The Co-Living Apocalypse

Oh Craig, you really shouldn’t text this kind of information.

The other day, Brad Hargreaves stepped down as CEO of the co-living company he founded, Common. While I don’t know the specifics, I’m glad it happened. Brad is a variety of untested, yet celebrated entrepreneur that goes from one fake success to another. Brad went straight from Yale to founding General Assembly (which he sold in 2019 for $413M) to founding and raising over $100M for Common — all before turning 36. He got as far as he did through inexpertly distributed venture funding, media manipulation, and deliberate obfuscation of business practices and economics. For the past three years, I’ve been Tweeting, blogging, and sharing information to expose Brad for the fraud he is, hoping to redirect money and leadership to the right places and people. My efforts, combined with a critical profile of Common by Noah Kirsch in The Daily Beast, seem to have paid off.

Brad is not the first co-living CEO I’ve had a hand in getting axed. In early 2020, Ollie CEO Chris Bledsoe got in my crosshairs. Like Brad, Chris embodied the same meritless success, albeit with a personal twist. Most insiders know — and the New York Times will attest — I was married to Ollie’s former Director of Design. When that designer made legal and character attacks on me that would make Johnny Depp blush, I turned to Chris to reason with her. Chris and I were once friends, and I wrote positively about him and Ollie and introduced him to many key figures in the company’s growth. I thought he might feel a duty to intercede and cool the situation. I was mistaken.

Chris, Brad, and others of their ilk seem to have missed the lesson on friendship, honor, and honesty. I told Chris that if he didn’t intervene, I would reveal what I knew about Ollie, which directly spoke to his lack of leadership and character. Stuff like:

• Him hiding Ollie co-founder Andrew Bledsoe’s participation in an illegal Airbnb operation, where an unlicensed worker nearly died on a job. Since Andrew was Ollie’s co-founder, and Chris’ brother, the worker was liable to pull them into a suit, which would dismay Ollie’s backers and compromise lease-up on their new building in Long Island City.
• Ollie’s former Director of Business Development, Andrew Levin, was shopping actively for jobs while still in the development role. This was told to me about another co-living dufus, Martin Ditto (revealing too much info seems to be in these guys’ genes).

Because of Chris’s lack of concern for me or my family, I relinquished my concern for him and his company, revealing the above information on LinkedIn and elsewhere. Chris was escorted from his office the same day.

Things you can tell just by looking at them.

But wait folks, there’s more!

I was also close with Jon Dishotsky, co-founder and former CEO of America’s other big co-living startup, Starcity. I have long been an advocate of shared housing, and thought Jon was the most competent and earnest CEO of the bunch. Last year, when I was pitching and raising for my startup, Change Order Group (COG), I included Jon and Starcity on our team as a development and operational partner. Despite my reputation for volatility (aka honesty) or because of it, Jon wanted to align himself with me, thinking it would keep him safe. Moveover, my downing Ollie directly benefited him, as Starcity absorbed the mortally-wounded Ollie in late 2020. I received a $10,000 spiff for making the initial introduction between Jon and Chris.

In late 2020, Starcity took over management of Ollie’s Co-living portfolio, including its interest in the much-hype Alta building in Long Island City, Queens, where Ollie managed 14 of 42 floors as well as other building-wide amenities. It was heralded as one of the world’s biggest co-living projects.

I liked Jon as a friend, but the more he revealed about his leadership and Starcity’s business, the less I respected him as a businessman. Among other things, Starcity was being sued by one of its development partners after backing out of their much-hyped 800 unit coliving building in San Jose, California — an awkward topic when I spoke on that city’s Housing Department’s podcast, Dwellings. Starcity was also pushing a modular project in downtown San Francisco with zero capital support. His cultish devotion to Y-Combinator — who has never incubated a positive-revenue housing startup, then or since — concerned me as well. Even though he claimed to be a master of fundraising ($65M, he reminded me frequently), he had few suggestions for my efforts besides, “you should apply for YC” — something he did for Jeff Wilson, another former close friend of mine, and his $20,000 glamp-tent company, Jupe, which raised $9.5M through YC. My view that most incubators are multi-level marketing schemes was solidified through all this.

I remained friends with Jon despite these red flags because I thought he had credibility in the proptech and venture worlds that would be useful to securing funds for COG. It was during this time Jon eagerly shared a text from his friend Craig about how Brad Hargreaves had to reach ridiculous milestones or he’d get booted as the CEO of Common by the end of 2021 (Craig’s timing was a little off).

Confederacy of co-living dunces.

And then Starcity was absorbed by Common in June, 2021 [quick recap: Starcity absorbed Ollie and Common absorbed Starcity]. Jon began working for Brad, the guy he trashed for years. I realized Jon was as dishonest as the rest of them, albeit with a modicum more personality than the fake-nerd Brad (I’m still smarting from his plagiarizing several pieces of my research, especially this one and this one) or wannabe cool guy Chris and his ill-fitting shirts. Attacking Jon seemed superfluous since his failures were so public, though I decided it was okay to share the “Craig text” despite my promise not to. I have occasionally publicly questioned Jon’s fitness as an Angel, especially when his advisory punchline is always, “join YC.”

What’s David’s Beef with Co-living?

First off, few mainstream folks have been bigger proponents of shared living than I have been in the last decade. I have lived in shared homes, co-housing, kibbutzim, and other shared housing situations. I was intimately involved with the Making Room exhibition at both the Museum of the City of New York and the follow up exhibition at the National Building Museum, an exhibition I covered for Dwell magazine. I was involved with IKEA’s innovation arm’s One Shared House 2030 initiative. A big facet of my current startup, Run Haus, involves shared housing. As a rule, shared housing is far more social, ecological, and economic than individual housing. These benefits largely disappear — particularly the economic part — when the company managing the sharing funnels the savings to founders and venture backers, not residents.

I wrote a piece for Dwell about the National Building Museum’s Making Room Exhibition, an exhibition that explored novel ways to share housing that meets modern demography, economics, and climate conditions.

Many of co-living’s problems stem from the sector’s main success model: WeWork. WeWork split up large office spaces, gave them superficial renovations, and atomized tenancy. Instead of leasing a floor to one company paying $20,000, a landlord could master lease it to WeWork, who might fill that floor with 100 tenants paying an average of $1,000 a month. Co-living sought to do the same thing, master leasing buildings, renovating to increase occupancy, and doing flexible, individual leases at a higher per square foot basis.

Fake claims of growth, pipeline, and meaningless claims like “consumer leads” were the fuel by which co-living founders like Brad Hargreaves built their empires.

But co-living was undone by many of the same problems as WeWork, particularly overestimating the demand for flexible leases with random people. The cost savings of a standard shared apartment — one that could be leased with friends — were too great. But there are so many other problems:

• Dividing residential spaces is far harder and costlier than dividing office spaces due to stricter residential building codes and inflexible floor-plates. In 2014, leaked WeWork projections showed the company expected its co-living operation, WeLive, to have 34,000 residents and make up a significant part of its revenue by 2018. Instead, WeWork abandoned the plan after their two initial buildings flopped owing to extreme costs and low tenancy.
• People are far more cost sensitive to their housing rent than office rent, which is often written off or compensated as business expenses. Co-living beds often rented for more than $1,500 and up to $4,000 — considerably more than a room in a conventional shared apartment. Having one convenient bill for a small room with West Elm decor was an insufficient trade-off for this cost premium.
• Like WeWork did for unleasable office properties, co-living did for properties landlords couldn’t lease through normal means such as Carmel Place and Common’s Baltic building. The units and amenity spaces in these properties weren’t designed to be shared, making rents higher and limiting potential to maximize a shared tenant experience.
• Co-living operators often master leased and operated properties with venture funds, even without assured tenancy. When the buildings failed to get adequate leasing, tenancy could be obscured by dubious founder claims of huge pipelines and tenant waiting list (see above). With big VC cash balances and hype, it was easy to deceive investors and press in thinking the sector had teeth. Ollie, Starcity, and Common all had stories about their bright future right before tanking.
• Managing buildings and people is arduous work that can’t simply be solved with tech. Many co-living operators, especially Common, were made up of junior workers with little real estate experience. Without proprietary buildings, most co-living companies became venture-backed, overpriced, and incompetent building managers.

My harsh critique of co-living is not a critique of shared living, which has only increased during the pandemic and economic downturn, and is more needed than ever in our wasteful, isolated culture. What I will continue to criticize are those who hijack important topics for their greedy and dishonest ends. Brad, Jon, and Chris — none of whom ever lived in shared housing themselves — are all working on new projects, still wealthy and free from fulfilling on any of the claims they made about solving urban housing crisis, and often doing stuff to make it worse by pissing away millions on stillborn projects. There are better ways to invest and build. The first step to better — and eventually ‘right’ — is removing the bullshit from building pro formas and investment narratives. Brad’s ousting is a good first step. Hit me up if you want to know the next steps.