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In a third round of layoffs in the last 12 months, rent-to-own company Divvy Homes is handing out pink slips to 95 employees in 21 states — including a number of senior managers at the company’s San Francisco headquarters, according to Worker Adjustment and Retraining Notification Act (WARN Act) notices the company filed last week.
Inman first reported the latest round of layoffs Friday, based on social media posts authored by seven affected employees. Divvy has not responded to Inman’s requests for comment on how many employees remain at the company, what markets it serves, and what Divvy’s long-term strategy is.
Divvy’s website currently facilitates home searches in 19 markets in nine states: Arizona, Colorado, Florida, Georgia, Minnesota, Missouri, Ohio, Tennessee and Texas.
In a WARN Act notice filed with the California Employment Development Department last week, Divvy said the layoffs will take effect Nov. 7, and include 26 employees in California, including the company’s chief legal officer, vice president of compliance and head of design.
Another 12 employees are being let go in Texas, including the head of brokerage, a compliance program manager and the company’s vice president of communications and public relations.
In Colorado, Divvy is parting ways with 10 employees, including the head of asset management, national escrow officer, and agent growth manager.
Other affected states include Arizona, Delaware, Florida, Georgia, Hawaii, Illinois, Massachusetts, Maryland, Mississippi, Missouri, North Carolina, New Jersey, New York, Ohio, Oregon, Pennsylvania, Washington and West Virginia.
Divvy, whose 2018 Series A funding round was led by venture capital firm Andreessen Horowitz, got off to a fast start with more backing from investors including homebuilder Lennar in a 2019 Series B round. In a January 2021 press release announcing that it had hired Blackstone veteran John Lee as chief operating officer, Divvy said its payroll had tripled in just one year, to more than 210. The company announced a $110 million Series C the following month.
But since announcing a $200 million Series D funding round in the summer of 2021 that valued the company at $2 billion, Divvy has been faced with a housing market that’s proved challenging for lenders and real estate brokerages alike.
Last year’s abrupt runup in mortgage rates made financing purchases more costly for renters, and also created an inventory crunch with many homeowners reluctant to give up the low rate on their existing mortgage. The drastic slowdown in mortgage refinancing and home sales prompted real estate companies to shed thousands of employees.
Divvy’s rent-to-own model may have presented challenges unique to that line of business. Divvy buys homes on behalf of clients who chip in 1 percent to 2 percent of the selling price, which is credited to their future down payment. While they’re leasing the property, their monthly payments include an extra amount on top of their rent that’s set aside for their down payment.
In an investigative piece published in October, Fast Company concluded that Divvy was one of the top 10 net acquirers of single-family homes in the U.S. and “arguably more insulated than its Silicon Valley peers from the ups and downs of the housing market for a simple reason: Its business model does not rely on homeownership as an outcome.”
But after analyzing rents advertised by Divvy on 18,000 properties in 19 markets, Fast Company concluded the company was charging higher rents than other landlords in some markets.
In an Aug. 1 article, the New York Times reported that Divvy owned 7,000 homes, and that “more renters are struggling to pay, forcing Divvy to file more eviction notices.”
Divvy told the New York Times that it evicts clients only as a last resort, and that not all eviction notices result in completed evictions.
“With mortgage rates at all-time highs, our mission is more critical than ever,” Divvy CEO Adena Hefets told the New York Times in a statement. “Divvy gives renters the power of ownership: Pick out a home, build savings, and have the option to make it your forever home.”
Last year, Hefets told Inman that she expected rising home prices and mortgage rates could help drive Divvy’s business, but that the company’s goal was “not necessarily to expand a ton into new markets.”
“I do want to acknowledge the fact that the market is really tight right now, and we’re being impacted just the same way that every single individual and any company you name is being impacted by low inventory levels,” Hefets said at the time.
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