San Jose, Calif. (KTVU): - On April 6, an anonymous post on Reddit started trending on social media. The post titled “San Francisco Based Startup Robs Every Customer they have for Thousands of Dollars Overnight, Fires Entire Staff” laid bare the story of a co-living startup that abruptly changed the terms of its service, and shortchanged thousands of users of thousands of dollars.
For legal reasons, the post did not mention the name of the startup. However, it didn’t take long before internet sleuths started to make educated guesses on the startup in question. HomeShare, a VC-backed co-living startup had gone viral for all the wrong reasons. On Sunday, the CEO posted an explanation for this sudden change.
In its latest pivot, HomeShare appears to have laid off a majority of its staff after enduring “unforeseen financial constraints”. Tenants who had to endure the same are livid about the sudden change in HomeShare’s terms of service and its broken refund process.
Founded in 2016, HomeShare provided an interesting solution to address the shortage of affordable housing, particularly for young working professionals – it leased apartments from real estate developers and partitioned the living room with dividers to create additional rooms, so that more tenants could split the rent. The tenants made monthly rent payments to the startup, who in turn made payments to the apartment community after taking their service fee - approximately 5-10% of the monthly rent payment, according to its service agreement. It offered rent protection (in case a roommate is unable to pay), roommate matching, and moveable dividers as a part of the agreement. Tenants were required to pay a move-in fee, which was equal to a month’s rent.
Fueled by a $4.7M Seed round from LightSpeed Venture Partners and Mucker Capital, the startup seemed well poised to capitalize on the lack of affordable housing. It announced its expansion to five cities - San Francisco, Silicon Valley, New York, Seattle, and Los Angeles in a feature that appeared in June 2018.
Less than a year later, the startup appears to be imploding - around March 25, it sent an email out to all its tenants notifying them about a change in service. “Based on feedback from partner buildings and residents alike, HomeShare will no longer facilitate payments from existing residents. This change will take effect immediately. This means you and your housemates will begin paying rent directly to your landlord on your next rent due date of April 1, 2019,” the email read.
The most contentious part of the email was where they calculated the refund amount – tenants had paid HomeShare a move-in fee equivalent to one month’s rent, out of which an “outstanding future service fee” for the remaining months on their lease was charged.
KTVU received two emails from HomeShare tenants where the outstanding "future service fees" was in excess of a thousand dollars.
"When most startups go down the worst thing that happens is employees lose their jobs. In this instance people are potentially losing their living situations and in expensive cities like these it's not easy to just up and move to another place, not to mention all the fees you can be charged for not meeting rent," said Rhiannon Sullivan, a HomeShare user based out of LA. "Honestly, if they had given 30 days’ notice and not held onto our deposits most of us would have been fine. I'm just really upset that they threw this all on us right before rent was due," she said.
Other customers shared similar accounts - John OShea, a tenant based out of Milpitas said that HomeShare failed on its contractual obligation to find a housemate replacement, leaving him to pay an additional $825 more than was necessary. According to the service agreement, HomeShare has 30 days to find a housemate if one moves out. They deducted future service fees from him and his roommate as well.
KTVU emailed Jeff Pang, HomeShare CEO for comment on Saturday. Jeff responded with a link to the explanation posted on the website, with a possible call towards the end of the week. “We are super busy issuing refunds and responding to customers,” he said. According to the post, HomeShare currently has 1,000 active residents. However, the post doesn’t explain why they are only serving two locations at present (San Francisco, and Silicon Valley), down from five previously, and why their Instagram account appears deleted.