One may assert  that co-living and Build to Rent (BTR) is borne out of economic necessity. Some may rightly wonder whether BTR and co-living is merely
affordable housing in new packaging.

With many institutional investors shying away from engaging in affordable housing for a
variety of reasons, a word on distinction is in order.

Affordable housing is often used as a blanket term to cover all manner of residential product – in the US, it can
mean subsidized housing (through federal, state or local grants used to offset rents for select populations), low
income and rent controlled housing (whereby households making well below the area median income have dedicated
and protected housing options), and rent stabilized (whereby households qualify for reductions to market-rate apartments and
annual renewals are subject to escalations approved by local administration).

 A survey of existing co-living operators’ rents today suggests the product is not solving for true affordable
housing, but instead is offering a discounted premium product targeted a specific subset of renters.

This alone makes co-living more akin to traditional market-rate multifamily product, where owners can determine rent levels and increases independently.

Co-living is an answer to young people’s desire for flexibility, more affordable premium living, access to facilities and amenities, while living in prime locations, and having the benefits of a community lifestyle. Many tenants are attracted to the Build-to-Rent market appreciate the flexibility of not owning a home. Not  committing  all their capital and savings into a home, with 25 or 30 year mortgages.

 While some people suggest BTR could help deliver affordable housing, whether or not it actually will is up for debate.

One of the ways it could is through government subsides, ensuring some apartments are available at discounted rent.

Queensland is an example, where Mirvac’s Newstead and Fraser’s project in Fortitude Valley will deliver a combined 240 (from a total of 750) apartments at discounted rent, subsidised by state government. So, approximately 30% of the stock is at a discounted rent.

“That rent is ‘affordable’ in the sense that the rental price is discounted; it’s lower than the advertised rental price.

But generally speaking, apartments in build-to-rent developments rent for more than a suburb’s median price.

So even at a discounted rate, it’s still likley that BTR pricing would be out of reach for certain demographics or for those requiring social housing.

Some BTR projects done in a smaller scale may well be targeted at more affordable rentals, with smaller aprtments. But this is unlikley to be seen with the huge BTR developments currently being considered.