Tenants of Nasdaq-listed apartment rental platform Qingke say they’re finding themselves out of a home and in debt as the company comes under fire online after failing to pay rentals or deposits to its users, fueling rumors of insolvency.

Why it matters: Qingke’s troubles highlight the risk that rental loan contracts pose to both tenants and lenders.

  • Like other “second landlord” companies, Qingke relies on rental loans to accelerate growth—a bit of fancy financing that brings in a whole year’s rent in advance while leaving both tenants and the platform on the hook to lenders.
  • For tenants, the model replaces rent payments with debt service to a third party. Tenants can owe payments even after being evicted.
  • The Covid-19 outbreak, which brought a halt to China’s home rental market, created a cash crunch.

Read more: China’s WeWork for houses reveals rental loan risks

Details: Qingke admitted a cash strain in an announcement released on May 29, but says their business is running normally and pledged to pay debts. But tenants say they are being forced out of apartments as Qingke misses lease payments.

  • Dissatisfied apartment owners who encountered rental payment delays are forcing tenants to leave their apartments. “We have been ousted by the landlord because Qingke has delayed payment for three months. The electricity and water in the house have been cut off,” Jiang Dongyue, who rented two houses from Qingke in Shanghai, told TechNode.
  • After graduating from college, tenant Gemini Cai took out a rental loan to sign a one-year contract with Qingke, but was forced to move out of her apartment in Hangzhou one month later by the apartment owner.
  • Cai’s deposits and rental loans amount to nearly RMB 20,000 (about $2,800). She only lived in the house for one month, which costs RMB 1,400. “With the rental loan contract still going on, I have to pay the rest of the loan even though I’m not living in their apartment,” Cai said (our translation). She has already moved back to her hometown due to financial pressure.
  • “I don’t believe a word from this unscrupulous company,” Cai told TechNode.
  • Another Shanghai resident, Ruth Yang, moved out of a Qingke apartment last month because Qingke terminated their rental contract without notifying her. Yang still hasn’t received a refund for her rent and deposit.

Context: Qingke, founded in 2012, rents shared houses targeting young professionals. The company raised $46 million in its Nasdaq listing in November, down from the original goal of $100 million.

  • The bike-sharing company Ofo likewise funded operations using advance payments, relying on deposits paid by riders. Millions of Chinese consumers lost their deposits when the company collapsed.
  • Qingke’s peers include Ziroom, Mofang Apartment, and Danke Apartment.
  • Qingke rival Danke encountered similar blowback after applying exploitative business practices in February to ease a cash crunch.
  • Danke drew attention from China’s finance and insurance regulatory watchdogs, which launched a joint investigation into the rental loan practices of apartment-hunting platforms in February.

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via lixin@sixthtone.com or Twitter.