into account). That rental price is becoming increasingly tough to find in metro Atlanta, leaving the cook traveling farther and farther away from the city center to find housing and facing a long, draining commute.
“I think this demand for affordable housing exists in every market, everywhere,” Atticus LeBlanc, a long-time real estate entrepreneur, tells Hypepotamus.
LeBlanc, who grew up in New Orleans but has lived in Atlanta for most of his career, worked in both commercial and residential real estate. When the market crashed in 2008, he and a partner began buying up houses inside the Atlanta perimeter for incredibly low rates.
LeBlanc would rent these houses out to low-income families and, before he knew it, became a bonified affordable housing developer. He ran the entire operation himself, serving as salesman, landlord, manager and more.
In addition to becoming acquainted with obstacles low-income workers face, he experienced additional challenges on his side of the equation, as well. When a whole family moved in and out of a home, there tended to be large turnover costs associated with cleaning and repairs. Moreover, the house could sit empty for months before another tenant moved in, during which time it was often vandalized or robbed.
While servicing his houses, LeBlanc became familiar with “rooming houses”, the often-illegal arrangement where landlords break up a property into multiple units. Though the circumstances were often shady, LeBlanc saw the potential in the rooming house model to improve affordability, turnover costs, and profit margins for the owner.
The idea kept percolating in LeBlanc’s head until years later, after he had exited his business and sold most of his houses. In fact, the idea had taken such a hold that he entered an affordable housing challenge, landed a small grant, and bought a house to experiment.
In 2017, Padsplit was born. The digital housing marketplace allows private landlords to turn single-family homes into affordable multi-unit houses. Padsplit institutes specific standards for the houses (fire safety codes, brand standards including renovated furniture, flooring, energy efficiency measures) and requires utilities, Wifi and laundry to be included in rent.
On the resident side, an individual seeking housing can search the platform like they would search Airbnb. They are matched with the options closest to where they work — as an urban planning graduate of Yale, LeBlanc is insistent about the importance of shortening commutes for low-income workers.
Once a resident is in their new home, they can pay rent, request maintenance, and rate their roommates or landlord through PadSplit.
LeBlanc says that owners using PadSplit are doubling their monthly intake. The startup takes a 12 percent marketplace fee, deducts the market rent of the property, and then splits the remainder 50-50 with the owner.
So, how do cities feel about all of this?
LeBlanc is open about challenges the startup will face. Though he has worked closely with the City of Atlanta and affiliated agencies like the Urban Land Institute, he acknowledges that the startup will be “operating in a legal grey area for some time.” Without getting into the legalistic weeds, his team has come up with a legal structure where each PadSplit is considered its own corporate entity and residents are partners.
“Every city has its own different regulations,” LeBLanc tells Hypepotamus. This magnifies the challenges any startup faces when looking toward expansion, as LeBlanc says they will soon do. But LeBlanc says they do not intend to operate like an Uber or, more recently, e-scooter company Bird, in how they coalesce with cities — he wants to be a partner, working together to solve the affordability challenge.
“We do eventually hope to change policy,” he says. One policy change the startup may benefit from is the recently-instituted Opportunity Zones, which were established by the federal government across the U.S. to spur investment in low-income communities. Real estate investors who buy properties in these Zones — which could be turned into PadSplits — will receive preferential tax treatment. In fact, LeBlanc is even considering moving the team’s office to an Atlanta-area Opportunity Zone.
That team, currently seven employees, will hopefully grow soon. Bootstrapped thus far, the startup recently graduated from the Techstars Atlanta accelerator and plans to begin the fundraising process to raise expansion capital within the next few weeks.
Beyond fundraising, LeBlanc’s biggest focus is driving growth across Atlanta by partnering with existing landlords to turn their properties into PadSplits.
Photos provided by PadSplit
