NYC Looks to Co-Living for Shared Housing Template
- Apr 26, 2019
The city of New York is currently poring over the results of a process that could officially bring the co-living business into the affordable housing field.
“We are doing a great job financing the preservation and new construction of traditional affordable housing, but we also want to start exploring opportunities that address the changing demand and changing demographics,” said Leila Bozorg, deputy commissioner of neighborhood strategies for the city’s Department of Housing Preservation and Development.
The ShareNYC pilot program is part of the city’s Housing 2.0 plan, which raises the city’s target of 200,000 new and preserved homes by 2024 to 300,000 by 2026. To reach that new goal, the city is exploring “new housing typologies,” like shared units.
That’s where the co-living folks come in. Last November, HPD issued a request for information to stakeholders in the co-living business which could contribute ideas on developing, financing and managing shared units. The department also issued a request for expressions of interest to developers who might produce these shared units―with city subsidies―on privately owned sites. Proposals were due by March 14.
“Part of the idea is to test how this model can be harnessed for affordable housing,” said Bozorg.
Correcting an Imbalance
Development proposals were collected for new construction, adaptive re-use or conversion. The city required that a substantial number of the units in the new shared communities be affordable to the lowest income segment of the renter population, but the proposed buildings could also include some market-rate apartments, if the market-rate units help subsidize the affordable units, and micro units.
While shared units will help lower the city’s per-unit subsidy costs, they will also address the “mismatch” between the housing stock and the composition of demand. Currently, two-thirds of the city’s residents live in households of one or two people and only 45 percent of the apartments are studios and one-bedrooms, according to Bozorg.
“We know this makes it much harder for single adults living alone, who are tending to be older and more rent-burdened (spending more than 30 percent of household income on rent) to find adequate housing in the city,” she said. “We have unrelated adults in larger apartments that could otherwise be housing families.”
For many New Yorkers, small units with shared kitchens and bathrooms are reminiscent of the single-room occupancy units or SROs that were once popular with single young professionals and low-income individuals but developed a reputation (not always deserved) for attracting low-quality tenants. SROs still exist in the city, but the production of new SROs by the private sector is restricted by city ordinances.
“Those shared living models provided a quality stock … The stigma created some of the conditions why the model lost favor,” said Bozorg.
At first glance, co-living may not seem to align with affordable housing. Co-living occupants often pay a premium on a typical apartment share—for which they receive numerous services and often furnished accommodations—and leases may be less than a year. But co-living executives say making high-cost cities like New York affordable is already an essential element of the co-living model.
Common, an operator that started in New York City and recently announced a four-city expansion, is one of the companies that participated in the RFI/REI in partnership with a developer.
Vice President Brian Lee said there is a natural, significant demographic overlap between its typical middle-income renters—those who make $40,000 to $80,000 and have a difficult time finding affordable housing—and the city’s affordable housing tenants.
“Common and the city are fundamentally tackling the same issue, how to create more, denser housing at better price points in New York City, and it’s exciting to see city governments acknowledge this through pilot programs like ShareNYC,” he said.
The ShareNYC process, Lee explained, forced Common to think critically about how to design, market and operate affordable shared units, and how to do so in a way that qualifies for tax abatements and subsidies.
The layouts, finishings, furnishings and many of the services, he said, would not be that different from Common’s existing products, and there would still be three tiers of privacy: a bedroom as private space; an in-unit living room and kitchen as shared space; and community space for the entire building.
“Common would offer the affordable tenants a lot of the services that make roommate living easier, such as weekly cleaning and commercial-grade WiFi,” said Lee. “All of the building amenities would be shared.”
In terms of leasing, Lee said, the terms for their market-rate units and the affordable units would not be that different. Common, he said, is “permanent housing” with more than 70 percent of residents on 12-month leases. Common would also offer the 12-month option on the affordable units though they will be leased through Housing Connect, the New York City lottery system.
The Collective, the co-living developer based in London, New York and Berlin, recently took over ownership of its first U.S. location in Long Island City and has two under development in Brooklyn. They did not officially participate in the RFI/RFEI, but Brian Wang, vice president of Investments for The Collective, said that the company meets with housing officials in each of their cities to see how they can supplement affordable housing and help address critical housing needs.
“Both projects we have announced in Brooklyn will have a mix of affordable and market-rate units that co-exist within the building with no discernible placement or evidence of their difference,” said Wang.
New York City may end up pioneering a template for co-living as affordable housing, but shared units as an affordable solution are being explored in many cities around the country. In New Orleans, for example, Common is working with Wisznia Architects to bring workforce housing to downtown residents alongside the Industry Development Board of the city.
Andrew Collins, CEO & co-founder of co-living company Bungalow, said his company is involved in discussions at the local and national level. “We’ve met with leaders at the U.S. Department of Housing and Urban Development, who are increasingly interested in partnering with the private sector to address the urban housing crisis with new, innovative solutions,” Collins said.
Everybody’s Talking About Co-Living
News of the city’s pilot program and recent institutional-level interest in co-living―heads turned last fall when Deutsche Bank provided The Collective £125 million to buy out the rest of the ownership interest in its Old Oak community in London―has brought co-living to the attention of the broader New York City real estate community. As a result, ULI New York recently held a well-attended breakfast seminar to inform its various constituencies about this new residential product. Michael Atkins, president of Coromont Capital and a member of ULI’s Real Estate Tech and Innovation Committee, said each of the seminar’s panelists had co-living projects underway in the city and each was thinking about their role in improving affordability.
“For dense urban environments, where there are a lot of urban amenities and affordability is an issue, this a great solution for that … Innovation is responding to a market that has always been there,” said Atkins.
But, is co-living poised to disrupt the New York City residential real estate market? Adam Frisch, managing principal of Lee & Associates Residential NYC, doesn’t think so. Co-living, he said, appeals to a younger demographic and it is having more of an impact in less-expensive markets, like Brooklyn. It has, however, helped cool the two-bedroom share market (renting for $3,000-$4,000 a month) in Manhattan’s popular neighborhoods.
“The idea that this is going to supplant or prove a serious rival to the traditional real estate market over a long period of time is not realistic,” said Frisch.