For many tenants, living in a home managed by Seattle-based Loftium was a dream come true: a desirably located house, loft or townhome, in an expensive city, with affordable rent. Landlords, for their part, loved the ease and sense of stability that came with signing a lengthy contract with a well-funded company that promised to vet and supervise tenants itself.

But it’s all come crashing down in the pandemic.

Loftium, a startup that secured $15 million in venture capital last year, rents homes from owners and subleases a portion of the space to tenants — who then manage Airbnb listings in the rest of the home on the company’s behalf. Tenants typically pay half or less of the rent that Loftium owes to landlords; Loftium picks up the difference. The company keeps the revenue from its short-term Airbnb rentals.

In pre-pandemic times in the 11 heavily touristed cities where Loftium operates, including Seattle, the Bay Area and San Diego, it could be far more lucrative to list a home on Airbnb and collect short-term rental fees than to lease it long-term.

But the steep drop in travel triggered by the COVID-19 pandemic is suffocating businesses built on that kind of rental arbitrage, leaving landlords and tenants in the lurch.

Loftium recently has withheld lease payments to landlords, laid off more than half its employees, and culled nearly a third of its Airbnb listings. Early this week, tenants received an email from Loftium that many interpreted as a threat to raise rents if they didn’t agree to a suite of new lease terms, including hosting long-term stays, listing on booking platforms outside of Airbnb, and accommodating all guests who met Loftium’s screening criteria.

Tenants would need to agree to adhere to the changes, Loftium wrote, “to ensure the continuity of your discounted rent” in June.

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The company later walked back that ultimatum. Loftium CEO Yifan Zhang said the company didn’t intend to imply rents could go up but did not say how renters should have interpreted its message.

Loftium has “done our best to react quickly in navigating unprecedented situations,” Zhang said in an email, when asked about the company’s moves. “I certainly did not foresee the scenario that we’re all now living through, with a pandemic shutting down travel across the world.”

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Founded in 2017 by Zhang and cofounder Adam Stelle after she realized she could cover her mortgage by renting a room in her Seattle house on Airbnb, Loftium was expanding rapidly in the months before the pandemic.

It leased roughly 700 rental units — mostly in Seattle, but also in Atlanta, the Bay Area, Charlotte, Chicago, Dallas, Denver, Orlando, Phoenix, Portland and San Diego — with plans to reach 1,500 by year’s end. The company scaled up from 15 employees in 2019 to 54 by February, according to GeekWire.

But as the pandemic worsened, sending Airbnb bookings plunging by 50% or more in some cities — with nightly rates following suit — the company acted fast to cut costs. It laid off 60% of its employees in late March, and slashed the number of homes it leased to just 465 by terminating early-stage contracts, Zhang said.

Landlords and tenants say Loftium’s response to the pandemic has been fitful and often confusing, with the company rolling out new policies only to rapidly reverse them.

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The company has pleaded with tenants to pay rent if possible. “Making rent payments in full is critical to maintaining secure and stable discounted housing for our renters,” Loftium wrote in a March 27 email to renters.

Simultaneously, the company was trying to negotiate down its own payments. It called renters to ask whether they’d be interested in assuming the full lease amount, according to two tenants who spoke anonymously because of a stipulation in their lease preventing them from talking about the company. Both refused.

“There’s a reason people are renting discounted homes,” said a Loftium tenant in Northwest Seattle who said he found the offer laughable. “It’s because they can’t afford the full price.”

In early April, the company said it “couldn’t guarantee rent payments” to landlords who didn’t sign a lease amendment lowering Loftium’s monthly obligation, according to a copy of one such proposal reviewed by The Seattle Times. By signing, landlords would give up the right to seek the full balance of back rent.

But weeks later, Loftium paid landlords a portion of April’s rent, regardless of whether they’d signed new leases or not.

A “sudden and significant” loss in Airbnb income and across-the-board layoffs delayed payments, Zhang said, noting the company has never missed a payment until the pandemic. She said Loftium is committed to passing along any rent it receives from tenants to landlords, and nearly all Loftium tenants have continued to pay rent.

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As of May 28, some landlords had still not received any payments for May.

The company has used the CARES Act, a $3 trillion federal coronavirus relief package signed in late March, to justify not paying rent on time or in full. The legislation protects tenants in properties with federally backed mortgages from eviction until July 23 and expands mortgage forbearance for those property owners.

Loftium has said it qualifies as a tenant under that legislation and can’t be evicted.

For the business to try to take advantage of protections for households feels like “a free lunch on the shoulders of the landlord,” said Rosario Bevilacqua, who rents a four-bedroom home in West Seattle’s Highland Park neighborhood to Loftium.

“Loftium is a business that profits from my home,” he said.

Bevilacqua, an insurance agent, said he makes less than minimum wage; his wife owns a coworking space that’s been closed since the state closed nonessential businesses in late March. The rental income from the Highland Park property covered the mortgage, property tax and insurance and paid for things like swim lessons for Bevilacqua’s four children, he said.

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Zhang said the company wasn’t acting improperly in seeking CARES Act protections. “We’re certainly not profiting right now,” she said.

The company said it’s working with its tenants on payment plans to ensure none of them lose housing during the pandemic. But some tenants say the company’s rent nonpayment is hurting them directly.

In a closed Facebook group for Loftium tenants, some have said their landlords have postponed maintenance or are filing for eviction because Loftium has not paid rent in full.

Zhang said those are “isolated instances.”

“We take these cases seriously, so whenever it’s brought to our attention we work directly with the landlord and renters to remedy the situation,” she wrote in an email, acknowledging the company’s communication has been “not even close to perfect” since the pandemic.

Loftium tenants said that’s an understatement. Many said they aren’t sure how much they owe next month, who might be staying in their house next, or even whether they’ll have somewhere to come home to.

“I thought it was a dream come true,” said one Loftium tenant in Denver, “but it’s turned into a nightmare.”

This article has been updated to correct that Yifan Zhang and business partner Adam Stelle are not married.