In 2016, the WeWork co-founder Adam Neumann described home as “a feeling” rather than something you own. he was introducing We live, his company’s concept for rental apartments, where rental terms were flexible and apartments were furnished, right down to linens and toiletries. The idea replaced the traditional rental with a “membership,” allowing people to move between WeLive apartments as easily as Equinox members could slip into a gym in another city.
WeLive didn’t last long. It began to crumble, along with the rest of the company, in 2019 when WeWork’s IPO bid revealed the company was losing more than $200,000 per hour. The company went into crisis mode and halted plans to open more apartments. The two remaining WeLive sites have started operating more like hotelsuntil WeWork finally sold them.
Three years later, Neumann is back with his second swing to reinvent housing – and Silicon Valley commentators are unimpressed. His new startup, Flow, is another branded apartment concept, expected to provide community features and other amenities, on flexible terms. ApparentlyNeumann has 4,000 apartments in four cities (Atlanta; Miami and Fort Lauderdale, Florida; Nashville, Tennessee) to kick off the project, which is scheduled to launch in 2023.
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Journalists and investors have suggested that Andreessen HorowitzThe $350 million investment in Flow, valued at $1 billion, could soon be vaporized like much of WeWork’s cash. Neither Neumann nor his investors revealed much about Flow, but the backlash to giving the entrepreneur a second chance was swift. Tuesday, Forbes published complaints– denied by a Neumann spokesperson – that Flow could compete with an equipment rental startup called Alfred in which it had previously invested.
None of this means that Neumann and Andreessen haven’t identified a potential market. The gridlock in the US housing market has necessitated new ideas about how and where people live. And unlike WeLive’s launch in 2016, many startups are now trying to reinvent rental housing for a generation of people who are unlikely to buy homes. Flow could be part of a new industry that manages to fundamentally change the way some Americans think about housing, creating benefits for staying a tenant. It could be sustainable and profitable, even if it doesn’t alleviate many of the downsides of the US housing crisis.
Over the past two decades, a confluence of factors has pushed young Americans away from buying homes, a trend also seen in the UK and some other European countries. New construction has stalled, existing supply has stalled and population booms in urban areas have driven up housing costs. Almost one in five households in the United States is now bought by institutional investors – not individuals – adding further competition. As a result, the share of first-time home buyers has declined, leading to more millennials renting well into their 30s and 40s.
This new permanent rental class presents worrying prospects for some economists: housing is becoming scarce, which is driving up prices for everyone. But for startups, it also represents an opportunity. “It’s a massive trillion-dollar industry,” says real estate startup founder Andrew Collins Bungalow. “And yet it really hasn’t been innovated in the last 50 years.”
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