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    Real Estate Fintechs Try Their Hand at Solving the Housing Crisis

    The US is in the midst of a housing crisis. Home prices have become unattainable—a problem that will only be exacerbated by rising interest rates—and nearly half of apartment renters pay 30% or more of their income on rent. Almost all experts, conservative and progressive alike, agree that the high cost of housing is the effect of a severe supply shortage. The most recent research from Freddie Mac estimates that the US is short 3.8 million homes to keep up with new housing formation. That number includes both rentals and owned homes. 

    In the last few years, the housing shortage has deepened, and commercial real estate stakeholders have sought to provide some level of relief. Government officials have modified development regulations and increased incentives, developers have ramped up affordable projects and capital providers are rolling out new loan products to fund affordable housing. Now, the technology industry is trying its hand. 

    A new generation of fintech companies are emerging to ease the pain points in the apartment rental market. These companies are addressing the experience of renting an apartment at every step, and in the last nine months, they have raised billions of dollars in venture funding, setting them up to take on the industry. 


    In the current supply-constrained market, securing a quality apartment has become a “competitive sport,” according to one article in the LA Times earlier this year analyzing the supply shortage. One apartment hunter contacted more than 50 landlords before finally getting an apartment, and it is a story that is becoming more common. Research from CBRE shows the national apartment availability rate is at a low of 2.3%, down 2.5% from a year ago. 

    While technology can’t create more supply, new start-ups are streamlining the application and qualification process to make it easier and faster for prospective tenants to win an apartment. Companies like Canopy verify an applicant’s identity, income, credit score and rental history and collect the information all in one place, essentially becoming a renter’s passport. The qualification information—which includes only what is pertinent to protect privacy—is shared directly with the agent or landlord to make the apartment hunt easier for everyone. Canopy has $9.5 million in venture capital, and has completed its seed round. 

    Security Deposits

    The initial cost to rent an apartment is a major barrier to many renters. Upon approval, renters not only hand over the first rent payment, but also a security deposit, which is often equal to one month of rent. With 64% of Americans living pay-check to pay-check, the cost of a security deposit can be prohibitive to securing housing.    

    Several technology start-up companies have emerged to ease the burden of move-in expenses by covering the security deposit. Companies like TheGuarantors, LeaseLock, Rhino and Jetty pay the renter’s security deposit in exchange for a low monthly fee, around 3% of the rent, and serve as a lease guarantor for the landlord, mitigating risk if the tenant is evicted or stops paying rent. These companies have gotten a lot of attention from venture funds. TheGuarantors recently secured $50 million in its Series C round, and LeaseLock raised $52 million in its Series B round last year. 

    [Ebook] Discover the data that’s necessary to bring complex real estate  projects in on time and under budget.

    Paying Rent

    In the last year, US apartment rents have increased more than 15%, bringing the national average rent to a record $2,007 per month. For context, the previous high was $1,830 in 2019. Rent burden is crippling American families. As of August 2021, 6.2 million renters were behind on their rent payments, owing an estimated $16.8 billion. One way to aid renters in making payments is through a flexible payment schedule that gives occupants better control over their finances. 

    Rental fintechs are carving a pathway for renters to do just that. Jetty is leading the pack. It launched Jetty Rent late last year, a service that essentially gives renters a loan at the beginning of the month to make the rent payment to their landlord. The renter then has until the 24th of the month to pay it back. The service is available for a flat fee of $15 per month with no late fees or interest payments. Jetty raised $23 million to fund the start-up, which could revolutionize the traditional rent payment model. Start-ups Bilt and Flex offer  similar monthly loan services to give renters more flexible payment options. 


    Building wealth is a challenge for renting families. While the pandemic helped to boost personal savings accounts—thanks to a combination of stimulus money and stay-at-home orders that made it difficult to spend—nearly half of all Americans are contributing less than $5,000 annually to their savings accounts. But, what if you earned returns from your monthly rent payment? Venture-backed start-up Up&Up is making that possible. 

    Up&Up gives renters a portion of the monthly profits from a rental property. The money collects in a separate account, inaccessible to the renter, and when the lease term ends, the renter has the option to use that money to purchase the property; move the savings to another Up&Up rental property; or cash out for 90% of the value. Up&Up estimates that a family can earn an average of $36,000 over 10 years, which is six-times the average net worth of families that rent. Last year Up&Up secured $275 million in venture funding.

    Home Ownership

    The housing shortage and subsequent record rental rates have made homeownership unattainable—but for many, that is still the ultimate goal. Tech company Divvy is putting renters on the path to homeownership through a rent-to-own model. Pre-qualified users pick out a home, and then Divvy makes the purchase and rents the property back to the user. The program includes a built-in savings feature that can be used for the down payment. At any time, the renter can purchase the house at a locked-in price, to eliminate concerns over rapidly rising home values, and most Divvy users are able to purchase the home within three years. The company shows a lot of promise, recently securing $370 million in funding and $1.2 billion since it launched in 2017. 

    Solving the housing crisis will require a multi-pronged effort from industry stakeholders, and most importantly, increased home and apartment construction. While these fintech companies are easing rental hardship today, technologies like Northspyre are helping developers make affordable housing projects pencil through predictive analytics and machine learning that can manage even the most challenging developments, ultimately helping to grow the housing supply and address the heart of the problem. Together, these new technologies are giving working families an opportunity to access safe, affordable housing and build wealth. 



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