COVID-19 Blew Up the Business Model

Nice house in San Jose. Hope they work it
out with the owner (Chron photo).

It was a great pre-coronavirus housing concept.

With San Francisco and prime Silicon Valley studios costing close to $3,000 per month, four unrelated individuals could be eager to house-share by paying $1,750 ($7,000 total rent) for a four-bedroom house. The middleman would lease the home from an owner-landlord for $5,000-$6,000 and would manage the hassle of credit and collections from four different renters. The intermediary would find a replacement if a tenant moved out--not too difficult in a hot job-and-housing market.

COVID-19 blew up the co-living business model. People lost their jobs and left the area. Many who kept their jobs didn't want to live with non-family members.

With the lockdowns dragging on for over six months the following headline was inevitable:

Bay Area co-living startup HubHaus implodes, stranding renters and homeowners

HubHaus, a venture-backed startup in the burgeoning new field of “dorms for grownups,” has imploded, stranding hundreds of renters and homeowners, mainly in the Bay Area.

The 4-year-old Los Altos company, which had raised $13.4 million, is undergoing “a closure and liquidation process, commencing Sept. 23, 2020,” it wrote in emails to homeowners and tenants. It’s laid off all employees, the letter said, blaming the coronavirus pandemic’s severe impact on housing. Several renters and landlords provided copies of the emails to The Chronicle.

“The company is unable to pay October rent,” the emails said, suggesting that landlords use security deposits to cover it. The emails said that tenants’ leases were being transferred to the homeowners.

When landlords go bankrupt, tenants who have paid rent are left high and dry when the bank takes over the property. When the middleman goes bankrupt, both the renters and landlords take a financial hit.

Nevertheless, there are the makings of an acceptable arrangement because the subleases "have been transferred to the homeowners." If the parties can direct their anger at HubHaus, they have a good chance of working out a deal with each other.