Co-living: Where does it go from here?

“They came up with a policy just as we were going through the system”. George Tyson, project director at Downing Group, is sitting in a site office in the centre of Manchester explaining how the city’s newest co-living scheme came to be.

“[The council] didn’t have a policy on co-living – not many authorities did or do,” he explains. Square Gardens, an 830,000 sq ft site in the First Street district, was one of a few similar schemes coming in for planning during the pandemic and the city needed to figure out an approach to handling a residential typology which remains relatively uncommon in the UK. “They landed on a policy which said ‘ok, we’ll trial it for a period of time’”.

It recommended an initial ceiling of 5,000 units – roughly equivalent to what was proposed in the handful of schemes being brought forward at that time – to be restricted to key areas of employment growth in the city centre. “It’s great for us in terms of competition if there’s a closed shop and we are one of the shopkeepers,” Tyson jokes.

The situation in Manchester is indicative of the lukewarm reception which the burgeoning real estate sector has received from local authorities across the country, but it hasn’t blunted enthusiasm among investors for what they see as a potential profitable niche.

Since 2020, more than £902m has been spent funding or acquiring co-living developments, according to Knight Frank, including a record £258m in the first quarter of this year. The sector accounted for a fifth of the total amount invested in the build-to-rent market in that quarter. There are now 7,540 operational co-living homes in the UK, but a further 13,483 units are currently under construction or have planning permission granted.

Co-living developments are professionally managed and hospitality-led developments offering apartments to rent which typically offset smaller private areas with a larger provision of shared communal spaces and amenities. According to Knight Frank’s findings, the potential appeal of co-living is significant, if only among a limited set of demographics and geographies.

It is essentially a transitional typology for young, urban graduates who are looking for a slicker service than what is offered by the general private rental sector. Roughly seven out of 10 residents are aged between 26 and 40 and more than half of units under construction or with full planning permission granted are in London. Across the country, just 33 local authorities have a scheme either complete, under construction or with planning permission granted.

Overall, the Knight Frank estimates that there is a target market of 1.7 million individuals for co-living, but says current delivery accounts for just 0.4% of that.

No wonder there is investor interest, then. If local authorities can be convinced to get on board, the potential returns are large. There appears to be some enthusiasm among consumers for what has managed to get built so far, though. Folk’s Sunday Mills scheme in Earlsfield, South London, let 315 beds in just four months.

“The whole concept of shared living has been around forever – shared houses are everywhere – but this professionalises it and they are more purpose-built with a layer of management on it,” Tyson explains to Housing Today.

Square Gardens is Downing Group’s only co-living scheme, although they have options on other sites which they think could feature co-living. Predominantly a developer of purpose-built student accommodation, the firm was established by George Downing, who had started off owning a large number of houses of multiple occupation (HMOs) in Liverpool before realising the potential for professionalising the sector.

Over the years, Downing tried out other areas of development – including building faculty buildings for Leeds Beckett and Newcastle University – but ultimately made a decision to focus on student accommodation.. It now operates a vertically-integrated business, handling each stage through a developing company, a contracting company and a property management company. Manchester offered a good opportunity for it to make its first foray into coliving. The city has the second highest graduate retention rate in the UK and is the only English city outside London that gains more graduates than it loses.

“They need somewhere to live, there’s still a dearth of the right type of accommodation,” says Tyson, who says co-living offers the least expensive way of living in the city centre. Square Gardens, which was designed, like so much else in Manchester, by Simpson Haugh, includes 1,301 new homes, including shared apartments and one-bed studios, together with one- and two-bed apartments. The shared amenities offered include a gym, wellness centre and co-working spaces, as well as lounges, a cinema room, a private dining area and what it claims will be the largest private landscaped garden in the city centre.

 “A lot of the graduates have come through the PBSA route, so they are used to living in high-quality, professionally managed purpose-built accommodation”

George Tyson, project director, Downing Group

The shared apartments start off at about £200 per week, while studios are up to £350. This includes council tax, utility bills, gym access and the rest of the amenities, which Tyson says means the price “compares favourably” with the full cost of living in the city centre. He also notes that the rise of purpose-built student accommodation which Downing has been a part of has created a potential pipeline for coliving. “A lot of the graduates have come through the PBSA route, so they are used to living in high-quality, professionally managed purpose-built accommodation,” he says. “There is an expectation”.

So why the nervousness? Well for one, thing there is the space. “The big pushback is around the size of the studios being less than the space standard,” says Tyson. “That’s where they had a natural nervousness, because the city had been pushing on space standard apartments for a good while and the studios are 37 sq m one-bed apartments. But they’re not meant to be 37 sq m one-bed apartments – the compromise you make on space is compensated for by all the additional amenity.” Housing Today had a look around one of the smaller studios, and it has to be said, it was pretty pokey.

But Simon Bayliss, managing partner at architects HTA, which has worked on co-living schemes, argues that “when directly compared against general needs ‘C3’ housing”, an average studio size of 20 sq m, plus the share of amenity space, “actually compares favourably” with almost all other housing standards.

Councils have taken different approaches to handling these concerns. In an advice note published in March 2022, Liverpool City Council clarified that its development plan’s policies on residential size and mix would apply to co-living accommodation, meaning schemes in the city are required to offer a greater proportion of units with two beds or more, rather than one-bed units.

Meanwhile, the Salford Local Plan exempts co-living accommodation from space standards but requires that they provide 20% of the dwellings in the form of affordable private rent.

There is also some concern about encouraging the construction of a relatively unproven and specific housing type. Tyson says the sector “got a bit of a bad rep” after the collapse of the Collective Group in 2021.

>>See also: Could shared living help address Birmingham’s housing needs and give young people a sense of belonging?

>>See also: Co-living is an important tool in addressing the housing crisis

The firm had pioneered co-living in the UK but was hit by the impact of Covid-19 on occupancy rates and delays in development of its non-operational assets and was consequently unable to make enough income to service debt taken on to fuel a planned rapid expansion just before the pandemic. Tyson says some lessons have been learnt from the Collective’s experience. “They didn’t get it right the first time,” he says. “It was a purely studio offer and we think you need a mix of studios and shared apartments”.

It’s perhaps partly owing to the Collective’s failure that Manchester’s interim policy requires developers to submit a conversion plan to demonstrate how buildings could be repurposed in future if required as one of ten additional criteria for coliving. “Our experience suggests that most co-living buildings would be relatively straightforward to re-purpose to other forms of residential accommodation,” says HTA’s Bayliss. The 5,000 units that have been allowed in Manchester are all in roughly the same area of the city, which, according to Tyson, is part of a trend in which councils “formally or informally” limited coliving developments to a particular area of town.

Bayliss says despite its high profile in recent years, the contribution of coliving to housing delivery will remain modest.

“We believe that the value is in the quality of the offering that co-living contributes to a broader more resilient housing market, rather than the number of homes it contributes,” he says. On the other hand, the jury is out on whether it can meet the high expectations of developers, but the answer will almost certainly depend on how the wary reception of councils develops in the long-term.

“There’s not a lot of encouragement on co-living. [Local] authorities have policies to deal with it but nobody’s going out and demanding it”

George Tyson, project director at Downing Group

According to Bayliss, the “high quality” of completed schemes compared with other forms of shared living “has helped improve co-living’s reputation and whilst the receptiveness to co-living does still vary, our experience suggests that there is increasing acceptance and understanding of the positive role it can play”.

But others are slightly more circumspect. “There’s not a lot of encouragement on coliving. [Local] authorities have policies to deal with it but nobody’s going out and demanding it,” says Tyson. In Manchester, Tyson does not seem sure what will happen once these test developments are completed. “I don’t know if they are hoping that will be it and no-one else will darken their door again,” he says.