Affordable housing startup raises $6.5m seed capital
LONDON: A new affordable housing startup has raised a seed capital tranche to enable a product roll out.
PadSplit, an Atlanta-based affordable housing tech startup, has raised $6.5 million in a seed round. Social impact and institutional investors contributed to the round, which was led by Core Innovation Capital and includes Cox Enterprises, Kapor Capital, Techstars Ventures, 1984 Ventures, The Impact Engine, Metaprop and Enterprise Community Partners. Arjan Schütte from Core Innovation Capital and Kathryn Petralia from Kabbage will join PadSplit’s board, according to a news release.
PadSplit creates incentives to provide safe and affordable housing to the workforce while also increasing profitability for property owners. Founder Atticus LeBlanc said a majority of the funding would go towards hiring and marketing over the next two years.
“We’re at 14 (employees) today and I would say over the next year, probably hiring another 10 more, (then the year after that) probably another 20 more,” he said.
In addition to the funding, PadSplit recently transitioned from a traditional C-corp into a public B-corp because the company is providing public benefit and affordable housing. Last year, PadSplit participated in the Techstars accelerator program.
“We’re just growing fast, no major pivots or anything like that,” he said.
Founded in 2017, PadSplit provides a shared housing experience — a “PadSplit” — with private bedrooms and fixed utility costs.
PadSplit members average $21,000 in income annually and report $460 in monthly savings between housing, utility and transportation costs. Property owners have reported increased earnings of more than 60 percent in net income.
Each home must meet specific design guidelines designed to exceed HUD standards, while members must pass a criminal background check and screening process to qualify.
“We believe that the people who serve our communities also deserve to live in our communities. To achieve this, we have to align incentives across stakeholders, including residents, cities, and real estate investors,” LeBlanc said in a prepared statement. “We also have to think about holistic solutions that move beyond just the physical structure of a home, or the limited focus on ‘housing costs’ to better address a resident’s budget. That’s why PadSplit factors in the expense and complexity of operating the home and the proximity of the home to transit, services, or employment centers. This injection of capital will allow us to continue to scale and help more individuals across the housing spectrum.”
In addition to the equity round of funding, PadSplit announced its intention to work with an Opportunity Zone fund to build new PadSplits in designated opportunity zones across Atlanta. The fund will build new homes for permanent affordable housing that will be held for 10 years and managed under the PadSplit model. The Opportunity Zone program was established by Congress in the Tax Cuts and Jobs Act of 2017 and encourages investors with recently realized capital gains to invest in local businesses, real estate or development projects in exchange for a reduction in their tax obligations.
“It allows investors with capital gains to make qualified investments in specific opportunity zones,” LeBlanc said.
In the last year, PadSplit has created more than 200 affordable units without any public subsidies. The company serves five jurisdictions in metro Atlanta and is looking to partner with other markets and real estate investors interested in solving the affordable housing crisis.
“The goal for the year is to hit 1,000 units this year and expand to other markets,” LeBlanc said.
