Everyone is talking about the housing crisis in the UK. We see it in some form in the news almost every day. Put simply, the crisis is a massive gap between the demand for and the supply of affordable, quality homes.
One of the many improvised solutions that has sprung up is co-living developments. These have gained traction in large cities such as London, Manchester, and Birmingham. This new model provides a shared living experience, combining private spaces with communal areas, and is designed to appeal to people seeking affordability, flexibility, and a sense of community. For many people, especially young professionals, co-living offers an attractive alternative to traditional rental options, providing urban living in prime locations at potentially lower cost.
But are co-living spaces a genuine solution to the affordability problem, or are they simply repackaging housing costs in a way that feels more appealing to renters? Does co-living genuinely address the UK’s housing challenges or merely cater to a specific and limited market?
The Growth of Co-Living in the UK
The huge growth of Co-living over recent years has been driven by a combination of housing shortages, urbanisation, and changing lifestyle preferences. In 2023, the UK saw a 65% increase in completed co-living units compared to the previous year, bringing the total number of operational units to 7,540.
The trend is most evident in London, which accounts for 74% of all completed co-living units in the country. But regional cities such as Manchester, Liverpool, and Birmingham are quickly catching up. These cities are home to growing populations of young professionals attracted by vibrant employment markets and a lower cost of living than in the capital.
Co-living developments often target central, urban locations, making them an attractive option for people who prioritise access to work, amenities, and social opportunities. As well as offering private en-suite rooms or studios, these spaces provide shared amenities such as kitchens, lounges, gyms, and co-working areas, which help foster a sense of community among residents.
Affordability: A Genuine Solution or a Repackaged Concept?
Co-living developments position themselves as an affordable housing solution, but the reality is more complicated. On the one hand, co-living can provide a more cost-effective alternative for renters who might otherwise struggle to secure housing in central urban areas. With utilities, Wi-Fi, and cleaning services often included in the rent, co-living removes some of the financial and logistical challenges associated with traditional renting. This all-inclusive approach simplifies budgeting and appeals to people seeking a hassle-free lifestyle.
But critics argue that co-living doesn’t actually solve the broader issue of housing affordability. Monthly rents in co-living developments, although they can be lower than equivalent private rentals in similar locations, can still be relatively high when compared to the cost of renting in suburban or less central areas. Many say that co-living primarily caters to a narrow demographic: young, single professionals earning moderate to high incomes.
Also, the smaller private spaces and reliance on shared facilities may not suit all renters, particularly those seeking long-term stability or housing for families. This limits the potential of co-living to address the full range of the UK’s housing challenges, which include a shortage of affordable homes for families and older generations.
Investment Potential and Market Trends
Despite debates over affordability, the co-living sector has proven highly attractive to investors. Since 2020, nearly £1 billion has been invested in co-living developments, reflecting growing confidence in this emerging asset class. Institutional investors are increasingly recognising the potential for strong returns – 45% have indicated plans to invest in co-living by 2028, up from 32% currently.
There are several factors behind this confidence. Co-living developments boast strong lease-up rates, with some projects achieving full occupancy within months of completion. This shows that there is a strong demand for these developments, particularly in urban areas. Tenant satisfaction is another key factor: 92% of residents surveyed by Homeviews said they would recommend their landlord to friends and family.
The co-living model also benefits from economies of scale, enabling operators to optimise costs and maximise returns. As the sector matures, investors who enter the market early are in a good position to capitalise on its growth.
Future Outlook for Co-Living in the UK
The future of co-living in the UK appears promising. The development pipeline includes over 13,000 units currently under construction or with planning permission, signalling that supply could nearly triple in the coming years. This rapid expansion reflects increasing recognition of co-living’s potential to address some of the challenges posed by the UK’s housing crisis.
Local authorities are also playing an important role in supporting the sector’s growth. As more councils acknowledge the importance of co-living in meeting housing demand, policies are being adopted to facilitate these developments. This regulatory support, along with sustained demand from renters and investors, makes co-living a scalable and sustainable housing solution.
The sector’s growth is impressive, but it’s also important to recognise its limitations. Co-living is very unlikely to be a universal solution to the UK’s housing crisis. But as the model evolves and diversifies, it may broaden its reach and address a wider range of housing needs.