Thanks to the high cost of living and mounting student debt, Gen Y are struggling to afford a house. But US start-up Loftium is offering a new kind of mortgage that hopes to solve their home-ownership woes. Instead of shelling out for the down-payment, prospective buyers list one of their rooms on Airbnb for at least 12 months. We explore the insights of what this means for the future of the property market.
Founded in 2017, Seattle-based start-up Loftium is offering prospective home-buyers the deposit they need to buy a house. In exchange, they must rent out at least one of their rooms on Airbnb for 12-26 months, and give back a proportion of the income. “There’s obviously a lot of controversy around people buying investor properties and renting the whole thing and taking housing supply out of the market,” says Adam Stelle, co-founder and chief operating officer at Loftium. “I think we’re using Airbnb and that technology platform for good and helping first-time home-buyers, primary residents, buy and afford to stay in their homes.”
When it comes to buying a home, the biggest hurdle for Gen Yers is being able to afford the deposit – 68% of Americans say that funding a down-payment is the number one barrier to home-ownership, which is hardly surprising given that 46% of Gen Yers have no savings at all. And although banking services are adapting to encourage savvier spending, people want financial companies to offer more than just money management in the hope of turning their dreams of ownership into a reality.
“The mortgage industry is poised to experience a monumental shift as more Millennial home-buyers begin to enter the market,” says Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. “There are roughly 87 million would-be home-buyers in the Millennial generation and 91% of them say they intend to own a home one day. Lenders must prepare today to meet their needs.”
Financial brands are starting to take note of the main barriers for this cohort. The REX Homebuyer programme, for instance, offers payment assistance in exchange for a future share of the home's value when sold, while UK-based companies like Trussle and Habito are offering one-click mortgages in a bid to streamline the process. And though the sharing economy is certainly nothing new, Loftium is one of the first to utilise its power – in terms of both the trust it’s generated as well as its ubiquitous nature – as a stepping stone to home-ownership.
Hannah Elderfield is a behavioural analyst at Canvas8, which specialises in behavioural insights and consumer research, who has worked with global clients including BelVita, the UK Government, the FCO, Depend and Superbrands. Outside of work, she can be found shopping, walking her dog or attempting to curb her addiction to Nutella, not all at once of course.
