Addressing the lack of supply of rental properties

Research by Savills shows that the likely demand or target market for co-living in London is at least 640,000 people, with only c.6,200 operational co-living units. There is a clear imbalance in terms of supply and demand, and the new London Plan should recognise that co-living is equally important in the housing lifecycle as general needs housing, particularly as it offers flexibility and affordability. Greater housing choice will free up more housing and allow greater movement in the housing market for all.

Co-living schemes and developments are typically located in highly sustainable and urban areas of London, such as near stations or with very high public transport accessibility level (PTAL) ratings, utilising brownfield land and are likely to be in locations where high density, smaller forms of housing would be delivered, as opposed to family housing. Therefore, provision is unlikely to be crowding out or adversely impacting the delivery of family housing.

Equally, as suggested in the consultation paper, co-living provides an alternative to living in a flat share, freeing up those homes for others and ensuring there is a supply of flexible rental housing in London that will reduce family-sized housing being converted into shared accommodation.

In nearly all London boroughs, the supply of rental properties has declined over the past year compared to the pre-pandemic ‘norm’ of 2019. With many buy-to-let investors looking to sell their properties due to regulatory changes and cost pressures, the supply and demand imbalance looks set to continue. Co-living can address the declining supply of rental homes in London and should be seen as an important part of the required housing choice alongside smaller-scale houses in multiple occupation (HMOs) and Build-to-Rent (BtR), as well as PBSA and traditional residential.

Can co-living help deliver affordable housing?

The consultation also questions the approach towards co-living and the provision of affordable housing. Current London Plan policy and guidance advises that co-living should contribute towards affordable housing through on-site traditional housing, or off-site payment-in-lieu. We believe there is an opportunity for the new London Plan to consider how co-living could better contribute towards affordable housing, in particular for key workers who make up c.25% of London’s workforce.

PBSA and BtR developments can contribute towards affordable housing through on-site discounted market rent (DMR) units. Prior to the current London Plan policy and guidance, a number of co-living schemes in London were approved with on-site DMR, including Sunday Mills in Wandsworth and the Apiary in Ealing. The new London Plan should look at the success of these, and allow for co-living schemes to deliver DMR as part of wider affordable housing provision, particularly as a number of large co-living schemes have not yet been implemented or commenced due to viability challenges around funding significant payments-in-lieu.

Co-living schemes, by virtue of their operations, could be particularly well-suited to partnerships with public sector bodies or charities who are constrained in their ability to deliver housing needed to attract and retain their workforce, with DMR units linked to the potential new Key Worker Living Rent tenure highlighted by the consultation paper.

Co-living schemes could deliver on-site DMR units helping key workers live close to their places of work, particularly in central London locations such as those in Zone 1 where rents close to large hospitals and schools will be expensive and challenging for key workers, resulting in long-distance commutes with additional costs.

As evidenced by recent Savills research, in London, there is not a single borough where a newly qualified NHS nurse can afford to rent a 1-bedroom flat. Whilst there may be BtR schemes with DMR for key workers, with nearly 1.4 million key workers in London, the supply will not be sufficient to meet the likely need. Furthermore, the discounted rents in a co-living scheme will be more accessible and affordable given the size of the units, compared to those of a 1-bedroom flat.

The result of allowing on-site DMR is the promotion of more mixed communities in co-living schemes with greater housing choice for key workers in London who face affordability challenges in respect of rent, the cost of commuting and the quality of housing.

Conclusion

We hope that the new London Plan will be as bold a plan as it must be to deliver the number of homes needed to enable the capital to thrive and grow. Co-living can contribute towards housing delivery and targets, whilst also widening housing choice and addressing affordability issues.

On this basis, the new London Plan should recognise and ensure there is support for these schemes across the whole of London as an important part of the housing eco-system. We hope that the consultation prompts the Mayor to reflect and ensure that there is greater flexibility and opportunity for these schemes to contribute towards a wider provision of affordable housing, particularly for key workers.

Further information

Contact Mark Thomson or Fergus Wong