The Future of Co-Living
In March, every sector and every business scrambled to understand how COVID-19 could and would impact their operations and what paradigm shifts, if any, would occur. A diversified real estate investment company called outlier, based in Washington, DC, has $100 million of co-living projects in various stages of operations, construction, or entitlement. As COVID-19 unfolded our team began to consider short term and long term impacts on co-living; how would it change, how would the needs and preferences of residents change, and what accelerated trends might be beneficial or be detrimental to the roommate–style housing sector of real estate?
Below are three predictions for post COVID-19 co-living and the larger multifamily housing sector:
1. Affordability and flexibility are more important than ever before
Before COVID-19, in many major cities across the United States most renters paid more than 30 percent of their income towards their rent, and in some cities above 50 percent. The Wall Street Journal recently reported that 22.5 percent of Americans are at risk of being evicted. As the economic impacts of the pandemic unfolds, many may become unemployed or underemployed, pushing more people to seek more affordable and flexible housing.
Co-living properties provide residents the opportunity to live in a great neighborhood for 30 percent less than what a studio or one-bedroom costs. It also provides residents more flexibility, not only with a shorter lease term, but with the ability to move within 24 hours to another unit in the network of our property management partner, Common.
In addition to individuals feeling the economic impact, municipalities are being affected and forced to cut their budgets. Dealing with a projected $700 million loss, the Mayor of the District of Columbia made the decision to cut spending on affordable housing by $16 million. Many cities already have a severe shortage of affordable housing and reduced spending on affordable housing will only exacerbate the issue and create a more dire supply and demand imbalance. Fortunately, co-living is one product that can be utilized to create a more affordable option for residents often without the use of public subsidy.
2. More awareness of our physical environment
All of us are more aware of the surfaces we touch, the air we breathe, and the environment where we live. Residents will be more demanding of their property managers and building owners to ensure that there is not only adequate cleaning, but that there is transparency about the overall health of their environment.
Owners and developers will be incentivized to provide a better and healthier product which will further galvanize property tech companies to innovate and build new tools to raise the standards of healthy living.
Several examples of innovative companies already providing health and wellness solutions:
Delos has launched a Home Wellness Intelligence system called Darwin, which monitors various conditions of the physical environment and takes action to improve those conditions, such as air quality and lighting.
Healthe lighting has released various lighting solutions one of which called Cleanse® uses ultraviolet lighting to sanitizes surfaces and can be installed at entrances of buildings.
SURFACEGUARD has launched a cleaning service including a microbiostatic antimicrobial coating that kills COVID-19 and other viruses.
3. People want and need community
The pandemic made us acutely aware of one negative aspect of being so connected to other people, the ability to contract a deadly disease. While it is difficult not to focus on the depth of that downside, it is important to understand how important our connection to each other is and will continue to be in the future.
Susan Pinker, in her book The Village Effect, cites numerous studies that illustrate the power of close relationships and living together. One such study suggests that people with active social lives can increase their lifespan up to 15 years.
COVID-19 isolated many of us, forced us to stay out of the office and shelter in our homes. Loneliness effects all age groups and as Pinker’s book suggests, 20-40 percent of adults report feeling lonely, it seems likely that those statistics increased during the pandemic. In addition to being mentally challenging, loneliness has real physical implications. Dr Julianne Holt-Lunstad, PhD, a professor of psychology at Brigham Young University, says loneliness ranks as detrimental as smoking and obesity and people who are lonely are 32 percent more likely to die early than those who are connected to their peers.
Those who live with others during the pandemic benefited from being able to continue to socialize. Co-Living provides the ability to have your own personal space but live with others and share common areas such as a kitchen, living room, and outdoor space. Many of our residents choose to renew their lease and stay longer because of the close relationships they develop with their roommates.
The Future of Co-Living
Over the past ten years co-living has emerged as an effective solution not only to rising rents in urban areas, but to address other trends like people getting married later in life, traveling more, and changing jobs more frequently. While COVID-19 shocked our health system and our economy, it has not disrupted those trends. Many will still flock to cities to find jobs, go to school, and be with a diverse group of people. Many will want or need to spend less on rent and more on other areas of their life that they value more and for those that do, co-living will remain an attractive option. As the cohort that values experiences and flexibility grows so will co-living.