Tenants, meanwhile, ponder if they should cease making full and timely rent payments — to HubHaus
Not quite a week before rent was due April 1, a Bay Area homeowner was informed by his tenant, in writing, not to get his hopes up.
He didn’t. And that was the right call.
April’s rent arrived late and was underpaid. May and June were the same, with less money delivered each month. July’s rent is delayed, and who knows how many zeroes will be on that check.
“They say they still owe me the whole rent and they’re still going to pay it,” said the homeowner. “But I’m afraid they’ll go bankrupt and never give me the money I am owed.”
That’s not a unique worry among mom-n-pop landowners right now, but this situation is a bit unique. Corporations may be people in the eyes of the law, but things get more complicated when your residential tenant is a corporation. And, in this case, a move-fast break-things startup to boot: HubHaus.
The San Francisco-based co-living platform now leases scores of homes across the Bay Area, as well as in Los Angeles and the nation’s capital. HubHaus is, essentially, a property management company. It leases homes, subdivides rooms with materials more than half a dozen current or former tenants independently likened to LEGO blocks, moves a goodly number of people into what is often a single-family home, and charges market-rate rents.
Well, to quote Sam Brannan, there’s gold in them thar hills. HubHaus received some $10 million in Series A funding two years ago and has grown in leaps and bounds; there are now scores of “hauses” throughout the Bay Area, and vacancies in some 17 in San Francisco alone.
The company claims it’s meeting a need and providing affordable accommodations during a housing crisis. Critics, meanwhile, have complained that HubHaus’ business model is to essentially jack up the already ludicrous cost of living in the Bay Area.
But nobody said that wasn’t a good way to make money. Perhaps until now.
Homeowners, sold on the ease of receiving a monthly check from an ostensibly highly capitalized company, are now being informed that as HubHaus isn’t receiving full rent, it cannot pay them full rent.
This, multiple homeowners have claimed, is a breach of lease terms: HubHaus, they say, is supposed to pay up regardless of whether its subtenants pay up.
Homeowners have bemoaned, in writing, that they are receiving barely half of the rent they’re owed — or, in some cases, considerably less.
“They’re using COVID-19 as an excuse for their poor business model,” grumbles one homeowner. “They are a venture-funded company,” complains another, “that should have business interruption insurance, access to small business assistance, credit lines, etc.”
Homeowners, meanwhile, aren’t the only ones who are vocally unhappy. So are many of HubHaus’ tenants. And a number of them are considering making that known — by withholding rent.
See also: Co-living rental platform HubHaus wanted its users to form a community. And they did — after being evicted.
Your humble narrator has gained access to multiple social media platforms in which HubHaus tenants gripe about the status quo. There are, to be sure, many complaints about many perennially leaky washing machines; if the tenants are to be believed, HubHaus does about as good a job servicing washer-dryers as BART does maintaining its escalators.
But what’s more interesting on these postings — counter-intuitively — are the spreadsheets. It’s not hard to find mathematically capable young professionals among the ranks of HubHaus tenants. They know from spreadsheets. And, in their accounting, the numbers aren’t adding up as HubHaus says they should.
In a series of written communications between Mission Local and HubHaus CEO Jamie Wilson — who succeeded founder Shruti Merchant earlier this year — he addressed some, but not all, of our questions.
Despite multiple queries, he did not address direct questions about HubHaus’ partial and late rent payments to homeowners (we have, since, obtained company emails to homeowners stating that this is happening).
“HubHaus is on solid financial ground,” he wrote, directly answering questions about the company’s stability.
“We believe that as we navigate COVID-19, HubHaus offers a desirable, naturally affordable, community-focused living option that the vast majority of our residents enjoy — particularly in California, where the state was facing a housing crisis before the pandemic.”
Wilson’s communiques are sprinkled with upbeat copy of this sort — which mirrors the upbeat copy in company letters to both tenants and homeowners.
Tenants, however — both those we personally spoke with and the many who posted electronic messages to one another — are far from upbeat.
At the outset of the pandemic, residents were informed that they would no longer be receiving services such as housekeeping and gardening, which tenants pay for via “amenities” fees.
That’s to be expected during sheltering-in-place, and housecleaners haven’t visited some HubHaus locations since March. Residents, however, are still paying for them — an arrangement one tenant summed up as “theft.”
The rationale, explained to tenants on message boards and in emails, was that HubHaus was already “subsidizing” most of its houses’ amenities costs, so residents weren’t exactly due a refund. Tenants who wrote to HubHaus requesting that their money go to out-of-work cleaners or gardeners were informed this was only an option if their houses weren’t being “subsidized” — so, by the company’s reckoning, most houses would be ineligible here.
To boot, tenants were recently emailed that, come August, their amenities charges would be “adjusted” to “cover the actual cost of utilities” — which, the company maintains, would be more.
On its face, this struck many tenants as infeasible. Residents in one house noted that their home is plastered with solar panels — how could HubHaus be subsidizing their utilities costs? Other tenants observed that their utilities bills remained static even though the number of residents in the houses had dropped precipitously.
Wilson affirms that, for transparency’s sake, residents were sent their itemized bills. And that’s true: Tenants dutifully tabulated them — some of them are accountants, after all — leading to the aforementioned spreadsheets. And in house after house after house, far from being “subsidized,” residents claimed that they were actually being overcharged — in some cases, to the tune of $400 a month.
And that’s interesting. Because if the tenants’ math is correct — in house after house after house — the company’s rationale for charging residents for services it was not providing strains credulity. The rationale for raising amenities costs strains it even more.
(Tenants have been assured that, in the event of “errors,” the amenities bills will be adjusted. Perhaps coincidentally, last week, after months of tenant complaints — and recent media inquiries — at least some tenants received emails stating they should expect refunds for nonexistent cleaning services.)
On Internet forums, tenants have bandied about the idea of a rent strike.
This has garnered a cool reception on forums moderated by HubHaus. So the tenants have created their own forums.
“We believe that now, more than ever, affordable shared housing is a great option for people facing California’s housing crisis and the COVID-19 pandemic,” wrote Wilson.
His current tenants may agree. Whether they want that shared housing to be with HubHaus remains to be seen.
There’s a facebook group called “hubhaus – uncensored”. I am the homeowner and got stuck with Hubhaus with two properties. I’ve heard Hubhaus has transferred some leases back to the homeowners. I’m not sure if that’s particular cases. And I’m not sure even if that case the current tenants’ deposits will be transferred as well.
I’m a DC homeowner and HubHaus owes me more than $16k while still collecting rent from the tenants in my house. If homeowners want to be in touch, go to the Reddit conversation. The lack of transparency and clear communication with both tenants and homeowners is shameful–and they got a PPP loan!
I am also a homeowner renting to HubHaus and also not getting paid. Does anyone know when they will close the whole thing down? Can a homeowner get their house shut down sooner? Is there anyone at HubHaus who will answer questions? Is there anyplace else I can get information?
They were paying half the rent since March. Even if they get rent from tenants it was not passing to landlords. They used to sent an e-mail about delay in rent. But this month no e-mail. It seems like they stopped showing rooms to prospective tenants. Something is not right. what are the options as landlord.
I spoke with their lawyer Ed Singer and he mentioned plans to shut down our house and have everyone move out. Another Hubhaus is closing near us as well and some of the tenants there want to move to our house but they are not being allowed to transfer. It seems like Hubhaus is closing up shop and why not keep collecting rent until April 2021 while at the same time stiffing all the landlords. I expect a BK soon. I had a friend apply to move in and the virtual tour was with a very young woman who appeared confused and unable to operate the webcam. She was unable to show the house to the tenant and mentioned she doesn’t know how anything is going to work. Since then all virtual tours have been cancelled and he was not provided an application to move in. He wanted to move in but he is hispanic, so they didnt even send him an application.
From what i understand, HubHaus has laid off the majority of it’s staff and is winding down the company. Not sure what this means for the current homeowners. I’m sure they’ll hear something soon. very sad.
Seems like this month, September, 2020, this landlord is getting no rent at all, and and no response from HubHaus. We now need to spend thousands on legal fees? HubHaus is already 15,000. in arrears on their rent since April. I am just a regular guy, trying to rent my home. I still have to pay my mortgage, property taxes, insurances and maintain my good credit. I would definitely tell any prospective landlords to NEVER lease to HubHaus. At the time we leased our property to them, there were no reviews by landlords to be found. Don’t do it. It’s a scam.
HubHaus turned off our water and power while we were all living here and paying rent and utils. Don’t ever choose HubHaus!
Unhappy landlord renting to Hubhaus here. We know the home residents are paying, but the rent isn’t being passed on in full. You’d think Hubhaus would be looking to break leases and cut down inventory, but no. Hubhaus is still generating income and benefits from the rent moratorium, while forcing its own residents to continue to pay. I still owe a mortgage, and not receiving rent is seriously impacting my finances and cash flow. Not that it should matter, but this is my primary and only home that I’m renting out due to a temp move, not some investment property.
I’m glad tenants are getting together on this. Landlords should too. There are reddit pages detailing more issues, so that may be a good forum for landlords to connect.
Ks, Can you point me in the direction to connect with other landlords? I have searched “reddit Hubhaus” “Reddit landlord” “reddit coliving” but only found two other HH landlords.
I am a HH landlord too. Thank you.
From what I can tell, the FB group (hubhaus – uncensored) is the best bet.
Southern California based HubHaus landlord here, looking to connect with other HubHaus landlords. What is next?
Exceptional work here, Joe. If you ever want the stories from hell of Hubhaus in their early days, I have emails, pics of slack conversations and more to share with you. I joined in July/2016, about five months after they formed. They still owe me $1500 for the security deposit when I moved out in august/2017. Shruti is very, very incompetent business leader. The LAST person who should be featured in Forbes.
Expensive crowded urban dwellings. What is not to like about this business model when you are on the receiving end?
This is what occurs because NIMBY have stifled, over the course of decades, the creation of adequate amounts of housing.
It looks like this reporter might not understand the business model of HubHaus. From their website, it looks like they are turning expensive single family homes into affordable housing, which we desperately need in San Francisco. Now more than ever, it’s really a shame to see Mission Local taking such an anti-affordable housing stance.
With all due respect, HubHaus did not invent the concept of roommates.
People have been renting out single-family homes to large groups of non-related people since this city was founded. That’s not a novel business model.
While HubHaus touts itself as “affordable,” the complaint among critics — who have litigated this — is that its business model is to maximize income from the housing. As such, here in San Francisco, it was charging in excess of $9,200 a month for a house with an estimated market value of $7,000.
Current tenants have tallied their rents at $8K or more, for houses that would probably rent for around half that if not for the middleman. And that’s not including the amenities fees discussed in this article, for services that were not provided.
HubHaus may yet prove to be the wave of the future and a boon for this and every city. But there are plenty of landlords providing “affordable” housing whose behavior warrants observation and reporting.
You and I both know that’s not true.
They were cramming more market rate accomodations in the city, hence them falling off a cliff with the techxodus drying up that market.
HubHaus is an abusive middleman which skims profits off tenants, and does not fulfill its obligations to landlords. If you understand the company, you would understand their abject lack of competence and morals.
The lack of transparency is clear.
Market rate is a nonsense term, that means over priced.
A competent government would’ve halted all mortgage and rent during such pandemic. And focused all efforts in containing and ending the spread.
It’s mind boggling how so many incompetents are allowed to ruin what could be a great country.
HubHaus sounds pretty much like a Ponzi Scheme.
They don’t own anything.
They don’t create value through developing new, more efficient and, therefore affordable housing typologies, construction approaches or financing mechanisms.
In short they won’t be around much longer.
If tenants within their “properties” are not receiving the services that they agreed to, they should go on a massive rent strike — which, incidentally will be supported by any applicable eviction moratoriums currently in effect.
You’re right that HubHaus adds no value and I hope you’re right that they’ll be out of business soon. A rent strike wouldn’t hurt HubHaus, though; they’d just stiff the property owners even more. Tenants should sue to get rid of HubHaus entirely and put HubHaus’ margin back in their pockets. Better than living in a foreclosed home, which is where this is heading if property owners don’t get some relief.