Can startups solve the urban housing shortage with co-living?

Plan a move to a new city; the first issue for many is not where to rent but what you can get. Urban migration is colliding with the failure of many cities to invest in an adequate housing supply to meet the number of residents. Or lax local laws mean higher yield Airbnbs smother the residential rental market. 

This makes home hunting a competitive sport and a significant source of stress. But now there's an alternative going from strength to strength and demonstrating a new way to solve the problem. It's called co-living.

What is co-living? 

Traditionally geared towards digital nomads on working holidays, today's coliving looks a lot different and is designed to solve the housing shortages facing many people in cities like Berlin, London, Paris, Oslo, Copenhagen, and Madrid. 

And if you baulk at the idea of shared housing, cohousing is not just student accommodation for adults. There are various configurations – what you choose depends on your budget and your desired balance of personal and communal space – but the general idea is that you rent a furnished bedroom and share a communal kitchen, meals, and workspace with others. 

Depending on provider, location and budget, amenities extend from wifi, utilities, communal lounge rooms and cleaning to at the upper end, shared ebikes and electric vehicles, cinemas, bars, gyms, and on-premises libraries. 

Founders solving pervasive pain points 

I spoke to Ritu Jain, co-founder and CPO of the co-living company LifeX. The business started by default organically following a move to Copenhagen from San Francisco. She and her partner ended up renting a huge apartment in the city centre too large for a couple.

The property became home to six bedrooms and large shared spaces. The spots were filled by word of mouth before they even unlocked the doors.

The company now has 100 homes across Aarhus, Berlin, Copenhagen, Halle, London, Munich, and Paris.

Berlin: a case study in housing inaccessibility 

Let's look at Berlin as one example, where 80% of people rent. If you move to Berlin to work, you can't just sleep on someone's couch. You need to register your address (owning or renting) with the local authorities – this is called Anmeldung and is necessary to open a bank account, get your tax ID, and gain an employment contract. And getting that rental so you can register is challenging without the job contract, tax ID or bank account. 

Stories of racism by landlords are commonplace. And it's notoriously competitive - one game developer even made Berlin Flat Quest, a game where you can test your luck against the rental market. 

Co-living not only provides housing that can provide anmeldungen, but people can move into without needing to build a kitchen (yes, really) or buy furniture. It also gives you friends and the experience of being part of a community – necessary given that many people are already experiencing isolation in new cities from the aftermath of COVID and remote work is the new normal. 

Further, co-living is space efficient, putting more housing stock into the pool by residents sharing space. 

Luca Bovone is the founder and CEO of co-housing startup Habyt, which started in Berlin in 2017. He explained that part of their task is transforming inefficient buildings built in the 1940s and the 1950s into much more efficient spaces." 

Tech-forward 

Also well as palatial furnishings, today's coliving spaces are increasingly serviced by smart tech such as smart lights, locks, and energy monitors. LifeX created its own technology platform that runs end to end, from the initial application to invoices, maintenance requests and management, and a subset where residents can organise events. Jain explains: 

"I can sit in our office and at any time see what's happening in our cities, in the houses, in terms of the level of service, the happiness of our tenants and take the necessary actions. The real estate industry has never had that before. They don't make decisions based on data."

Habyt's platform allows the automatic posting of listings of the available units onto multiple platforms simultaneously for long-term accommodation. Bovone shared that this has made it possible to have an occupancy of over 95% throughout the year.

And with both companies focused on new housing builds, tech can be embedded from the get-go. 

The challenge of disrupting a traditional industry 

Both Jain and Bovone noted that gaining traction with the traditionally conservative real estate agents was initially challenging. Jain said: "It wasn't all easy. Even though our first place had been unoccupied for two years, real estate agents initially baulked at the idea." 

But fortunately, things have changed. According to Bovone, today, "almost every developer in Europe has some kind of allocation to shared rental accommodation."

The company is working on a range of different projects and also partnering with some real estate companies that are "forced to look at sustainability and how the future of living is going to be." 

By comparison, gaining traction with investors was far more straightforward. Jain explained that early investors were familiar with the housing challenge after investing in startups whose incoming employees needed help to secure housing. "They get to see what's happening in society early on because of the nature of companies they invest in. And so I think they saw this trend early on." 

LifeX has raised a total of $19.9M in funding over three rounds. 

Habyt has raised $35.4M in funding over six rounds. The company has also made seven acquisitions, including Quarters Erasmo's Room, Goliving and, more recently, Common Living. 

Having somewhere to live vs hell is other people

Not all cities agrees with the idea. In Ireland co-living is a contentious issue for government officials and locals. New co-housing builds have been banned since 2020 over concerns they fail to meet the needs of those searching for long-term rentals. Is it a smear campaign by real estate lobbyists, or should we be looking at the issue of how much private space we need to live in? 

Co-living inhabitants aren't just 20-somethings in their first job. LifeX and Habyt residents are mostly 30-somethings. Originally a model of living for shorter periods, Jain and Bovone agreed that people now stay longer in coliving, given the shortage of comparatively priced, local alternatives. 

And with real estate agents on board, will co-living become not just the new norm but, in the future, the only option? 

In the long term, is a "startup" landlord better than a "corporate landlord"?

Habyt currently owns 30,000 housing units globally. Bovone wants to get to 100,000 units and eventually a million, "which is the same as the number of units owned by Marriott hotels." 

While ambitious, Habyt's numbers are modest in a city like Berlin, where a 2021 public (non-binding) referendum was passed to turn 240,000 housing units owned by private providers like Deutsche Wohnen SE, owner of more than 100,000 units in the city, into socialised housing run by the city as a public entity. 

Jain and Bovone spoke of the diversification of housing configurations, including private apartments and various-sized layouts. They agreed that there's a need for adequate housing for single parents, for example.

And beyond the stereotype of tech evangelists, LifeX residents already include a diverse mix of healthcare and hospitality workers. Bovone also plans cheaper accommodation for lower-paid workers, such as those in food services and the older residents market in the future. 

Bovone also spoke of the potential of future rent-to-buy schemes and also considers the idea to "collaborate with governments to utilise our skills and what we've learned to build housing that is community-driven, tech-enabled and more energy efficient." 

That's a lot more forward-thinking than your average landlord. 

Lead image via Habyt. Photo: Uncredited: