The United States has long suffered from an affordable housing crisis, but it has been It got worse Recently due to rising mortgage interest rates and declining inventory.
The problem is especially acute for low-income families.
A Portland, Maine-based startup seeks to help address the problem by purchasing single-family homes in blighted neighborhoods, renovating them and then renting them to their owners. Very low-income families, the elderly and the disabled (or Section 8 voucher holders). That’s the beginning, Simply homesIt recently secured $22 million in funding to bolster its efforts.
“We’re helping solve the affordability crisis for people who struggle the most with housing instability,” said CEO and co-founder. Brian Bagdasaryan. “While there have been groups that have tried to address programmed home buying in the past – with varying degrees of success – the reality is that no one operating in our market provides affordable, well-maintained homes to the people most in need.”
In fact, most iBuyers focus on buying, renovating, selling or renting homes in middle- and upper-class neighborhoods. Most homebuilders are “out of touch with reality and are building homes that anyone who needs affordable housing can’t afford,” Bagdasaryan told TechCrunch in an interview.
The opportunity to help people overcome poverty and improve their chances of social and economic mobility was what attracted Bagdasaryan, co-founder and CFO Robert Kavanagh to build the Simply Homes model.
“Children who are able to move to less poor neighborhoods can see a 31% increase in their lifetime income,” Bagdasaryan said.
The couple is a firm believer that you can still make money and do good at the same time.
Founded in 2020, Simply Homes spent its first two years developing its platform and associated models before purchasing its first home in January of this year. By the end of this month, the startup is expected to have 108 units or homes in its portfolio. Since its launch in Q1, it has seen its revenue grow more than 50% QoQ.
Baghdasaryan notes that more than 80% of Simply Homes’ tenant base are single parents who would need to work an estimated 50 hours a week to afford market-rate rent. Using HUD’s HCV program through Simply Homes, these families pay no more than 30% of their income in rent, Bagdasarian says.
Currently, Simply Homes operates in Pittsburgh, Pennsylvania and Cleveland, Ohio. Its goal is to expand into Baltimore, Maryland and parts of the Midwest, including additional territories Markets throughout Ohio and in St. Louis, Missouri, among other cities. The company looks for stable markets that are not susceptible to the extreme fluctuations of the housing industry.
Simply homes Operating in an operating company/real estate company structure, the operating company uses its own technology platform and operating teams to acquire, acquire, renovate and manage properties. The property management company retains it for the long term.
Many proptech companies have struggled, or closed entirely, this year, largely due to rising interest rates. But Simply Homes, according to Baghdasaryan, took into account the possibility of rising interest rates very early in its model, so it was less affected by the macro environment.
“Everything is guaranteed for the worst-case scenario. A lot of first-generation buyers never took interest rate risk. But we started with that,” Baghdasaryan said. “We made sure that our great rates of return were inclusive of high interest rates that still allowed us to operate in a profitable. the Another part of that is that we have a very stable income – because the way the Housing Choice Voucher works is that the renter pays 30% of their monthly income from their adjusted monthly income. The voucher covers the balance. So it’s a pretty predictable income.”
Initially, the company set out to solve the automated underwriting portion of the process for third parties, and then for itself by leveraging Baghdasaryan’s AI background and Kavanagh’s real estate experience. Bagdasaryan has two decades of experience in human process automation and machine learning, and was previously at HubSpot, having joined as part of Motion’s founding team. Kavanagh previously led the acquisition of Ireland’s largest social housing portfolio and spent 10 years as an investment banker at Jefferies and Cantor Fitzgerald in New York and London, specializing in infrastructure and environmental, social and governance assets.
“We know what we can rent homes for because the Housing Authority (or HUD) gives us that information. That means we can underwrite — using that data and machine learning — very accurately, very effectively, very quickly,” Bagdasaryan said. The friction that keeps other organizations out of the space and gives us that kind of leadership advantage.”
Simply Homes collects rent on its properties, which helps cover the cost of property management. It requires a 3% fee on an ongoing basis, and the rest of the money flows back toward institutional investors.
Besides expanding into new markets, the company plans to partially use its new capital Developing a series of virtual AI-powered analysts that “on the fly” interpret the vast amounts of data that Simply Homes collects and leverages in its acquisitions.
Gutter Capital and Watchung Capital co-led the company’s latest $22 million funding round, which included participation from Village Global, Ambush Capital, RavenOne Ventures, Neil Parikh, Gab Flateman, Luke Sherwin and others.
James Gettinger, managing partner at Gutter Capital, told TechCrunch that he believes Simply Homes is doing something that “desperately needs to be done.”
“By renovating old housing, they are able to build houses “It is available to people most affected by the affordability crisis,” he said. “One aspect of the housing shortage that I think doesn’t get enough attention, frankly, is the fact that primary homes are no longer being built.The average size of new construction homes has risen from 1,400 square feet 50 years ago to 2,200 square feet today. The end result of this is… basically, none of the new homes coming onto the market are affordable to the majority of Americans.
“I haven’t seen anyone approach affordability for the lower end of the market this way,” he added.