How is Co-Living Disrupting the UK's Private Rental Market?
HMOs are here to stay but the model is changing. Co-living and specialist or niche HMOs are becoming more normal in today's property market. Whilst before landlords and developers looked to provide accommodation, now, to meet modern demand, they are creating spaces for particular demographic groups.
Co-Living in the UK
Grant: HMOs are here to stay and I think they're going to evolve a little more. We're going to start looking at family HMOs, where you've got multi-generational pods.
There's a project in London, I think it's called XO or something like that, where you've got separate, self-contained apartments sharing a kitchen.
So, the things that aren't used that much during the day, can be shared. So that's two apartments sharing one space.
Amy: That's great, I didn't know about. I'm going to have to look into that because I've been really interested in the co-living, co-housing model since going to America and seeing how popular it is there, particularly in Manhattan.
I saw some really amazing co-living schemes there. I'm actually going to go and interview someone at The Collective, Old Oak, in London.
That's the largest co-living space in the world. They have restaurants, bars, a gym and a library.
But I'm in total agreement with you. We need more living space and people want more from their living space. They don't just want a bog standard house with a kitchen, a bathroom and a garden.
They are happy to share certain aspects of their life. Lifestyles are changing and more is needed from buildings and properties that will help to match those lifestyles.
People are getting a bit pickier, a bit more choosy and I think there are some great opportunities there for people willing to specialise in a niche.
Like you said about family sharing, this is really interesting because how many struggling families have we got in the UK? We've got families that are friends with each other that might really go for that kind of model where an aspect of privacy meets an aspect of sharing and socialising, too.
Grant: It's communal living. And it's how we would have lived together 500 years ago where necessity defined it.
We've just a done a feasibility study on a scheme in London where there are 30 bedrooms. In essence, it's 30 double rooms for couples.
Grant: So, in essence, there are about 60 people. There are a couple of shared kitchens, a gym and we've even designed in this live/work space. So, if you are a young professional, instead of commuting into the city every day, you can work from home.
But, you're not working in your bedroom. There is a dedicated breakout space.
Amy: I love that.
Co-Working and Community
Grant: And we have this idea that with this kind of set up, you could actually start to see industry and small businesses forming in that space. There could be cross-collaboration between residents, starting to come up with ideas.
It's that slightly hippy idea of people living, working, surviving and growing together in one space.
Amy: I wrote an article for the site about Castle Braid Co., which is somewhere I stayed in Brooklyn, that is a totally unique space. It's an artist residence where the idea is people living together, working together, making together, creating, forming businesses, partnerships.
They had this most amazing community and the building is so beautiful because they're all creating, making, and transforming it on a daily basis.
But like you say, there's these little communities and businesses and networks that are happening within these buildings, which is fantastic.
Grant: We have one in Manchester. It's not a live-in space, it's a workspace, in the old Granada studio. It's quite not together yet.
It is quite knocked together, but you go in and you see all these little fledgeling businesses. There's a videographer and there's a really good coffee company in there and a guy reupholstering furniture.
But they all talk to one another
And by helping each other and seeing opportunities and recommending each other, it becomes a support community for business.
The same model could work just as well for residential communities - a support community for residents.
Amy: I agree. As I say, there's this artist space in New York and I know that in the technology space and for start-ups, houses are becoming more popular.
I had a look at some YouTube stars that are all sharing properties and documenting their experiences as they go.
So I think there's huge leverage in this shared living idea.
There are a lot of landlords that are perhaps panicking because they've entered the student marketplace and it's saturated so their property is sat there empty with loads of voids.
If they were to look at diversifying and at entering a niche and doing it well - doing it fantastically well - and offering the best possible within that marketplace then that's a route to success.
Yes, by niching down you have a smaller marketplace to penetrate but you can charge a premium for the services that you're offering.
Grant: You've just put me in mind. I have some anecdotal evidence for this with a couple of my landlord clients. They have a problem with double voids. They get a male and a female or a gay couple leaving the property at the same time.
Because if I was moving to a new city, and I was single and didn't know anybody, I'd go to live in an HMO because it's a way to meet people.
So, for people who are looking to meet a partner, often an HMO is where they will meet them and then when people leave the property, it's in twos as they're leaving to move in together in their own place.
We've one client who's looking at this idea of creating a - not a dating site, exactly - well I suppose it is a dating website. Everyone puts their profile up and says whether they're single or whether they're looking or they're interested. And it's sort of an ... I joke about it. It's going to end up being a little bit like a Tinder-style hook-up type site.
Amy: A Tinder for HMO's. I love that.
Grant: But actually, it's a good idea.
Amy: Yeah. It is because there's such a social aspect to living like this and I think. I saw this in America and I think we're just hitting in on it now. It's not just people in a building, it's a community.
And one side of it can grow as the other side does. It can create something amazing that will be beneficial to the building, the property, the residents and to the overall investment.
Grant: We have started talking about doing specialised HMOs. So, an over 50s' HMO. A divorcees' HMO. Well, it's all very high-level stuff, and we don't know how much market there is for it. But we have been discussing this with our more how should we say? Adventurous clients.
But our clients are starting to ask, "Okay, what niche can we explore to set ourselves apart from the crowd?"
And all I can say is that if I was 50 and working away for three months and wanted to live in an HMO model, am I going to want to live in a house with a load of 21-year-olds?
It probably wouldn't fit with my profile.
And I suppose, that's having an understanding as to whether there is a market there to support your niche and then embracing that.
Serviced Accommodation and HMOs
Like you say, people like myself or yourself, that work away, and don't want to sit in hotel rooms all the time have limited option. Air BnB can be just as lonely as a hotel room. Wouldn't it be better to live with and meet other business people that are travelling, other entrepreneurs?
Grant: In Salford there are things like that happening. People are coming to work at Media City for maybe six months. They have a relocation budget and don't want a hotel but they don't necessarily want a house either.
Because they are only there between Monday and Thursday and they go home on the weekends. They just need somewhere to wash their clothes and keep a few things.
So this, as a service, is becoming more and more common. Sort of a half-way-house between a standard HMO and serviced accommodation.
We've one client who's toying with this idea of offering a kind of turnkey service. So, you'd get a stocked fridge and a made-up bed when you arrive but you are living in an HMO.
It's a good business idea. Serviced accommodation in an HMO.
Amy: I think that people are having to push harder. The HMO market is a bit saturated Like you said, I don't think it's going anywhere and people are having to diversify.
Traditionally it's been a bit lazy. The idea has been to just let to students and now you can't really get away with that.
The Death of Student HMOs
Grant: The student markets for HMOs are dying. There's too much money in it.
I can't remember who it is, but there's somebody approaching universities, and he's saying, "You know what, I'll throw up a 300 unit student block here and you recommend it to your students and you'll get a commission." And that's his business model.
And it's a beautiful business model because students are always coming. They're always going to want to stay in the best places. So the traditional house share student-let market, it's on the way out and it will continue to go on its way out.
Maybe not in the next five years, but, say, over the next 20 years.
Amy: I agree with you, 100%.
That's how I got into the marketplace originally. I was working with empty student properties because students aren't using those houses all year round so it was easy pickings for me, working with LHA tenants, to go and talk to those landlords and offer to help them with their void periods.
But as you say, we're going to keep seeing this. So, these are great tips for investors who are looking at diversifying, looking at the co-living model and taking a lead.
And, as I've said, I've written in a couple of articles for this site recently, looking abroad at what they're doing. And there are some really interesting takes on co-living that we could probably learn from.
Co-Living and the British Mindset
Grant It's really interesting you say that because there's a bit of psychological barrier here, in the UK. And this might simply because, in Britain, we've always been out on our own, away from Europe.
We're quite bad at living in high density.
If you go to Paris and look at the tower blocks, people live their whole lives on top of each other.
And you go to Hong Kong you have three generations of the same family living in a two bedroom flat.
But, in Britain, we don't really do it that well. It almost seems to be like a natural progression. You leave home, you move into a flat or an apartment but your aspiration is to get of that flat.
And you step up the hierarchy. You go to your terraced house, then to your townhouse, then your semi, then to your detached. And that's something that's going to be interesting to see. That is if co-living will work here.
Interestingly though, we are a hugely diverse population and we have a very international population especially in the major cities.
Because if you walk around Manchester, you don't meet many Manc's. Well look at me, I live in Manchester and I'm not a Manc.
I remember reading a couple of theories on this whole idea of what the 'Englishman's Country Garden', is all about.
We have an aspiration to live in a semi-detached with a front garden set back from the road. My back garden, my little bit of land. My little bit of dirt. That sort of thing.
And it does set us apart as a nation from a lot of the rest of Europe, in that you look across Eastern Europe, a lot of the major cities in France, where we're not talking skyscraper blocks, but four-story walk-ups, where you do have four different apartments and people live their whole life in them. And that's just normal.
Whereas for us, that's not particularly normal.
Amy: Yeah. It's going to be interesting to see how it develops over the next few years and where we go but I'm excited about the co-living model here, I really am.