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Co-living: the current state of play

The concept of ‘urban living’ continues to evolve in our towns and cities, and co-living is the latest purpose-built rented offer coming to the market.

Thanks to changes in investment profiles (allowing for longer term returns) and a number of pioneering and now well-established developers, the purpose-built rented sector (often referred to as ‘Build to Rent’ (BTR)) is flourishing. These developments are becoming prominent on the skylines of our largest cities. BTR developments are normally owned and managed by a single landlord / operator and the model offers a range of benefits for residents and the communities they create. These benefits include 24/7 on-site management; carefully curated communal spaces, including gyms, workspaces, cinema rooms, and other leisure facilities; and diverse external amenity areas, including green spaces, football pitches, and even running tracks.

The latest purpose-built rented offer emerging across the country is co-living. But, what exactly is it? How does planning policy deal with it? And how it is being received by councils, politicians and stakeholders?

What is co-living?

The co-living model has been around for some time, first in central and northern Europe (Berlin and Copenhagen) and then taking off in the United States. Over the last 4/5 years, co-living has started to gain momentum in the UK market as a viable investment proposition, with demand generally coming from graduates and young renters that are used to sharing communal facilities at university. 

The model has emerged to fill an affordability gap in the urban residential market and to provide high specification serviced accommodation in desirable, central locations that are more attainable for prospective renters. Co-living tends to offer similar benefits to BTR, in terms of residential amenity and the ‘all inclusive’ offer. And it’s not just recent graduates that co-living developers are targeting with this model, as short-term / flexible leases attract those moving to a new job and new city, as well as those who wish to adopt more nomadic lifestyles such as living in the city only during the week.

The difference in comparison to BTR is the availability of short-term rents and a greater focus on spending time in, and sharing, communal spaces. This allows co-living developments to offer smaller private accommodation units (generally between 20-30 sq m per unit), and consequently cheaper rents for residents.

Co-living and the planning system

Co-living in the UK does not typically fall under the residential C3 planning use class, or any kind of clearly defined use, but instead is treated as sui generis (i.e. not of any particular planning use). So initially local planning authorities have been required to consider and assess co-living without a clear rule book to go by – no use class, no clearly applicable regulations or standards and in many cases (although this is changing) no planning policy position. Whilst there are instances in the UK where local authorities have been proactive with granting permission for co-living in a planning and policy vacuum, others have approached it with much greater caution and even scepticism. For most local planning authorities, this concept is still new and many are currently considering what position to take. While they are trying to better understand the different models and formats, they are also having to grapple with the relevant material considerations relating to residential amenity and need, in order to put in place suitable and proportionate local policy guidance.

In the meantime, the market shift towards the benefits of co-living across many major cities continues apace and all indications are that each local planning authority will need to adjust and respond to a growing demand and increasing evidence of need based on the changing demographic, affordability, and need dynamics of urban residential supply.

Co-living across core English cities

Local authority attitudes and the interpretation of planning policy towards co-living developments varies from one authority to the next. We asked planning specialists from some of Turley’s key national cities (London, Birmingham and Manchester) to summarise how co-living is being implemented in their locations.

London

London has proved the initial frontrunner thanks to a number of outlier developers and operators. The Collective’s pioneering Old Oak Common scheme is recognised as the first of its kind in the UK in 2016. Since then, more and more schemes have been coming forward across London; forcing local authorities and the Greater London Authority (GLA) to engage with a form of development that did not neatly fit into planning policy.

In this context, the GLA was one of the first planning authorities to address the demand and need for large-scale purpose-built co-living in planning policy in its London Plan. This has been significant in formalising and defining co-living as a form of residential product with a role to play in meeting housing delivery. However, the setting of very prescriptive and fixed policy position has raised challenges for a form of development that is arguably still in its infancy and evolving to the UK market. 

The GLA and the London Plan sets a regional policy position, but how that translates at the local level varies from borough to borough, with some being more open than others. As such, many boroughs are now more engaged with co-living specific planning policies in their emerging Local Plans. Some of these align with the London Plan, while others take further steps beyond the London Plan and a minority are overtly against the product. The distinction between planning at the local and GLA level is significant for co-living in London, and we often consider this carefully with our clients and their product typology when formulating planning strategies. 

The next critical item on the horizon is the GLA’s drafting of specific co-living standards for schemes to adhere to, which were published for consultation in February 2022. The outcome of this guidance drafting could have significant implications for the sub-sector in Greater London. 

Birmingham

In the last few years, developers have tested the city council’s position in a handful of cases by submitting applications for co-living as a component of proposals for high density urban residential development within larger, mixed-use proposals. Due to resistance from the council, applicants have often been faced with the prospect of refusal in these cases unless they have been prepared to remove the co-living component from the proposals. Although applications for co-living have become more common in the city, we are yet to see an approval of any significant scale and the indications are that the city council remains sceptical and cautious towards the concept in principle.

The level of demand, interest, and increasing co-living market activity prompted the council to issue an interim position statement in summer 2021 which essentially confirmed they are opposed to co-living in principle. The council has since then prepared (and recently adopted, in April 2022) a Supplementary Planning Document (SPD) which sets out the expectations of the council in respect of the key requirements to be met by co-living applications, particularly those relating to space standards (the minimum bedroom size is identified as 25 sq m) as well as residential amenity and, significantly, the demonstration of need. The council’s approach has therefore been to ensure that they have an adopted local policy position and guidance to inform their consideration and determination of future planning applications. However, while the position is no longer one of outright opposition in principle, it is fair to describe the requirements of the SPD as ‘setting a high bar’ as a reflection of the ongoing caution towards such proposals as part of the future urban residential supply within the city. 

The policy position in Birmingham is set to shift further as part of the emerging review of the city’s Development Plan, particularly with the recent publication of the Housing and Economic Needs Assessment (HEDNA) (April 2022). As well as pointing to a significant increase in need (6,750 dwellings per year using the standard method), the HEDNA recommends that the council should develop a specific policy to support co-living proposals, including by drawing on the similar policy frameworks established by the London Plan. The report also identifies that co-living will be an option for those who would ordinarily occupy HMOs. The HEDNA is one of the first components of the evidence base that will inform the review of the Birmingham Development Plan, which is expected to be adopted in 2025.

Manchester / Salford

In Manchester, the council has consented three major proposals for co-Living development including those by iQ, Vita and Downing. Turley secured the first planning permission for iQ’s co-living Echo Street scheme. The council has adopted interim guidance for the determination of future applications pending a full review of the adopted Local Plan. The guidance seeks to direct proposals to sites within Corridor Manchester, particularly in the St John’s, Piccadilly, and Northern Quarter areas. The guidance requires proposals to demonstrate credible regeneration benefits and imposes a ‘cap’ on the number of bed spaces which the council is prepared to approve prior to completion of the Local Plan review. Overall, the city council remains cautious of the co-living model. 

Manchester’s close neighbour – the city of Salford – does not appear to have such concerns about co-living. Whilst developer interest in co-living has not been as intense as in Manchester, it has granted planning permissions for co-living in high density areas such as Salford Quays and is supporting developers who are drawing up schemes in Greengate. Council officers consider that in the right locations, co-living can make a useful contribution to the overall mix and type of accommodation the city offers.  As such, the emerging Salford Development Policies and Designations Local Plan supports the provision of co-living in the city centre, Salford Quays, Ordsall Waterfront and its town centres and doesn’t seek to place a cap on numbers.

Summary

Co-living is an attractive model for developers looking to build on the success of BTR and can provide a cost-effective solution for city centre living. However, the concept is still in its infancy and continues to evolve. While local planning authorities are beginning to gain a better understanding of co-living, this is often in the backdrop of a planning and policy vacuum. Accordingly, there remains uncertainty in many areas across the country. That said, the market shift towards the benefits of co-living and the progression of schemes in London will continue, and the planning system will have adjust and respond accordingly.

If you would like more information on co-living or to understand more about our experience across the country, please get in touch with the team set out below.   

Freya Turtle and Taylor Cherrett – London and the South East

Ben Williams – Birmingham and the Midlands (East and West)

Stephen Bell and Mark Worcester – Manchester and the North

Phil Jones – Bristol and the South West

Emma Kelly – Northern Ireland 

Eilidh Shaw – Scotland

25 August 2022