Our Investment in Simply Homes
Housing is a pre-requisite to life, liberty and the pursuit of happiness. Sadly, today there isn’t enough to go around.
At Gutter Capital, we believe there is a 6.5M unit housing shortage in the US. One downstream effect of the shortage is that the homes we have are getting older. Due to lack of new construction, the age of the average house has risen from 30 to 40 years old in the last two decades. Older homes more often require maintenance. When they’re ultimately sold, on top of the downpayment, cash-strapped buyers need to come up with a renovation budget to make the home liveable.
To make matters worse, the housing shortage is most severe at the bottom end of the market. We don’t build enough homes in general, but almost no new homes are small and affordable. Since 1940 the median size of new construction has nearly doubled (1,200 to 2,200 square feet). In the 40s, 70% of homes built were under 1,400 square feet, today it’s only 7%. For young families buying their first home, there aren’t many options.
Simply Homes has a solution. By rejuvenating the existing housing stock, they’re making homes available to the people who need them the most. Through their novel AI empowered process, they programmatically acquire aging homes, provide a light-touch renovation, and then make the homes available for rent by Section-8 voucher holders. They are buying properties with decades of deferred maintenance and transforming them in a matter of months, ready to provide their next family with a place to call home.
In Pittsburgh, their first market, there are 14,000 units rented through the Section-8 program, with thousands of families approved but waiting for new inventory to become available. There is a stigma against affordable housing, and it’s wrong. The average Section-8 tenant stays with a property for more than six years. Over 80% of Simply’s tenants are fully employed single parents, who would otherwise need to work 150 hours a week to afford rent. With Simply, these families are paying no more than 30% of their income to get a safe, secure, well-maintained home.
I’m excited today to announce our investment, leading the pre-seed round in Simply Homes. Since then, they have built a portfolio of their first 75 homes, and just closed on a large property investment fund to execute on this strategy for the next 1,500. They’re aggressively expanding and in a position to impact affordability nationwide.
I first met Brian Bagdasarian at a demo day, of all places. A former real estate underwriter, he started Simply after a decade of experience in tech developing human process automation and machine learning systems. He previously was with HubSpot, having joined as part of the founding team of Motion.ai, and LogMeIn, where he led Digital Engagement Strategy. To bring housing and finance experience to the team, we connected Brian with our good friend and long time bookclub member Robert Kavanagh (CFO). Previously he led the acquisition of Ireland’s largest social housing portfolio and spent 10 years as an investment banker at Jefferies and Cantor Fitzgerald in New York and London, specializing in infrastructure and ESG assets. Rob brings the financial and transactional expertise to complement Brian’s technical and visionary leadership.
At Gutter Capital, we believe that big businesses are built in response to big problems. Today, the housing crisis is the biggest problem that we’ve got. We back mission driven founders hell bent on resolving the bottlenecks constraining housing. If you’re inspired by our mission, please don’t hesitate to reach out.
