Typically, advocates for affordable housing seek ways to build more units. But Andrew Firestone and Chou Hoytt are taking a different approach that, they think, can have a more immediate impact.
The co-founders of Watson Living have created a recently launched platform offering cash rewards to renters who meet criteria determined by their landlords, money they can use, among other places, at local businesses where they can get discounts. In so doing, the partners figure it will give residents immediate resources they can tap to make ends meet and save, while creating efficiencies, lower costs and, hopefully, the potential to charge less rent, for multi-family property operators. Local stores also get more business.
“Instead of having a massive impact on a few people’s lives by building a few apartment buildings, our approach is to create a smaller, immediate impact across millions of people’s lives,” says Firestone. “If we can give back $1 billion to renters they otherwise would not receive, that’s a great stride forward that a handful of apartment buildings couldn’t approach.”
The founders also are working on a feature that will allow residents to report their on-time rent payments to credit bureaus.
Firestone and Chou met in 2019 while they were founders-in-residence at startup accelerator Antler. They quickly realized they were kindred spirits: Both had been involved in real estate at different points of their careers and both knew they wanted to start a company that addressed the affordable housing crisis. They just weren’t sure how to do it.
They began with the premise that it would be quicker to tackle the problem by targeting owners and managers of multi-family real estate—that is, apartment buildings—using fintech to create operational efficiencies that could be passed down to residents. Their immediate customer would be those landlords.
With that in mind, they interviewed about 50 big multi-family operators to pinpoint their problems and how to use tech to solve them. After three months, they decided to create an alternative credit screening program for multi-family properties that would include such information as a renter’s track record of timely rent payment. In November 2020, they raised a $500,000 pre-seed round but, about three months after launching the program, realized the idea lacked the business potential they’d anticipated. Worse, it wouldn’t have the immediate impact they were after.
Back to the drawing board. Beginning this year, they started talking to multi-family operators again, running 10 different pilots with different concepts. One was creating a marketplace where multi-family operators could offer Groupon-like deals to local residents, delivered through an app. “We wanted to see how we could make it attractive for all the parties involved—residents, local businesses and real estate companies—and increase their engagement,” says Firestone.
That one led them to their final concept. Their experience showed that offering deals to renters was a hit. But “It wasn’t impactful enough to move the needle,” says Firestone. So, the partners created a digital banking platform, which would act as a loyalty and rewards program for multi-family operators. (Firestone didn’t want to provide the banking partner). “Think American Express card membership meets a Starbucks rewards app for rental properties,” he says.
Specifically, landlords create a customized program through which they designate a certain amount of cash per year to be paid to residents. But they attach those rewards to behaviors that help their properties improve, with the money delivered to residents through a digital banking app and a physical debit card.
The actions to be rewarded include such positive behaviors as signing a new lease, paying rent on time and referring new tenants to the building—activities property managers want to encourage, but typically find difficult to make happen. Thus, renters who pay rent on time might get $100 immediately sent to their debit card; when they renew their lease, they might receive, say, $250. “By discounting services residents have to buy, you’re helping them save or even get in a better position for home ownership,” says Firestone.
Watson takes a small monthly fee for managing the program on behalf of the landlord, while all of the features are free to the resident.
In addition, the approach ties directly to community improvement. For one thing, residents only need to use their debit card to make purchases, making the process easy. Plus, through partnerships with Watson, local businesses can offer discounts to renters. The upshot: Stores get sustained traffic, already financed.
Pilots, launched about two months ago, are now underway in LA and Chicago, with plans for many more over the next six months, according to Firestone.