The co-living sector is widely misunderstood to be a residential offering that resembles a HMO – which is not the case, despite many HMO operators branding their developments as ‘co-living’. A true co-living development provides residents with private, high-quality apartments and access to their own kitchen, bathroom, and living spaces, whilst putting wellbeing and community at the heart of operations within the amenity spaces and wider building.
While purpose-built student accommodation (PBSA) was formerly the most popular accommodation choice for students in the UK, students are now opting to rent outside of the PBSA sector in favour of alternative accommodation options, such as co-living, as it grows in demand across the UK.
To compare the benefits of co-living and PBSA investments, we have outlined three ways that co-living is different to PBSA.
Purpose-built student accommodation (PBSA) is a popular form of accommodation for students across the UK, with the sole intention of providing housing for students that are currently in full-time education at university, with no considerations made for prospective tenants outside of the student demographic that do not hold valid student documentation.
By limiting the number of prospective tenants for this specific residential offering, PBSA restricts the pool of available tenants for its accommodation and actively excludes the most prolific demographic currently dominating the UK rental market – young professionals and ‘lifestyle renters’.
Co-living, on the other hand, is specifically designed to accommodate those aged between 18 – 30-years-old and has become increasingly popular amongst students, young professionals, and ‘lifestyle renters’ in the UK. By providing housing to a much wider range of prospective tenants and not discriminating based on the current life stage that a resident is at, co-living provides a residential offering that can house a student throughout their studies, onto their first professional position, and later as they develop in their career, if they choose.
Until very recently it was not commonplace for buildings of residence to house amenities and on-site facilities for residents to use, and PBSA has unfortunately failed to keep up with the demand for this type of residential offering in the UK rental market. Instead, opting to continue creating tall, glass blocks of cluster apartments with no social consideration for its residents or spaces that can be enjoyed and used regularly by tenants in the building.
When taking into consideration the fact that mental health issues are the major reasons as to why students drop out of university, it is essential for accommodation that intends to house students to create and facilitate an environment that fosters relationships and social interactions between residents.
While co-living may seem to appear as a residential building that just has apartments and some on-site amenities, the difference in co-living is the central focus on wellbeing and community living, not communalliving. Co-living developments not only have an on-site dedicated community manager, whose sole role is to actively facilitate engagement and community and provide a regular calendar of events for residents within the building, but co-living developments also give thought to place-making when in the design and development phase, as opposed to offering a few token facilities for residents to use if and when they like.
As PBSA chooses to only house those currently studying with valid student documentation, PBSA limits the length of consecutive tenancies available to their residents to between 3 – 4 years, depending on the course the student is taking. This means that PBSA can only secure a tenant for up to 4 years, if the student chooses to stay in the same PBSA accommodation throughout the duration of their university study, which is extremely rare, if not unheard of.
By limiting the demographic of prospective tenants available to live in PBSA, investors will have to rotate tenants on a yearly basis – as only 30% of students currently live in PBSA and prefer to live in alternative forms of accommodation after their first year of study – resulting in vacancy periods and impacting investors’ return on investment (ROI).
By widening the market audience to encompass students, young professionals, and those who have already established their careers, the co-living sector provides investors with the possibility of holding a tenant in their investment for a period of up to 12-years; providing a secure ROI with no vacancy periods and not having to lose revenue each year when a student moves on, graduates, or as the demand for PBSA continues to decrease and students look to the co-living and alternative housing sectors for their accommodation each year.