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This Startup Wants To Sell You A Slice of A Rental Home (#GotBitcoin?)

As more investors turn landlord, Roofstock aims to make housing bets similar to buying stocks and bonds. This Startup Wants To Sell You A Slice of A Rental Home (#GotBitcoin?)

Vacationers have long enjoyed shared ownership of homes. Now, a California startup is hoping investors will buy portions of houses as well.

Roofstock, which operates a website where investors buy and sell occupied rental properties without disturbing tenants, has launched a marketplace where investors can buy stakes as low as 10% in single-family rental homes.

The company’s executives say they hope to make housing investments more like buying stocks and bonds at a time when investors are on a frenzied house hunt.

Since last decade’s housing crash, investors have sought new ways to get a piece of the $26 trillion market for U.S. residential real estate while also wagering on demographic trends that point to a lasting suburban rental class.

Big investors like Blackstone Group LP and Barry Sternlicht gobbled up foreclosed homes by the thousand after the crash and created national rental-home companies. Droves of smaller investors have followed the financiers into landlording. They are being aided by service providers that emerged to cater to big investors, from companies that cut far-flung lawns to those that buy rental-home loans and bundle them into securities that are sold on Wall Street.

Last year, 11.3% of U.S. home purchases were made by investors, the highest portion on record, according to CoreLogic Inc. This year, shares of big rental firms Invitation Homes Inc. and American Homes 4 Rent have outperformed the broader stock market, surging 36% and 27%, respectively.

Roofstock Chief Executive Gary Beasley previously ran Mr. Sternlicht’s publicly traded rental company, which is now part of Invitation. He said his new venture aims for investors who want more direct exposure to rising rents and home-price appreciation than they might get buying single-family home stocks, but who aren’t interested in becoming landlords themselves.

“It’s kind of like how you can go to a store and buy ingredients and cook your own dinner and clean up afterward, or you can just go to a restaurant and eat,” he said. “This is eating at the restaurant.”

The idea: Buying stakes in a number of individual homes lets investors pinpoint their investments without concentrating bets on a single property, Mr. Beasley said. That is a contrast to buying shares in outfits like Invitation, which owns more than 80,000 homes across the country.

Roofstock, which holds a 10% stake in each property, has so far offered shares in about 50 houses. They are located around Indianapolis, Atlanta, Houston and Dallas, all popular with Wall Street’s rental players for their job growth and relatively inexpensive homes. The properties range from a $96,000 split-level east of Atlanta that is walking distance from two schools to a $245,000, five-bedroom brick ranch in a sprawling subdivision outside Dallas. A 10% share in the former costs $5,040; $12,500 in the latter.

The risks, of course, are the same as owning rental properties outright: pricey repairs pop up, tenants turn out to be deadbeats, a big employer bolts town, the neighborhood falls out of favor. Plus, there are management expenses paid to Roofstock’s property-management arm, which finds tenants, collects rent and maintains the properties.

If all goes well, though, Roofstock says the shares can return between 5% and 7% annually.

One of the homes Roofstock is selling in pieces is a 17-year-old three-bedroom, two bathroom house in Temple, Ga., that Roofstock spent $145,000 purchasing and renovating. The company financed half with a loan, leaving $72,500 in equity, and set aside 2% of the home’s value, or $2,900, in a reserve account for repairs. Dividing the resulting $74,500 into 10 shares makes them $7,540 apiece.

Over the course of a year, the property’s $1,200 monthly rent—minus a 5% cushion for vacancy and about $9,500 in estimated annual costs like property taxes, loan payments and management expenses—leaves $4,157 in annual profits, or about $416 per share, according to Roofstock.

That would generate an annual yield of about 5.5%. But two months of missed rent could cut that return roughly in half.

And what about investors who want to sell their shares? That is more complicated. Investors who purchase shares in Roofstock homes are prevented from selling for six months. After that lockup expires, investors are free to sell their shares for whatever price they can fetch on Roofstock’s platform. If they don’t find a buyer for a price they like, Roofstock will buy back shares at a 7.5% discount to market value.

Distributions are paid quarterly. The shares currently are available only to accredited investors, generally those earning more than $200,000 a year or with a net worth of more than $1 million excluding their primary residence. Mr. Beasley said Roofstock hopes to open the program to all investors by next year.

Updated: 1-7-2020

Point, Click, Own: Firms Transform How to Buy Investment Homes

Real estate startups exploit new technologies and data on house rentals developed after the housing bust.

Buying a home as an investment property has long been too complex or daunting a process for all but the wealthy. Thanks to a group of real estate startups, that may be changing.

The companies enable individuals to assemble a portfolio of rental homes throughout the country relatively hassle-free. Without ever visiting the properties, investors can buy and manage homes with a few clicks of a mouse or taps on the phone.

Roofstock, an Oakland, Calif.-based firm founded in 2015, offers an online marketplace where buyers and sellers trade about 500 rental homes a month in cities such as Atlanta, Indianapolis and Houston. The homes, which sell for prices ranging from $50,000 to $400,000, typically come with tenants in place.

REI Nation LLC and JWB Real Estate Capital are getting into what is known as the turnkey business in regional markets. They buy, upgrade and lease houses, then sell them to investors.

Other firms are poised to offer investors ways to build their residential portfolios sliver by sliver. Compound, a startup based in New York, is launching an app this month that will enable investors to buy small stakes in condominiums in cities such as New York, Miami, Nashville and Austin. The minimum investment: $50.

Compound empowers even investors without much cash “to participate in the growth of cities where they live and work but can’t afford to buy,” said Janine Yorio, the firm’s co-founder and chief executive.

The proliferation of the businesses reflects how small investors are searching for fresh alternatives when ultralow interest rates have made bondholdings less attractive and a record stock-market run strikes many as vulnerable to a pullback.

Firms like REI and JWB say that investors are getting annual returns after fees and expenses of 7% to 9%. That compares to the yield on the benchmark 10-year U.S. Treasury note, which has been stuck below 2% for months. Home buyers also keep any profit from selling the properties.

“Investors are looking under every rock for ways to have additional cash flow,” said Paul Pagnato, founder and chief executive of PagnatoKarp Partners, LLC, a Reston, Va., firm that advises families on investments. Real estate is particularly conducive to that, he said.

Homebuying services are also taking advantage of new technologies and data on house rentals developed after the housing bust. Firms like Blackstone Group Inc. and Starwood Capital Group bought tens of thousands of houses at discounted prices and converted them into rentals. Along the way, they figured out how to use the latest mobile and cloud-computing technology to manage and upgrade homes on a large scale.

Many of the entrepreneurs behind the new firms learned the business after working at the larger operations. Roofstock founder Gary Beasley was one of the players behind Starwood Waypoint Residential Trust, which went public in 2014.

“We didn’t know when we first started buying homes whether we could do it profitably on any scale,” he said.

Roofstock, whose financial backers include Bain Capital Ventures, recently started a new business which enables investors to buy stakes as low as 10% in single family houses. Roofstock retains at least a 10% stake in each house. The rest of the equity is divided up among investors.

Each startup operates a bit differently, but many follow a similar formula. In a typical deal at JWB, the firm buys a house in the Jacksonville, Fla., region and upgrades it for a total cost of, say, $130,000. JWB also finds a tenant for it paying about $1,175 a month. Then it sells the tenanted house for $150,000. Investors typically pay with about 20% in cash and borrow the rest.

Owners can manage the house themselves or hire a local firm. Most use JWB’s management arm. Rent increases and an eventual sale of the house can boost returns. But investors shouldn’t expect to make a quick buck by flipping the house soon after they buy it, cautioned Alex Sifakis, JWB’s president.

“This isn’t a get rich quick scheme,” he said. “You’re buying for market value. We tell clients they should hold for a minimum of five years or you shouldn’t buy it.”

Even holding it entails risks. Investors who buy houses sight-unseen can be hurt by an unforeseen maintenance bill or by the vagaries of the rental market. They might even have to reach into their own pockets if they have borrowed to buy the house, and home prices tend to flatten or fall during tough economic times.

“You’re getting equity like returns so you need to take some risk,” Mr. Beasley said.

Still, the appeal of a steady return from rental properties is attracting a crowd, especially as rents rise throughout the U.S.

REI got its start in Memphis, Tenn., developing rental housing for Federal Express pilots who wanted to invest in single-family homes without the headaches of management, said Chris Clothier, a partner in the family-owned firm.

Last year, REI sold about 1,000 homes in eight cities. “There are investors that want to swing the hammers and slap the paint themselves,” Mr. Clothier said. “But there are way more investors who want to be passive.”

Billy Maloney, a 37-year-old graphic designer in Los Angeles, said he had bought and sold investment properties through REI to grow his retirement savings. He owns a home in Memphis, one in Jacksonville and has bought and sold two in Cleveland.

“ I’m…thinking like an investor where your money goes further out of state,” he said.

Updated: 2-4-2021

Commercial Property Giant Moves Into Rental Houses

Jones Lang LaSalle takes minority stake in Roofstock, which manages rental properties for big investors.

Jones Lang LaSalle Inc., JLL -4.49% a major player in office leasing and management, is moving into the red-hot market for rental homes.

The commercial property giant known as JLL has struck a pact with Roofstock, which manages rental properties for big investors and operates an online marketplace on which income-producing single-family homes trade.

Roofstock is buying from JLL a real-estate asset-management platform geared to smaller investors. JLL is adding an undisclosed amount of cash in exchange for a minority stake in Roofstock. The companies also forged a commercial agreement in which Roofstock will serve JLL’s clients around the world who want to own pools of rental homes.

“It gives us credibility with a lot of their customers who are looking to invest in U.S. housing,” said Roofstock Chief Executive Gary Beasley. “They can dial in a strategy and our team will build those portfolios for them and manage the properties.”

Rental homes have been a hot investment since last decade’s foreclosure crisis, which made millions of U.S. homes available to investors for rock-bottom prices and created droves of renters. Advances in mobile technology and cloud computing enabled what had always been a local business to be administered from afar.

In the ensuing years, landlording gained popularity among investors large and small, who struggled to find steady returns on other investments given historically low interest rates.

The pandemic added allure when big home-rental firms reported record occupancy and steady rent collection despite the economic shutdown. Suburban rents shot up as the work-from-home crowd sought space for home offices and yards for children and dogs. A new crop of big investors, including those who had previously focused on now-shaky corners of the property market, shifted billions to buy rental houses. Many built houses expressly to rent.

“It’s a pretty resilient income play,” said Richard Bloxam, who leads JLL’s capital markets business. “The ability to collect rent in 2020 was very high.”

Besides the consistency of the American rent payer, owning houses allows investors to spread out risk across many assets and in different parts of the country, he said.

Executives said they expect the deal to result in more international investors buying U.S. rental homes and to create the opportunity for Roofstock to open rental-home markets where JLL operates abroad.

Stessa, the asset-management platform that Roofstock is acquiring, allows mom-and-pop real-estate investors to track and size up the performance of their holdings. “These investors have been limited historically about what they know about the market,” said Yishai Lerner, co-head of JLL’s technology group.

JLL, based in Chicago, has previously branched into industrial properties and apartments. It also expanded in asset management and in its capital markets business, selling and financing commercial property.

Lately the firm has been a popular pick among investors looking to play the economy’s reopening. Its shares have shot up 95% since late September. J.P. Morgan analysts said they expect the firm’s earnings to return to pre-pandemic levels while it will continue to benefit from the cost cuts and investments it has made recently.

“There are long-term trends that should benefit the larger commercial real-estate service companies, namely the trend toward outsourcing of corporate real estate and the institutionalization of real-estate investing,” that bank’s analysts wrote in a note to clients.

Updated: 4-16-2021

Are Millennials Finally Ready To Binge On Housing?

America’s largest generation has long struggled to gain a foothold in the housing market. There are signs of change even as many obstacles remain.

According to one Census Bureau survey, 2020 was the first year on record (going back to 1947) in which the number of households in the U.S. declined. According to another Census Bureau survey, 2020 saw the second-biggest increase on record (in this case going back to 1955) 1 in the number of U.S. households.

This disagreement can be chalked up partly to the Covid-19 pandemic, which sent response rates to government surveys plummeting over the spring and summer, and also to the timing of the two surveys — the first was conducted in March and April, the second over the course of the year. But it turns out that estimating how many households there are in the U.S. is always hard. “For such a basic and fundamental measure, the number of households in the U.S. is largely a mystery,” three researchers from Harvard University’s Joint Center for Housing Studies lamented in 2015.

It’s a really useful number to know, though, given that household formation drives demand for housing, and by extension demand for lots of other things. In general it follows demographics, but over the past decade-plus the progression of the giant millennial generation through its 20s and 30s — usually prime years for forming households and buying first homes — hasn’t been accompanied by the expected amounts of household formation or home buying.

The consumer behavior of millennials has been the phenomenon that launched a million takes, with early arguments that they had fundamentally different priorities and values from their elders eventually giving way to an acknowledgement that no, they were mainly just broke. As three Federal Reserve Board economists put it in 2018:

We found that many of the demographic attributes associated with millennials—such as higher rates of racial diversity, higher educational attainment, and lower rates of marriage—are consistent with secular trends in the population and are therefore not the aberrations of a single generation. We showed that millennials do have lower real incomes than members of earlier generations when they were at similar ages, and millennials also appear to have accumulated fewer assets.

The distributional financial accounts that the Fed started publishing on a quarterly basis in 2019 allow us to compare the household net worth of the millennials, defined here as those born from 1981 through 1997, with that of generation X (1965-1980).

This understates the per-person gap, given that as of 2019 there were 17% more millennials than generation Xers. Still, the millennials had been catching up in recent years as the impact of Great Recession waned, and while the gap had widened again since early 2019 that was mainly because the gen Xers of circa 15 years ago were enjoying the upside of a housing bubble that would soon have its downside (which was in turn followed by a lot more upside; at the end of last year gen X controlled an estimated 27% of U.S. household wealth).

That brings us back to household formation, and estimating its growth or lack thereof. The two different Census Bureau surveys mentioned above are both offshoots of the Current Population Survey, the monthly interrogation of about U.S. 60,000 households from which the unemployment rate, labor-force participation rate and the like are derived. The Annual Social and Economic Supplement to the CPS is a more-detailed survey of about 100,000 households usually conducted mostly in March, while the Housing Vacancy Survey is based on the monthly CPS but also includes the 10,000 or so housing units selected for the CPS each month that turn out to have nobody home.

The Census Bureau’s 3.5-million-household American Community Survey also delivers annual estimates of the number of households, but it has only been in existence since 2005 and isn’t conducted in decennial census years such as 2020. Then of course there’s the census itself, which in theory surveys everybody and thus delivers what should be the most reliable household numbers, although they’ll be coming out extra late because of the pandemic and aren’t entirely compatible with the higher-frequency estimates anyway.

Here’s household formation as measured by the two annual surveys with 2020 numbers and long records, averaged out over three years because the results can be pretty volatile year-to-year, as compared with the Census Bureau’s count of housing starts, also averaged over three years.

The three series tend to follow similar if far from identical courses, most recently with the big drop-off in household formation and housing starts during the housing bust and modest recovery in early 2010s. Over the past five years, though, the ASECS survey has been showing a tailing off of household formation while the Housing Vacancy survey and housing starts have been showing an acceleration. We probably shouldn’t take the 2020 numbers from either survey too seriously, but the divergence was apparent before then.

The upward trend does seems a bit more likely to be real, given that the other annual estimates of household formation, from the American Community Survey, also show a rising trend line through 2019. There’s also the unmistakable evidence of a real estate boom in 2020, with new-home sales rising 20% and existing-home sales 5.6%, both reaching levels not seen since 2006.

But while some of 2020’s home buyers were new-household-forming millennials, most weren’t. The average age of buyers rose to an all-time high of 55 in 2020, according to a National Association of Realtors survey, the 31% first-time buyers’ share was the lowest since 1987 and the 22% of first-time buyers moving directly from a family member’s home (forming a new household, that is) also represented a decline from previous years.

According to a recent Apartment List analysis of CPS data, millennial home-ownership rates have risen sharply over the past five years — which you’d expect as more millennials age into their 30s — but continue to lag those of previous generations. At age 30, 42% of millennials own homes; for gen X that was 48% and for baby boomers 51%.

This could signify a lot of pent-up demand. “There would be some 5.7 million additional households today if Americans formed households at the same rate they did in 2006,” Zillow Group Inc. economist Jeff Tucker wrote in December, “a testament to widespread difficulties in securing affordable, accessible housing over the past decade-plus but also a potential indicator of enduring housing demand to come.”

Then again, those “widespread difficulties in securing affordable, accessible housing” could persist and possibly worsen as tight supply and rising demand drive up prices. As the millennials-focused Business Insider pithily summed up in a headline this week, “Millennial homeownership is causing the US to run out of houses.”

Near the beginning of this column I wrote that “household formation drives demand for housing,” but it’s clear that over the past decade-plus the supply of affordable and appropriate housing has to a large extent driven household formation. Inadequate new construction in and near places that created lots of jobs, such as New York City and the San Francisco Bay Area, drove prices so high that it was hard for even well-paid young workers there to strike out on their own.

Meanwhile, the houses that were being built around the country grew increasing large and out-of-range for first-time buyers, with the share of new single-family homes with four bedrooms or more rising from 18% in 1985 to an all-time high of 47% in 2015 even as average household size fell.

The pandemic did make all those extra bedrooms seem a bit more sensible, both as home offices for remote work and as refuges for adult children fleeing locked-down cities. It’s also possible that the grand experiment in working from home that Covid-19 unleashed will break through some of the housing logjam for millennials, both by reducing real estate prices in super-expensive cities and making it easier for young professionals to do big-city jobs while living in less-expensive locales.

There are even some extremely modest signs that this is happening: The percentage of 18-to-29-year-olds living with their parents has been rising since the 1960s, according to a Pew Research Center analysis of census and CPS data, and reached an all-time high (going back to 1900) of 52% over the spring and summer.

But more recent CPS data-crunching by Harvard’s Joint Center for Housing Studies found that by October the percentage of 25-to-29-year-olds living with parents had actually fallen below 2019’s levels (the 18-to-24 living-at-home percentage remained elevated because so many colleges and universities were still operating remotely). Maybe some of them got a good deal on a Manhattan apartment!

Updated: 6-20-2021

Napa Valley Feud Pits Real-Estate Startup Against Homeowners

Pacaso buys high-end homes and sells ownership shares for weekend getaways, alarming some of the neighbors.

Pattie Dullea stepped out one morning last month in Napa, Calif., to have a word with the young man who pulled up in an antique sports car to tour the home across the street.

“You might not want to buy there,” she said she told the man, who was there to consider investing in the home. “We don’t want our neighborhood to turn into a timeshare neighborhood. And we are going to do everything in our power to make that not happen.”

Such scenes are becoming more common in California wine-country towns where a real estate startup called Pacaso is snapping up million-dollar homes, then selling ownership shares to second-home searchers looking for weekend getaways.

Pacaso, based in San Francisco, was co-founded by Zillow Group founder Spencer Rascoff, and it counts former Starbucks Corp. chief executive Howard Schultz among its earliest investors. The company claims to have reached unicorn status faster than any company in U.S. history, hitting a $1 billion valuation within six months of launching last year.

The Covid-19 pandemic was a boon for the business. Remote work inspired many to spend time away from cities, but rising home prices and a short supply of homes meant fewer people could afford to buy an entire second home of their own.

The opposition to Pacaso in Napa is the latest attempt by homeowners to block real-estate companies from changing how homes in their neighborhoods are occupied or owned.

Homeowners and local governments have for years fought the spread of short-term rentals made through platforms like Airbnb, and high demand during the pandemic for both vacation and primary residences has only intensified the conflicts.

Austin Allison, Pacaso chief executive and a Napa resident, said the local unpleasantness was misplaced outrage about the larger shortage of affordable housing in California. The company’s 14 homes in the region, which the company markets to up to eight partial owners each, are a drop in the bucket, he said. “This housing crisis is a big problem that’s way bigger than Pacaso,” he said.

Homeowners in the Napa Valley say their quiet residential cul-de-sacs are on the brink of becoming high-traffic party zones and no longer affordable to local families. Anti-Pacaso signs dot property lines. Groups opposing its presence have organized in several towns: In Napa, there is Communities Against Timeshares (Cats); in Sonoma, Sonomans Together Opposing Pacaso (Stop) is active; and in St. Helena, Neighborhoods Opposing Pacaso Encroachment (Nope).

The opponents can count early victories. On Ms. Dullea’s street in Napa, Pacaso said this month it would no longer market shares in the house it bought there. The company cited community feedback in its decision to sell the house, which it will sell to a single owner.

To calm concerns about reducing the stock of relatively affordable housing, the company also agreed to only buy homes priced above $2 million. And to help keep the peace, it has placed decibel limiters on stereo systems in its homes.

Napa Valley’s resistance could become a roadblock for Pacaso’s model, which relies on offering luxury-home stays inside traditional residential neighborhoods and away from typical vacation zones. The company so far has launched in 20 U.S. markets and has plans to expand to Europe.

Mr. Allison said the pushback in Napa likely would influence how the company buys homes in the future, but said it would remain committed to its core idea of acquiring homes in places like the Napa Valley, where second homes are already common.

“Luxury homes in luxury neighborhoods make terrific Pacasos,” he said.

Pacaso sued the city of St. Helena, which told the business that its homes are considered illegal timeshares under a city ordinance. Pacaso says that its properties are technically not timeshares. A lawyer for St. Helena maintained the city’s position that the Pacaso timeshares violated the law.

Napa Valley has a long history of conflict between the people who live there and tourists, and some longtime residents say their towns have struggled to strike a balance. In the 1980s, locals protested the construction of the Napa Valley Wine Train, a rail project intended to ferry tourists between wineries and resort towns, though they failed to stop it.

Pacaso has accused some locals of trespassing and intimidation. One Pacaso executive filed a police report after someone responded to an online listing with the message, “I will burn down any home you buy in Napa,” according to a company spokesman. But the residents involved in protesting against Pacaso say that they don’t trespass or act aggressively.

“I think people need to just chill out and mind their own business,” said Will Maroun, a Pacaso customer in St. Helena who bought a one-eighth share in a house with backyard views of the vineyards. Mr. Maroun was hosting an outdoor dinner for four at 7 p.m. one evening when a neighbor called a noise complaint into the police, he said.

The police ordered him to turn off his music, but Mr. Maroun has continued to enjoy poolside tunes since. “They just haven’t called the cops.”

On Old Winery Court in Sonoma, residents of an eight-home cul-de-sac say Pacaso is the big problem. They are hoping to duplicate the victory won by Ms. Dullea and her neighbors in Napa. They are upset about the new house a former neighbor built, then sold to Pacaso this spring for $4 million. Now they worry their tightknit community will become overrun with part-timers coming and going to the house.

Every yard now has an anti-Pacaso sign, and some cars parked on the street have them, locals say. When a prospective buyer arrives to tour the property, residents alert each other and then step out of their houses, making their presence known, said Nancy Gardner and Carl Sherrill, retired homeowners opposing Pacaso.

“It’s nothing personal,” Mr. Sherrill said. “You might be the nicest people in the world. But we’re going to be angry. Because we’re angry at Pacaso.”

Updated: 6-23-2021

Renters Could Collect Home Down-Payment Points With Credit Card

A real-estate startup is proposing that cardholders could convert points into cash to purchase a property.

A new credit-card concept would allow cardholders to pay and build credit on their largest monthly expense: rent.

Bilt Technologies Inc., a real-estate startup, is joining with Evolve Bank & Trust and Mastercard Inc. to launch a credit card designed for renters. Users can accumulate rewards points through rent and other spending, with no fees charged to the tenant or the landlord when paying rent on the card, according to Bilt.

Rewards points can then be put toward rent and other purchases, even toward a down payment on a house. “We believe paying rent should build your credit score because it’s your single largest liability,” said Ankur Jain, founder of Bilt.

Many landlords already accept credit cards, but they typically pass on processing fees to renters, often totaling about 3%. For landlords that don’t accept plastic, Bilt says it will mail landlords paper checks on behalf of the tenant, then charge the renter’s credit-card account, with no fee.

The partnership can afford to offer no-fee rent payments because of the fees that Evolve and Mastercard will collect from all other types of spending on the card, according to Bilt. The card program also attempts to incentivize non-rent spending by increasing the rewards for rent when cardholders spend more on everything else. Mastercard declined to elaborate further on how it will profit from the card without fees on rent payments.

Unlike homeowners, who build equity with every monthly mortgage payment, renters get no long-term benefits from their monthly payments. Paying by credit card gives renters some additional value that could help them buy a house, Bilt says.

Cards do this partly by improving renters’ credit scores. The Bilt cards, set to launch Tuesday, also do this because points can be used for a down payment.

When a card user goes to buy a home, Bilt says it will convert rewards points into cash and deposit the money into the home-sale escrow account. “It should be a path to homeownership,” said Mr. Jain.

Still, it would take a lot of rent money and time to build enough points to put a dent in a down payment. For the typical card user spending $1,500 on monthly rent for 10 years, Bilt estimates the accumulated points savings for a down payment would equal about $6,000.

In recent years, financial-technology companies have come up with more ways to allow renters to either finance rent payments or put them on credit cards.

But credit counselors often warn against using credit to pay rent, because many cards come with high interest rates and because rent is typically such a large expense. The average annual percentage rate on the Bilt card, for example, will run between 15% and 22.5%. The highest rate for subprime cardholders will top out at 30%.

Bilt hopes to avoid letting the card become a debt trap through a tool that disables rent payments when users don’t have sufficient cash savings in a linked bank account. Card users deemed higher risk will be required to use the feature. For other users, rent still has to be paid off within one month and no interest will be collected on rent spending, according to Bilt.

Home prices have rallied during the pandemic, and the relative shortage of homes available to buy has produced the tightest housing market in many years.

The median sales price of a U.S. home that was financed with a mortgage was $306,500 during the first quarter of 2021, according to real-estate data provider Attom Data Solutions. The median down payment was $18,700. The median age of a first-time home buyer was 33 years old, according to a 2020 report from the National Association of Realtors. In the hot housing market, more buyers with small down payments are seeing their offers rejected in favor of competitors who can put more money down.

The Bilt card will allow rent payments to be made to any landlord, but several large apartment operators also plan to accept the card payments as part of existing loyalty programs.

These landlords include AvalonBay Communities, a publicly traded company that owns nearly 80,000 apartment units. Karen Hollinger, a senior vice president with AvalonBay, said that such rewards and loyalty programs are common in the hotel industry and are now being used by apartment owners as tenant-retention and marketing tools.

This Startup Wants To Sell You A Slice of A Rental Home (#GotBitcoin?) *******


All Hail ‘Dormzilla,’ The Monster Dorm The Internet Hates

A billionaire’s plan to build the largest college dormitory in the world at UC Santa Barbara ignited a firestorm of criticism. But there’s an even bigger outrage outside Munger Hall.

The University of California, Santa Barbara (UCSB) has a plan to build a new dormitory, and the internet is not happy about it.

Last week, renderings and floor plans of an 11-story building called Munger Hall erupted across social media after the Santa Barbara Independent reported that consulting architect Dennis McFadden resigned from the university’s design review committee.

In an op-ed for the Los Angeles Times, McFadden explained why, calling the building “a misguided experiment that will affect the health and safety of multiple generations of undergraduates who will be forced to negotiate the design’s gross miscalculations and unintended consequences.”

Many were quick to agree. Architecture critic Paul Goldberger called the proposed building a “jail masquerading as a dorm.” Others likened it to a “human rights violation.”

But is the mega-dorm — dubbed “Dormzilla” by the Independent, which has been following the story intently — really so bad?

It’s true that the proposed design is profoundly weird: The plan is to house nearly 5,000 students in a 1.68 million-square-foot building — the largest college dormitory in the world. This would transform a corner of the UCSB campus into the eighth-densest neighborhood on the planet.

Students would get small bedrooms, with eight units sharing a kitchen and bathroom. Much of the building is reserved for common study, dining and recreation areas. Instead of windows and natural light, most interior rooms would be lit only by porthole-like fixtures. Parking is strictly limited to bicycles.

At $1.5 billion — a mind-boggling per-unit cost of $330,687 — the dorm is partially funded by its mastermind, billionaire investor Charlie Munger, who donated $200 million to the university, with the caveat that his building design must be followed.

A vice chairman at Berkshire Hathaway Inc. with a side passion for architecture, the 97-year-old businessman has made similar arrangements at other schools, including Stanford and the University of Michigan. The residence hall for Michigan graduate students that Munger helped fund and design is among the more popular housing options on campus.

And if you can get past its monolithic city-in-a-cube scale, bring the costs down, and hammer out minor issues like fire safety and what to do if the power goes out, Dormzilla is fine.

It’s perhaps best understood as an extreme but necessary response to the deepening student housing crisis that leaves one in 20 UC students homeless. As KCRW reported, the problem is especially acute at UCSB, where many students have taken to sleeping in cars and crashing on couches, if not dropping out altogether.

The university could soon face legal penalties if it doesn’t build more student housing. Dormzilla would help to solve that.

Say what you will about Munger’s architecture chops, but the man has a plan.

Nor are the proposed living standards particularly egregious. Dormzilla’s units may lack windows, but each student gets a private room with a desk, bed and space for personal belongings. (Down at the University of California, Los Angeles, many undergraduates sleep three to a room on bunk beds, and pay handsomely for the privilege.)

And for all the stink that has been made over four students sharing a bathroom, this is hardly an unusual ratio for communal living. It may not sound dreamy, but it beats living in a car.

“It’s a game of tradeoffs,” Munger told Bloomberg News. “If you build a big square building, everything is conveniently near to everybody in the building. If you maximize the light, you get fewer people in the building.”

Indeed, say what you will about Munger’s architecture chops, but the man has a plan: With its sparse private accommodations and lavish public spaces, the building is conceived to coax students out of their rooms and into the community. That was once understood to be the entire point of the more-spartan dormitories of the past.

You go there to sleep and shower, but otherwise, you’re out and about on campus. With many new student residences resembling luxury apartments — with astronomical boarding fees to boot — Munger’s design is an earnest, if outlandish, attempt to return to that vision of dorm life.

The added irony in all of this is that Dormzilla represents a tradeoff that many urban dwellers understand perfectly well. Like moving into Munger Hall, choosing a dense urban environment over a suburban one often means settling for a cramped apartment and giving up your car, yard and a measure of privacy.

In exchange, the restaurants are your dining room, the libraries your office, the bars your parlor, the theater your entertainment room, and the public parks your lawn. In other housing contexts — see Los Angeles’ inward-looking bungalow courts — urbanists rightly pine for this space-efficient style of communal living. Is Dormzilla really so different?

Of course, the root cause of this student housing crisis — the reason the university finds itself needing a behemoth like Dormzilla — is the refusal of UCSB’s neighbors to allow housing construction.

Like so many towns and cities in California, the communities around the university are in the thrall of single-family zoning policies that make multifamily developments all but impossible, forcing students and staff to either live far from campus or pay inflated housing prices.

In neighboring Goleta, a segregationist zoning code bans apartments nearly citywide, while in unincorporated Isla Vista, densities are strictly capped at 20 units per acre.

The city of Santa Barbara has permitted fewer than 500 apartments over the past half-decade — half as many units as down-and-out Detroit built last year — despite enormous demand. (For further context: Each floor of Munger Hall would have more than 500 units.)

To go out on a limb, Dormzilla is hardly a perfect project. Its location on the periphery of campus is far from ideal. Its costs are comically high, even by California standards. The long corridors seem dreary and repetitive. It’s not the dorm that I — or evidently many other people, trained architects or otherwise — would design.

But when you follow housing fights for long enough, you start to realize that there are a million reasons to oppose every new development. This building requires more facade articulation or fewer stories; that one lacks yards and parking. The NIMBY impulse is an unlimited renewable resource, forever coming up with superficially convincing reasons for why nothing should ever be built anywhere.

The only way to overcome it is to remain true to one simple fact: We need housing. If we made it easier to build, there would be more to go around. And perhaps some of those new apartments could even come with windows.


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