When someone rents an apartment in a new complex in Columbus, Ohio, they can now also get a financial stake in the building. The property is the first to partner with Rhove, a startup that wants to help shrink the wealth gap between renters and homeowners by offering “rentership,” an asset that grows with the value of the property.
“We’re creating a new situation where every renter is a stakeholder,” says Rhove cofounder Calvin Cooper. “Everybody living at the property is going to be granted a financial stake in the building, and they’ll be able to buy more on their own terms. So what we’re creating is a situation where renters are given many of the financial benefits of ownership while maintaining the flexibility of renting.”
Cooper, previously a partner at a venture capital firm, hadn’t planned to start a company. But when he calculated how much he’d spent on rent over the last decade while he considered buying a home—and thought about how the system of renting contributed to wealth inequality in the U.S.—he realized that something needed to change. “The average young person is going to spend over $200,000 in lifetime rent,” he says. “And this isn’t just a San Francisco and New York problem. This is an American problem. When you look at the data, the rent-to-income ratio is very high. Most Americans are spending over a third of their income on rent, and this is one of the reasons that the average American can’t afford a $400 emergency.”
Renters also can’t easily build wealth over time. The gap in assets between renters and homeowners continues to grow: A 2019 report found that Americans over 65 who own homes have a median net wealth 47 times larger than renters of the same age. Renters are less likely to have wealth to pass down to their children. As the cost of buying a house gets further out of reach in many markets, many people don’t have the option of buying a home.
When someone moves into a property using Rhove’s new platform, they’re granted a $50 stake in that property that they can claim through Rhove’s app, and each year they live in the apartment, they’ll be given an additional $50 grant. They can also buy additional fractional stakes, starting at $5, on a one-time or monthly basis. Through an agreement with the property owner, who Rhove pays a lump sum of cash in the beginning to become an investor, stakeholders earn a 5% return on their investment paid out of the rent that the property owner collects from the building; the value of the shares increases as the building appreciates. If the property is later sold, they’ll earn a cut of the proceeds. The platform is the second offering from the company, which launched a separate savings program for renters last year.
This “rentership” is a way for renters to build financial security, Cooper says. If something similar had been in place during the last recession, he argues, people who are struggling now would be in a different position. “After the last recession, there was a $60 billion wealth transfer from Main Street to Wall Street,” he says. “As hedge funds and private equity managers bought up real estate in Middle America, imagine if the average American participated in that and if every single household owned a piece of where they live, and generated income based on those holdings.”
Reimagining renters as stakeholders could also build stronger communities. “Ownership is not just about finance,” says Cooper. “Ownership is about citizenship is about social responsibility. It binds us more closely to our neighbors. And it’s something that the founding fathers of our country understood as critical to our democracy.” (John Adams wrote that the new country needed to “make the acquisition of land [ownership] easy to every member of society” in order to preserve “equal liberty and public virtue,” which Rhove notes on its website.)
Rhove isn’t the only company that hopes to change how renters can benefit from their buildings. In Los Angeles, a startup called Nico has a related model, offering community members in a rapidly gentrifying neighborhood the opportunity to buy stakes in rent-controlled apartment buildings in the area. Rhove, which is based in Columbus, partnered with a local developer to offer its “rentership” program first in a development near the city’s downtown. The company says that property owners want to join the program as a way to attract residents, build community, and get an influx of cash. Eventually, Rhove plans to expand across the country. “Our vision is that every renter is an owner,” Cooper says.