Co-living: what does it mean for the UK rental market?
Building more co-living developments tops the list of people’s preferred solutions to the housing crisis, according to new research by the Federation of Master Builders . In FMB’s survey of 2,000 homeowners across the UK, a third of respondents believe co-living is the future.
In 2018 flat shares – often with strangers – are commonplace, but co-living is more than merely sharing a property. Similar to the co-working model (US giants WeWork even have a WeLive division), this is a flexible and all-inclusive accommodation model aimed at modern tenants. Properties are fully furnished, usually including televisions and artwork, and are offered on a rolling contract basis.
What is co-living?
Adam Goff, founder of all-inclusive flat-sharing company Capital Living explains the new model: “If you think about the old method of sharing with someone it would have been seen as a negative: ‘I’m a lodger, I have a lodger, I share with 5 people’. I think what co-living is doing is using innovation and tech and being clever with use of space to help people live together and provide an improved quality of life.”
One thing all UK co-living developments pride themselves on is creating a sense of community, with the ethos of their properties as marketable as the facilities. Therefore, many of the providers conduct tenant interviews to confirm potential residents are a good fit for the facilities. Renters are often referred to as ‘members’ rather than tenants.
James Penfold, director of planning and zoning at another operator, The Collective, believes that co-living offers great appeal to transient young professionals: “The feeling of being part of a community is waning; even though we are a more connected society than ever thanks to technology, it has resulted in less physical human contact, and that’s what we want to combat.
“Today, people want to spend their money on new experiences as opposed to things, and at The Collective that’s certainly something we offer. There are hundreds of people to meet, a robust events program that brings the best of the city to our members’ door and a number of initiatives to support them both personally and professionally. Lastly, we aim to take the hassle out of living so our members can get on with doing just that – one convenient bill, paid monthly.”
Co-living takes two approaches: the first is a custom-built block. London-based The Collective is leading the pack here, with its 546-bedroom complex in Old Oak. The build-to-rent model means rooms are standardised, and tenants have access to on-site facilities such as gyms, common rooms and cafes. The Old Oak site cost £37.5m to build and fit.
The second co-living solution uses larger existing properties, which are managed by an agency such as Capital Living or Lyvly who provide an all-inclusive offering for tenants.
What’s the appeal of co-living for renters?
Co-living is primarily aimed at the millennial-professional market, and the accommodation demands of this demographic are to the fore of developments. Similar to student accommodation models, most co-living models offer an all-inclusive way of living, from rent to Wifi, and often even Netflix and on-site fitness facilities.
All co-living companies pride themselves on their smart, clean spaces, with modern facilities and fresh décor. It’s understandable why this model of living is attractive to young professionals.
However, these properties come at a price, with monthly rent in the range of £900 – £1,600 per room.
Goff explains: “Definitely from the outside looking in £1,000 per month sounds expensive, but the market ultimately sets the price. People who have lived in London say they think it is good value compared to smaller shares they have lived in. Because we take the bigger 6, 7 or 8 bed houses we can offer better value to customers.
“When you add up the cost of council tax, other bills, and that we also provide about £50 a month of house supplies such as toilet paper, light bulbs, and cleaning products, it’s good value.”
Co-living providers are keen to promote their tenant-first approach, with founders often inspired by their own disappointing rental experiences. Phil Laney, Founder & CEO of co-living company Lyvly, says: “Working in the residential property market I saw first hand just how isolated young professionals are, living in apartment blocks with little way to make genuine, valuable connections, paying fees left right and centre, and suffering from poor service. It’s clear that the property market was built for landlords and not tenants wellbeing. But why, when tenants are the customer?
“Renting is often not a pleasant experience! Living in cities can be lonely and stressful. Moving into your new apartment, sorting out furniture and utilities, and then trying to connect with busy people around you all whilst working long hours in a transient economy are frustrations many of us have experienced. We are confronting three problems for renters in the city – their desire for community, convenience and affordability.”
Goff agrees its convenience that sells this living model to consumers: “We’re selling a product here. It’s frustrating when you want something and it’s not out there. The sign up process is all online and we use digital signatures. It’s so easy. We have our own tech platform that makes on-boarding simple. It’s housing as a service.”
What does co-living mean for other residential landlords and agents?
The co-living trend is still relatively small in the UK, and largely confined to London. However, it is growing at a sizeable pace.
Phil Laney from Lyvly explains how collaborating with co-living providers could be a smart move for landlords: “The (current rental) system is painful for landlords, who don’t have consistency and control over the quality of their tenants, they pay high fees to middle men and struggle with vacancy rates. We provide them guaranteed income with no voids and no fees, and a genuinely positive social impact.”
Co-living companies who use a ready-built property model either rent from a landlord on a long-term lease with the intention of subletting, thus guaranteeing the rent, or they act as an agency for landlords who already have an HMO license for their properties. As renters demand a more inclusive living experience, working with these agencies could prove a simple way to cash in on this share of the residential market.
What is the potential future impact of co-living?
For Capital Living’s Adam Goff, right now is an exciting time for the flat-sharing industry: “When you combine innovation in property with innovation in tech, we’re changing the way young people are living in cities.
“I think co-living will eventually be addressing every demographic. You’ll have co-living families, co-living retirees, et cetera. I think it will improve our lives and make up more social and more mobile. I do think it will fundamentally change the way we live in cities. We’ll be able to live closer to people than we have before but in a better way and on better terms.”