Ensure Economic Progress
We believe every American aspires towards economic mobility, yet millions of Americans face material barriers to that goal. We engage with those closest to this problem and have found housing affordability and employment to be among the most important drivers of economic opportunity with the greatest barriers to progress.
Housing: fulfill the basic human need for shelter
There is a lack of supply of affordable housing for millions of Americans. This forces individuals into dire situations: extended and expensive motel stays, inhabiting automobiles, missing medical payments, and even homelessness. Like many scholars and those with lived experience, we believe housing is a critical component of an individual’s basic health and safety needs. The root causes of the affordable housing crisis are a rise in construction costs, housing costs outpacing wage growth, and prohibitive zoning laws that preclude the development of further affordable units.
There is a shortage of millions of affordable homes for low-income renters. The National Low Income Housing Coalition estimates 6.8 million houses would need to be built to service the current demand from low-income renters.1 In no state, metropolitan area, or county in the U.S. can an individual working a standard 40-hour work week earning the prevailing minimum wage afford a two-bedroom rental home. In fewer than 5% of counties across the country can a minimum wage worker afford a one-bedroom rental on a 40-hour work week.
Furthermore, a minimum wage worker in the U.S. would have to work close to 127 hours per week at the federal minimum wage salary ($7.25) to rent the average two-bedroom rental or 103 hours per week for the average one-bedroom unit. The chart below shows that 50% of workers are not able to afford a one-bedroom rental and 60% of workers are not able to afford a two-bedroom on 40-hour work weeks.2
STVL’s investment in PadSplit addresses the gap in actual earnings vs. housing costs. PadSplit repurposes legacy real estate assets into multi-room units, enabling a decrease in rent prices. The increased number of units enables rent (~$600/month) that allows an individual making less than $40,000 to live in major metropolitan areas like Atlanta for 57% less on average. Not only are PadSplit’s rooms significantly less expensive than market rates, PadSplit backs its solution with strong technology and functions that meet their customer’s core needs. For example, with PadSplit, rent is due each Friday, utilities are included in the monthly rent price, a move-in does not require one month’s rent as a security deposit and move-ins can occur within 48 hours of occupancy application approval. These factors have contributed to high occupancy (PadSplit has averaged 80% room occupancy for the thousands of members and hundreds of homes on the platform), high credit (PadSplit members have maintained a greater than 95% collection rate), and multi-month stays in PadSplit (the average PadSplit member tenure is 9.5 months, enabling members to save a minimum of $1,000 on average).
Employment Resources: give the necessary resources, conditions, and connection for people to work
Millions of Americans want to work yet are not seen by employers. Too often, this forces individuals into a cycle of unemployment and poverty. Employers express a desire and need to hire a diverse talent pool, yet current protocols are ineffective for employers to reach candidates without typical hiring profiles. Even if these candidates can apply for positions, obstacles such as criminal records, the absence of a traditional four-year degree, or the immigration system prohibit an individual’s ability to successfully complete an application and navigate the hiring process.
STVL’s investment in RiseKit creates a network of jobseekers, community-based organizations (CBOSs) supporting the jobseekers, and employers seeking to hire these jobseekers. Current partners of RiseKit include the Chicago Department of Family and Support Services, which supports thousands of jobseekers in pursuit of employment. The company’s platform allows CBOs to monitor the progress of their jobseekers and call upon a directory of employment resources for the jobseekers they work with. The company has already placed hundreds of jobseekers in workforce development programs and has seen early progress and promising indicators in placement services provided to employers.
Long Term Thinking
Guided by a belief in the entrepreneurial spirit of everyone, STVL is focused on addressing long-term barriers to economic progress. STVL does not look purely at shifting macroeconomic indicators as signals that economic mobility is proliferating. Rather, through continuing dialogue with those closest to the problems, STVL continues to refine its investment thesis and engage with entrepreneurs who aspire to tackle employment and housing affordability challenges head-on.