In the U.S. context, according to Harvard’s Joint Center for Housing Studies, approximately one third of U.S. households are cost burdened by housing, and more than a quarter of U.S. renters spend more than half their income on housing. This means the challenges around affordable housing are impacting many U.S. citizens.
To address the challenges, a new generation of companies are bringing technology to bear on the crisis of unaffordable housing. Some companies, like Till, are helping low-income renters stay in their homes and build financial stability. Others, like PadSplit and Nesterly, are reducing the barriers for homeowners to rent out spare rooms, helping capitalize on the more than 50 million spare bedrooms in the U.S. Still others, like RentLogic, are giving renters new tools to evaluate buildings before they rent.
To assess the impact of these technological solutions, Digital Journal spoke with Nate Loewentheil, Senior Associate at Camber Creek. Camber Creek is a venture capital firm based in Washington D.C. that aims to fund companies that are changing technology in real estate that can help tackle challenges like affordable housing.
Digital Journal: What is the extent of the affordable housing problem in the U.S.?
Nate Loewentheil: The United States has a grave challenge with affordable housing. According to Harvard’s Joint Center for Housing Studies, approximately one-third of U.S. households are cost burdened by housing, and more than a quarter of U.S. renters spend more than half their income on housing. In cities with high populations of low-income residents, the problem is even more severe. In my hometown of Baltimore, more than half of Baltimore’s renters live in housing they cannot afford, according to a report from the Abell Foundation.
DJ: Is this more to do with economic events or political activity?
Loewentheil: The two are not really separable. It’s both an economic and political issue. Historically, the market has not produced adequate housing for lower-income Americans. That is a reflection of both the low wages which many working Americans make and the relatively high cost of producing quality housing. At different points in the last century, our country has been more or less committed to providing all Americans with decent homes in which to live.
Since the 1970s, for example, Federal spending on housing has steadily declined as a percentage of the Federal budget. Just in the past few years, according to the Urban Institute, the share of low-income renters with housing needs receiving Federal assistance dropped from 24 percent in 2005 to 21 percent in 2015.
DJ: What can be done to address the affordable housing issue in general?
Loewentheil: Books could be (and have been) written on that subject, so let me just touch on two policy priorities. From a federal perspective, one of the key measures is increasing funding for public housing and for housing vouchers. At the local level, zoning regulations and restrictions on development are often a key driver of housing costs. San Francisco is probably the most obvious example here. There’s also movement afoot to allow home owners to build accessory dwellings in their backyards. But from a venture perspective, there is room to reshape how the market delivers housing and in the process bring down costs
DJ: How are technology startups helping to address the problem?
Loewentheil: There are a generation of companies tacking housing affordability from multiple angles. Let me give just a few examples. Till, a company founded in 2018, provides short-term loans to renters to meet rent and avoid eviction on terms far cheaper than traditional payday loans. Till views housing as a route to building financial stability.
Another set of companies, like PadSplit and Nesterly, are reducing the barriers for homeowners to rent out spare rooms, helping capitalize on the more than 50 million spare bedrooms in the U.S. and providing much cheaper living options in the process, especially in dense urban areas that often price out low-income workers.
Still others, like RentLogic, are giving renters new tools to evaluate buildings before they rent, putting pressure on shoddy landlords to address issues like leaks, infestations, and heating.
Finally, dozens of companies are thinking about how to use modular construction to lower housing costs or deliver those accessory dwelling units I mentioned at a very low price point. These efforts have attracted the attention of traditional affordable housing developers, like Enterprise Community Homes, which has been investing directly in housing tech companies
DJ: What support does Camber Creek offer to first operating in the affordable housing space?
Loewentheil: We believe there’s an opportunity for companies that both deliver strong returns to our investors and help address the challenges of affordability. We have already invested in a number of companies helping make construction more efficient and affordable, like Rabbet and Latista, and are keeping a close eye on dozens of other companies focused on modular construction, home sharing, and tenant experience and finance.
