Co-living, while representing just a fraction of the multibillion-dollar apartment industry, seems to be having its moment.
In 2018, publications including the Wall Street Journal, Business Insider, and the Financial Times covered the rise of this trend among younger renters in major US cities. While the concept is less than 10 years old, it has expanded its appeal to both established real estate developers and the New York City government, which recently announced an incentive program for the development of new co-living spaces.
Often described as “an extension of dorm life,” co-living allows tenants to rent a private bedroom within a larger apartment. All of the co-habitants have access to living rooms, kitchens, and other common spaces. In addition, amenities such as cleaning services, dog walking and cooking classes are often included. Although it is similar to having roommates, co-living differs mainly in that a renter has an individual lease versus a shared lease and therefore is solely responsible for his or her bedroom and bathroom.
Many co-living providers present it as a better and cheaper way to rent, with rents ranging from $690 to $3,050 per month depending on the company and room chosen. Most executives of co-living operators remark that co-living is a good transitional product, as opposed to a permanent living situation. According to The Collective, average tenancy is ~9 months to a year.
Perhaps unsurprisingly, co-living is particularly popular among Millennials. From 2005 to 2015 the number of Americans aged 18 to 34 with roommates increased 23%, according to the US Census Bureau. This is mainly a result of higher housing costs, the burden of student loan debt, and delays in marriage. Additionally, with Millennials and Gen Zs reporting higher loneliness levels than other generations, both generations seem increasingly inclined to seek co-living situations because of the strong sense community they provide — especially in major urban areas, which can often feel lonely.
From the landlord and development perspective, co-living is a good alternative to an oversupplied luxury multi-family market. Co-living arrangements provide access to young renters with disposable income. The amenities offered can make their buildings more competitive than traditional offerings.
As Millennials and other renters explore new ways to rent, they are looking at new technologies as well. Co-living is a good example of this in that it is a technology-driven offering that is expanding the options of tenants and landlords alike. Likewise, options including lease guarantee or security deposit replacement are making it easier for Millennials to move how and when they want.