Kathleen SayVon had spent weeks hunting for a new place to live in 2018, sleeping in her car and showering at the gym, when she finally caught a break. As she scrolled her phone in her car one evening, an ad for affordable rooms in the Atlanta area appeared on her Facebook feed. The price—$130 a week, with utilities included—was a rare find she could afford on the wages from two temp jobs she was working while attempting to finish her bachelor’s degree.
SayVon thought she’d hit the jackpot. “You’re like, ecstatic, you know?” she said.
A phone call and a $35 application fee later, SayVon, 59, had a new place to live—along with five roommates in their thirties who she had never met before, plus a pitbull. Some of the troubles SayVon soon ran into were standard roommate stuff: noise from other rooms that often kept her awake, disputes over cleaning the bathroom. Other parts of her new living situation were new to her, and more unsettling: No one seemed to know exactly who owned the house they lived in, only what happened if you missed a weekly rent payment: “They just locked them out of the house,” SayVon said, an eviction that could happen in an instant with the keycodes tenants had been given to access the property being changed remotely.
SayVon, in her search for cheap rent, had stumbled across PadSplit, a buzzy startup that aims to “disrupt” the affordable housing industry with a cross between boarding houses and Airbnb. Like the vacation rental app, PadSplit doesn’t directly own or manage properties. Instead, the “mission-driven marketplace” offers its own value proposition to owners and investors in single-family homes: By renovating properties to double or triple the number of bedrooms, owners can double their rental income. PadSplit then advertises, books, and processes weekly payments for rooms through its website, in exchange for a 12 percent cut from property owners. While other “co-living” startups like Common and WeLive target upper-middle-class professionals, PadSplit says the annual median income of its users is $22,000. Depending on the location and amenities offered, like a private bathroom, most rooms currently available on the site are listed at between $130 and $190 a week. Compare that to the average monthly rent of a one-bedroom—$1,020 in the Atlanta metro area, per the 2019 American Community Housing Survey, and increasing quickly—and you can understand the appeal.
This apparent win-win arrangement for landlords and renters is a key part of the pitch: PadSplit says it’s creating affordable housing through the private market, without waiting for the federal government to act. Depending on how you count it, the United States needs at least seven million more homes that are affordable to low-income families—meaning, in industry parlance, that they’re paying no more than 30 percent of what they make annually. PadSplit founder Atticus LeBlanc, an Atlanta-based real estate developer, contends that his approach can help fill this gap by subdividing existing homes into cheaper, smaller rooms. Building new housing requires time and money, the thinking goes; converting existing rooms takes much less of both. Since launching in 2017, LeBlanc told The New Republic, PadSplit reports adding more than 1,600 affordable units to the market “without requiring direct public subsidy.”
In a long list of purported supply-side solutions to the housing crisis—tax credits! Opportunity zones! Upzone everything!—this contribution is certainly an original one. To date, the start-up has attracted nearly $15 million in funding from venture capital firms and affordable housing developers alike. After launching in Atlanta, the platform is now active in cities like Houston, Texas, and Tampa, Florida, with plans to expand further.
For low-income tenants, so-called housing innovation has often gone hand in hand with housing instability. The federal government’s steady retreat from the business of providing housing directly during the last half-century has given way to a dizzying array of grants, tax credits, and public-private partnerships, most of which put tenants at the mercy of private developers. (These temporary public-private covenants were their own kind of disruption at the time.) A new crop of start-ups is turbo-charging this slow march toward privatization with tech’s “move fast and break things” ethos, promising to eliminate the market barriers to low-cost housing.
People need affordable places to stay, and PadSplit claims it has the solution. But SayVon and three other current and former PadSplit members told The New Republic that while they rented rooms from the company at moments when they had few other options, their stays were marked by negligent property owners, punishing fees, and capricious policies surrounding eviction and relocation—all with little formal recourse. Start-ups’ sudden enthusiasm for housing justice also raises larger flags: While they may share the goal of eliminating the stranglehold of single-family homes on our cities, there’s a big difference between creating new opportunities to profit from housing of last resort and providing dignified homes for all—a vision that housing movements are pushing in a demand for millions of new units of green social housing.
“We do need a way to generate lower-cost options,” Dan Immergluck, an urban studies professor at Georgia State University in Atlanta, told me. “But anytime you put housing and ‘innovation’ together, I worry.”
Atlanta’s housing woes follow a similar pattern to those in other fast-growing cities, such as San Francisco and Denver. Metro Atlanta has gained more than 700,000 people since 2010, and overall housing supply has failed to keep up. The crunch is most severe at the low end of the market, where just 23,000 units renting for $1,000 or less have been built since 2000, according to an analysis by the Atlanta Regional Commission. Rents around major employment centers have increased by about 50 percent in the last decade, while wages rose by just 15 percent.
Enter PadSplit. As with its sharing-economy forebears, the basics of PadSplit’s operations are couched in some inspired rebranding. Tenants who reserve rooms using the company’s platform are “members”; they pay “dues” in lieu of rent. They are encouraged to resolve conflict internally, using the PadSplit dashboard to give each other “shout-outs” or “call-outs” if needed. And they sign a “member agreement” instead of a standard lease, affording them a murky status under local landlord-tenant law.
Shared housing is certainly not a new concept. Flexible housing known as single-room occupancies, or SROs, was once a staple of the U.S. housing stock in major cities, catering to singles, recent immigrants, and factory workers. As recently as the early 1950s, SROs made up more than one-tenth of New York City rentals. But between the mid-1970s and 1990s, U.S. cities eliminated approximately one million SROs.
After launching in the Atlanta area in 2017, PadSplit initially operated under the state’s “innkeeper” laws for short-term occupancies. When tenants fall behind on rent, Georgia code requires landlords to serve legal notice and file in court to evict them; hotels and vacation rentals have far more leeway to remove or relocate guests who overstay their welcome. PadSplit’s model falls in a “gray area” between these laws, according to Margaret Kinnear, a senior attorney with the Atlanta Legal Aid Society. Her group has tried to assist tenants who have called their hotline to complain about lockouts, involuntary moves, and maintenance issues with PadSplit.
“We’ve had calls of either, ‘We’re going to put you out after Friday’ or, ‘We’re moving you to another location, and you have no choice in the matter,’” Kinnear said.
SayVon said that the latter happened to her following months of conflict with both her housemates and PadSplit personnel. Property owners, not the platform, are supposed to be responsible for maintenance, but not knowing who owned the property meant that SayVon and her PadMates had no clear recourse when issues arose. (Public records show that the property’s taxes are paid by an LLC registered in Winnekta, Illinois.) A mouse infestation in the house went unchecked, SayVon said, and she grew increasingly dismayed that other tenants burned incense and smoked weed indoors, scorching a hole in the floor and repeatedly triggering the fire alarm. She reported all these issues to PadSplit, and she said the company eventually responded by moving her, without her input, to another one of their houses with a vacancy.
“I was just like, ‘We pay our rent every week. Could you do what you’re supposed to do?’” SayVon recalled. After moving out of her second PadSplit home in 2019, SayVon found a subsidized apartment an hour outside of Atlanta, where her portion of the rent is fixed at $204 a month.
According to LeBlanc, PadSplit was initially advised that Georgia’s innkeeper laws were the most applicable to the company. But he said that for more than a year, PadSplit has followed landlord-tenant law in all jurisdictions where it operates, provided that a member has stayed for more than 30 days. A version of the membership agreement posted on PadSplit’s website as of early May stipulated that a user “can be kicked out immediately” for failing to pay on time.
The company said that this version was outdated, and has since updated its website with an agreement that advises, “This agreement and your membership may create a landlord/tenant relationship after 30 days of occupancy.”
Three recent PadSplit renters who spoke to The New Republic gave differing accounts of the company’s current policies. PadSplit arranged an interview with Keosha Roache, a 32-year-old Atlanta teacher who also appears in promotional materials on the company’s website. “I knew that PadSplit is literally just a tool and a resource,” Roache said. “You have to have a vision for yourself to move to the next level.” She said she had no complaints about maintenance issues or lockouts.
Court records show that in Fulton County, Georgia, PadSplit is currently facing small-claims suits from at least four renters alleging that the company damaged their belongings or attempted to evict them without due process within the last year.
One of them, Todd Griffin, filed suit against PadSplit in December 2020. He told me that he did so after the company locked him out over unpaid late fees. PadSplit’s stated policy is to assess a $25 fee each week that members have an overdue balance; once the total balance reaches $300, their membership can be “terminated,” according to the company’s website. Griffin said that this happened to him after he asked for a concession on a late fee resulting from a bank card error. He thought the fee was unfair, especially given that he and his roommates had dealt with prolonged heat and internet outages resulting from past-due utility bills for the property’s owner that arrived at the house, he said. Instead, $25 fees continued to accrue each week, until PadSplit ended his membership and changed the access codes to the house.
In order to regain access to his room, Griffin said he pawned some of his belongings and paid his balance, plus the application fee and $100 room-booking fee that PadSplit requires members to repay after they have been terminated. “That put me in a hole, and I’m still trying to recover,” he said.
Another former renter suing PadSplit is Alexis Johnson, a 29-year-old Black woman who reported harassment by a white PadMate to the company earlier this year. After a “really great” experience in her previous PadSplit house, Johnson moved to a new house in February, where she paid $175 a week. One of her new roommates took pictures and videos of her to send to the home’s owner and accused her of stealing coffee the morning after she moved in, Johnson said. She wanted to transfer to a new house then and there, but the company told her she would have to pay the $100 re-booking fee. Johnson provided The New Republic with email exchanges showing that she complained to PadSplit twice about the “very racist and rude” roommate, who told the home’s other residents that she had the power to get them kicked out, thanks to her friendship with the property’s owner. Two days after Johnson’s second complaint to PadSplit, the company terminated her membership.
“It has been brought to our attention that you have not been assisting to maintain the cleanliness of the PadSplit property,” reads a March 10 email sent to her by the company’s support team. Johnson believes this was a lie made up by the roommate who harassed her, but it still constituted “strike one” within PadSplit’s three strikes policy. Over the next two hours, Johnson received emails from PadSplit sanctioning her with two more strikes. The second was for an “unregistered non-member guest”—Johnson had her 7-year-old son with her and said she hadn’t realized that entailed an additional $25 weekly charge. The final strike was for hanging up the phone on a PadSplit staff member when Johnson called to talk to them directly.
Finally, on the same Wednesday afternoon, Johnson received another email informing her that the property owner would give her until 9 a.m. on Friday “to vacate the premises before changing the locks and removing your personal items from the home.” The owner made good on those threats the following week, another email from PadSplit to Johnson shows, and the company instructed her to pick up her belongings from the porch within 48 hours. After looking up information about Georgia’s eviction process and the ongoing federal moratorium, Johnson called the police, at which point she said PadSplit enabled her code again to let her back into the house. The home’s owner then filed a formal eviction suit against her, but she was able to move into a new apartment in April.
“[The company] feeds off of the fact that some of the people who use PadSplit are old, and some are also really young and aren’t going to take the time to do research,” Johnson told me. “I’m a millennial with the internet—you can’t just tell me something and expect me to take it at face value.” Under Georgia code, it is illegal for landlords to change the locks or otherwise attempt to evict tenants without a court order.
Asked about the lawsuits, LeBlanc said that PadSplit could not comment on ongoing litigation. “With over 1,600 units on our platform, it is inevitable that PadSplit will be subject to litigation, just like any other housing provider in any other market,” he said. “PadSplit has a remarkably small amount of disputes, considering the scope of our operations.”
The Atlanta Legal Aid Society’s Kinnear said her group has begun to notice other companies that appear to be operating on principles similar to PadSplit’s. With millions from social-impact investors, as well as more traditional ones like Citi, the model looks poised to expand.
“I do think we’re going to see more companies trying to follow this model,” Kinnear said. “This is an area where what’s happening in the world is moving faster than the law can catch up.”
Atlanta is among a growing number of cities nationwide already reexamining its exclusionary laws around zoning and occupancy. This movement creates a certain amount of opportunity for PadSplit, which must navigate existing regulations and has run into legal trouble with some of the localities where it operates. In March 2020, a rabble of angry homeowners attended a court hearing in DeKalb County, Georgia, where the solicitor general’s office is suing PadSplit in magistrate’s court.
The case involves six separate code citations issued to properties on PadSplit’s platform, including running an unlicensed rooming house and commencing construction without permits. Neighbors complained at the hearing about cars belonging to PadSplit renters clogging up street parking and driving through their lawns. (Due to the pandemic, the suit has yet to proceed.)
LeBlanc told The New Republic that PadSplit had been “incorrectly named” in the citations involving construction permits, which the company requires hosts to apply for. He said, “PadSplit is vigorously defending the other three citations, as they incorrectly assert that PadSplit is violating zoning laws.”
The company has painted this kind of homeowner opposition as little more than reactionary backlash. And where PadSplit’s incursion into neighborhoods full of white picket fences runs afoul of zoning codes prohibiting rental housing, it’s self-interested but not wrong to point out that those codes are part of the problem in our current housing crisis. The introduction of zoning in U.S. cities in the early 1900s helped keep the encroachment of industry into residential communities in check, but the codes’ origins also lie in racial exclusion. While the Supreme Court struck down Louisville, Kentucky’s explicit racial zoning code in 1917, cities continued to use zoning to uphold segregation by another name.
In the Atlanta area, about 60 percent of land is still zoned exclusively for single-family houses, precluding the possibility for more affordable housing and helping preserve class and racial segregation. LeBlanc and PadSplit are among those calling for the elimination of single-family zoning, over an outcry from “not in my backyard” homeowners’ associations.
“Our model reflects emerging ideas about returning density to residential neighborhoods,” LeBlanc said.
It’s hard to argue with the notion that housing shouldn’t revolve around the individually owned single-family home as its basic unit. But decades of intensifying privatization have also contributed to the bleak options facing low-income tenants. After first abandoning public housing in favor of publicly subsidized, privately managed Section 8 buildings and temporary public-private partnership packaged under the often misleading banner of affordable housing, federal low-income housing policy has moved in the direction of indirect subsidies and vouchers for tenants to use in the private market. Social housing is back on the table for the first time in a half-century, as the Congressional Progressive Caucus pushes to lift Richard Nixon’s ban on expanding the public housing stock, and climate and housing activists work in tandem to push for a Green New Deal for Public Housing. But in the meantime, Atlanta alone has a waitlist for voucher assistance of more than 20,000 people, and many who do have vouchers are unable to find landlords willing to rent to them. Given their average income, PadSplit members would typically qualify for subsidized or public housing, were there enough of it available.
This is the vacuum LeBlanc said he wants to fill, claiming that PadSplit is simply a supplement to an inadequate public response.
Alexis Johnson sees things a different way. Long settled into her new apartment, she continues to receive messages from a collections company called “Evict Them for Me” about her outstanding PadSplit balance. “If you’ve got eight people living in your house, and they’re all paying $175 a week, that’s a lot of revenue,” Johnson said. “What really frustrates me, bigger picture, is that it’s taking advantage of people.” When tenants land in shared housing because they’re out of other options, she added, “you can pretty much do whatever, and it’s like the tenants kind of have to deal with it. Because where else are we going to go?”