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Housing affordability is at a dramatic level. The US population will be 340.627 million by the end of 2024, but homeownership is only 65.6%. Major cities are becoming enclaves for the super-rich, pushing the majority to the brink of subsistence.
The New York Times' research reveals a sad truth we all know: housing prices are rising while wages are stagnant. This makes it difficult for Americans to realize their dream of affordable housing. In recent years, prices have risen by about 60%, and a quarter of renters now spend more than half their income on rent – far more than the average of a third.
To cover living expenses alone, a single New Yorker needs an estimated $70,000 per year. The same is true for residents of LA and San Francisco; in Chicago, it's about $50,000 per year. The highest rents are in New York City and San Francisco, where one-bedroom apartments cost about $4,280. This type of housing is more affordable in LA and Chicago, at about $2,500 per month. With an average salary between $5,000 and $7,500, many Americans spend more than half of their income on rent.
Related: Kevin O'Leary says house prices won't fall anytime soon
The authorities recognize the problem
The White House Economic Report (ERP-2024) confirms a mismatch between supply and demand and a shortage of 3.8 million homes.
Contributing to this imbalance are restrictive zoning laws, rising construction costs, and limited land availability, among other factors. Despite long-standing recommendations to loosen zoning restrictions and support the construction of affordable housing, these measures have had little success. In addition, short-term rentals in New York are facing a crackdown. The city recently began enforcing a 2022 law that prohibits stays of less than 30 days unless the host stays in the apartment with guests. This means lost income for many landlords.
While political decision-makers continue to sit idly by and fail to address the root causes of the crisis, the market is responding with new approaches.
Related topics: Hope for the US housing market as fixed-rate mortgages fall
Coliving as a multi-vector solution
As mentioned above, striking a balance is difficult because solving the housing crisis requires regulatory and financial measures, new housing models and targeted support for those affected.
In response to the housing crisis, an option emerged that offered many advantages: communal living.
Unlike traditional facilities, co-living spaces offer a mix of convenience, community spirit and lower prices that attract and retain tenants. Individual rooms coexist with shared common areas such as kitchens, bathrooms and lounges.
This model is best suited for millennials looking for affordable housing for the medium term – from a few weeks to a year. They don't have to worry about housework (repairs, cleaning, garbage collection or utilities) because the co-living operator takes care of that. There are always fresh renovations, high-quality furniture and modern appliances. Everything works and nothing falls down. This allows tenants to focus on what is important to them – work or study.
For landlords, this model requires a different approach to property management. Homeowners can earn higher profits per square foot due to the higher density of residents. In Williamsburg, for example, the average rent per square foot for a 4-bedroom apartment is $5-$7, while rent in shared apartments can be as high as $9.50-$10 due to the higher density.
Co-living can also ensure a lower vacancy rate and a steady income stream. Although the higher pressure on standard utilities brings additional expenses for maintenance and repairs, proper management makes this type of housing extremely profitable for landlords. The co-living operator, who takes care of the property and tenant services, can provide a paradise for tenants (for a relatively small fee) and a golden goose of steady income for landlords. Homeowners remain free from the headaches caused by tenant complaints and demands from authorities.
Take, for example, a community in the heart of Williamsburg, New York. Residents here enjoy amenities such as digital access keys for the main door and each apartment, top-notch security systems, renovated interiors, high-end furnishings, game rooms, a co-working space, laundry facilities, and a cozy cafe area. Residents can host events with DJs or watch the 4th of July fireworks from the rooftop.
As traditional housing models fail to cope with rising costs and regulatory hurdles, innovative solutions such as co-living offer a glimmer of hope. Co-living offers a practical and affordable alternative for renters and a lucrative opportunity for landlords willing to adapt.
Renters are looking for more affordable, flexible and community-oriented housing options. According to the data, 18-22% of renters are looking for stays of more than 30 days, with 500 million requests for such longer periods.
The real estate market is responding with increased supply. There has been a significant increase in new home construction recently. According to Cushman & Wakefield, the market is not standing still, with the number of bedrooms available or under development increasing by 20% across the country from 2020 to 2022.
This upturn in construction and increasing tenant demand shows that the co-living model has come at just the right time. Co-living represents a promising and viable option for property owners exploring new opportunities. It is a model worth considering for those looking to adapt and succeed in today's real estate market.
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