Startup is quietly packing SF's empty luxury rentals with millennials

The exterior of the 1010 Potrero building is seen on 16th Street in San Francisco, California, on Tuesday, Feb. 14, 2017. The exterior of the 1010 Potrero building is seen on 16th Street in San Francisco, California, on Tuesday, Feb. 14, 2017. Photo: Gabrielle Lurie / The Chronicle Buy photo Photo: Gabrielle Lurie / The Chronicle Image 1 of / 42 Caption Close Startup is quietly packing SF's empty luxury rentals with millennials 1 / 42 Back to Gallery

This story originally appeared in the April issue of San Francisco.

At the heart of many of the Bay Area’s tech megacorporations is a simple quid pro quo: In return for free media, professional connections, or cheap rides, you surrender privacy. Now, inevitably, that arrangement has moved into the realm of housing, with a hush-hush startup asking tenants to sacrifice privacy in return for a discount spot inside a gleaming new luxury tower.

Say you’re young and new to town. Forget settling down in an illegal Craigslist in-law or behind a curtain in a Richmond district living room as your young, striving forebears once did. For about $1,300 a month, you can now be safely housed within 40 stories of concave blue-glass facade at 340 Fremont Street. Or, if you prefer a grittier vibe, you can put down roots at Potrero 1010, where you can see (and hear) the traffic on I-280 rattle away beneath your window.

These arrangements, which come complete with subdivided bedrooms featuring upholstered partitions between roommates’ beds, come courtesy of HomeShare, a startup that carves up rooms inside of unoccupied luxury apartments and then vets and links up strangers to occupy them. Each of HomeShare’s hundreds of tenants gets about 55 square feet along with half a closet, half a bathroom, and a compact common area shared with a roommate and usually two other flatmates, slumbering in the unit’s other divided bedroom. Each micro-bedroom fits a queen-size bed and little else. Some of the walls don’t quite reach the ceiling. It’s a fit for the kind of person who needs to scrounge cash and will tolerate roommates, but craves panoramic views and glistening new plumbing fixtures.

HomeShare was cofounded in April 2016 by CEO Jeff Pang, a recent Stanford graduate who previously started a company called Breeze, which, before closing up shop last summer, leased hybrids to gig-economy drivers on a weekly basis. His cofounder Tom Jacobs is an Uber alumnus who began his career in technology with Red Swoosh, Travis Kalanick’s pre-Uber peer-to-peer file sharing service. With their newest company, these youthful startup veterans are attempting to bring a little guerrilla innovation to bear on the city’s most notorious problem: its lack of affordable rental stock. “Our mission is to democratize cities by providing attractive yet affordable housing at scale,” reads the company’s AngelList page. For now, they seem content to keep these ambitions to themselves and their investors. Multiple attempts to contact them stretching back to last summer were met with no response. In November, I received an email from Pang stating that the company is “very much heads down right now and not taking press inquiries” and offering to “start a dialogue” in 2017. Subsequent emails had gone unanswered as of press time.

Why all the secrecy? HomeShare now operates dozens of units in four brand-new Bay Area luxury towers. And its success and its shyness likely stem from the same source: a market glut of dense, expensive housing. Since the beginning of 2015, nearly 22,000 units have been built or approved in San Francisco (excluding the massive Candlestick Point development). Of these, 19,500—89 percent—are “above moderate,” meaning they can likely only be afforded by individuals making more than $90,000 a year. “We are in the midst of the biggest apartment-building boom since World War II,” says Patrick Carlisle, chief market analyst at the Paragon Real Estate Group. But this boom comes with a downside, and not just for tenants who can’t afford the lavish new spaces popping up downtown like mushrooms after the rain. “Lenders seem to be fearful that we are reaching a saturation point for these sorts of units,” Carlisle says.

Enter HomeShare. Its mere existence suggests not only that the need for more affordable housing is strong, which no one ever doubted, but also that the demand for new luxury housing is softer than expected. In January, the company expanded into a third San Francisco luxury apartment complex, the LSeven in SoMa. In February, it opened up shop in a fourth, across the bay in Emeryville. This arrangement is surely “not the first choice of any management company, especially in these high-end units,” Carlisle says. “But they need to get them rented to satisfy their investors and lenders.” Not that either HomeShare or the building’s developers are trumpeting this relationship: “I can see why they wouldn’t want to publicize it,” Carlisle says. “So much of trying to lease units at the high end is cachet. Having five twentysomethings playing video games next door probably doesn’t fit with that.”



Denied the opportunity to discuss HomeShare with its principals, I did the next-best thing: I signed up on its website to take some tours. A visit to Potrero 1010 took place inside a virtual reality headset while I was actually standing in a partitioned unit at 340 Fremont Street. Both buildings are owned by Chicago-based Equity Residential—which also spurned interview requests. The amenities at the Fremont Street location include a yoga room, a club lounge, a demonstration kitchen, and an outdoor grilling area. “I get my Zen on out here,” my tour guide, Manning, a casually dressed twentysomething, said of the grilling patio. “Sick views, right?” The bay glittered between surrounding cranes and skyscrapers. Manning grimaced through the aftertaste of his coffee-flavored Soylent meal replacement as he repeatedly urged me to fork over the $15 application fee and fill out the digital questionnaire so that I could get matched with new roommates pronto. (Full disclosure: While I signed up for my tour under my own name, I corresponded with Manning using a dummy email account due to concerns about being flagged.)

When I first visited in June, that questionnaire asked potential renters to specify their age by indicating whether they were “18–21,” “22–25,” “26–30,” or “Over 30.” A newer version simply provides an open field in which to enter one’s age but is otherwise identical. Renters are required to provide their age, gender, and links to social media accounts. They’re also asked to reveal their sexual orientation. When I balked at providing my personal information, Manning had a ready response. “I totally understand your hesitation,” he wrote. “I just want to say that your information is secure and will only be used to help you get matched” with roommates. Though mandating such disclosures from prospective tenants could be a violation of fair-housing laws, there is no sign that HomeShare intends to discriminate, except against people who put a high value on personal space. It turns out this isn’t too limiting a factor. Priyanka is a student from Delhi in her 20s who moved in to a two-bedroom apartment at Potrero 1010 with two fellow students she knew from home. “It was in our budget, the area is good, the building is very secure. And as for privacy, it’s really about mutual respect,” she told me when I buttonholed her outside the building. “We changed the sleeping situation around so we have one person in each bedroom and the other in the living room, separated from the kitchen by the partition. We’re students; we don’t really need a living room.”

Another HomeShare tenant who agreed to speak to me, 22-year-old Mike, works in sales. He was matched with three random roommates in a two-bedroom in June. He likes the amenities and the fact that he lives close to work. And he reports that he’s very happy with his roommates. “We just got back from a trip to Big Sur,” Mike said.

It’s an arrangement that seems to be working well for everybody—tenants, matchmakers, developers, investors—although not everyone is willing to say so. The owner of any building in which HomeShare operates has a keen interest in keeping quiet about the partnership, lest it reveal that its units are not filling up as well as it had planned. HomeShare claims not to mark up the cost per square foot in its lease agreements,and it takes a cut of the rent it collects from tenants, meaning that the developer is likely giving the company a discount in exchange for the certainty that units will be filled quickly. To some extent, the building owners’ pain is HomeShare’s gain—but too much publicity could hurt them both. How many other new luxury apartments in the city are being converted in similar ways? HomeShare, at least, seems determined to maintain its privacy—the privacy its customers can’t afford.