How can co-living help tackle the housing crisis?

Earlier this year, CBRE published How to fix the broken housing market, highlighting the continued lack of housing supply across the UK. More than 50% of single-person, working-age renters live either alone or in home shares, according to Experian, showing how important the provision of accommodation for this cohort is. Yet it remains underserved. Co-living, which is specifically designed for this demographic, could help alleviate pressure on housing and plug the gap.

Supply of rented accommodation for single occupants continues to fall across major cities. In London, Manchester and Birmingham, the number of studios and one-bedroom flats within the private rented sector (PRS) has fallen 45%, 21% and 21% respectively since 2019, according to REalyse. Compounding matters is the exodus of landlords from the buy-to-let market: more than 20% of properties currently for sale in London were previously rental properties, according to TwentyCi. Interest rates, taxation and other legislative changes have reduced the number of buy-to-let mortgages to 30% below the long-term average (UK Finance).

The number of houses in multiple occupation (HMOs), considered home shares, is also shrinking. London, Manchester and Birmingham are all experiencing shrinking supply of mandatory licensable HMOs (down 28%, 30% and 33% on 2018/19 respectively).

Despite this declining availability of rental accommodation, these cities are considered ‘rental hubs’, characterised by a higher percentage of renters, typically young professionals in their 20s and 30s, compared with the national average. This highlights the need for alternative housing solutions, particularly for young professionals and single individuals, and this is where co-living can play a part.

Against a backdrop of shrinking supply, the number of single-person, childless renter households is increasing. This demand and supply imbalance has contributed to rental tension within some cities, which could lead to migration of this cohort from urban centres as renters are priced out.

Co-living occupants reflect the single-person renter population in the UK. Most residents are aged 26 to 40 years old (but can be anywhere from 18 to 70 years old) and earn upwards of £40,000 per annum. It is also popular with international residents, who account for 40% to 60% of a typical scheme, as well as students who may be struggling to find PBSA beds (and account for 10% to 25% of residents), according to Urbanbubble. At least 50% of PRS single renters and home sharers in London and Manchester earn more than £40,000 per annum, as do 35% in Birmingham, making co-living an accommodation option for at least a third of the PRS population (Experian).

As co-living is still nascent sub-sector, planning policy has until recently been opaque. In February 2024, the Greater London Authority provided guidance for London local authorities and, as a result, clarity for investors and developers. While London is where the majority of operational and pipeline schemes are located, other large local authorities such as Birmingham City Council and Manchester City Council have provided guidance and there is an active pipeline in many cities throughout the UK.

Further understanding and recognition of the benefits of co-living, such as the role it can play in placemaking, enhancing a sense of community and contributing to the wider objectives of a local authority, should help encourage more local authorities to recognise co-living as a housing typology and the positive contribution it can make.

As co-living caters to single-person households, an increase in this type of accommodation could alleviate the pressure placed on housing supply and its knock-on effects on other types of renters (such as families). Co-living may not solve the undersupply of rental accommodation, but it can contribute to and complement other housing options as well as provide choice for renters in an undersupplied housing market across the UK.