Atlanta affordable housing startup PadSplit Inc. raised a $20.5 million round, according to a Nov. 1 filing with the U.S. Securities and Exchange Commission.
Why it matters: PadSplit converts underutilized single-family homes or apartments into shared worker housing as a way to use the existing housing stock to increase affordable options. Lack of housing supply is one of the main obstacles to providing affordable living accommodations, according to the U.S. Department of Housing and Urban Development. The city of Atlanta and other community organizations are constantly brainstorming affordable housing solutions, including using public land and changing zoning regulations. Between 2000 and 2017, Atlanta’s median rent increased by over 70% but median income only increased by 48%, according to the city. An estimated 340,400 metro Atlanta households pay over 30% of their income for housing, according to the Atlanta Regional Commission. PadSplit’s co-living model could be an innovative solution to housing supply and affordability problems.
Inside the deal: PadSplit is backed by Core Innovation Capital, Impact Engine, Citi, Mark Cuban Companies and Cox Enterprises. The Series B round included 13 investors, according to the SEC filing. PadSplit raised $10 million to expand into other cities in August 2020.
About the company: The public benefit corporation was the fastest-growing company in the residential real estate category of Atlanta Business Chronicle’s Pacesetter Awards with a 179% year-over-year revenue growth rate. Founded in 2017, PadSplit has created more than 2,500 shared housing units and housed more than 4,800 people. Renters pay one weekly bill for a furnished room and utilities, and property owners earn a portion of that rent. No minimum credit score or security deposit is required. PadSplit claims that 88% of its residents have improved their credit scores and report saving $420 per month for housing, utilities and transportation. The startup has a fully distributed workforce and no physical office space.
What’s next: PadSplit will use this round of funding to increase the number of “PadSplit” houses, CEO Atticus LeBlanc said. Up to now, PadSplit property owners have been mostly professional real estate investors. PadSplit plans to source properties, provide financing to hosts and help convert the homes to co-living spaces. Housing supply is PadSplit’s biggest growth obstacle, LeBlanc said. By helping more people invest and create “PadSplits,” the company can expand faster. Right now, Atlanta is the startup’s largest market. The startup is focusing expansion on Texas and Florida and has a presence in Virginia and Wisconsin as well. PadSplit has more than 100 employees and plans to focus hiring in sales and operations.