Developers say co-living — a housing model in which a tenant rents just the bedroom and shares a kitchen and bath — is supposed to give young people the opportunity to live in neighborhoods they otherwise couldn’t afford in this unprecedented housing crisis.

But the leader of Boston’s Housing Innovation Lab told the Globe that the initial results of a pilot program that sought to encourage compact apartments like those at co-living developments throughout the city show that the model isn’t necessarily boosting affordability.

“I think from the developer perspective, and what I think we’re seeing based on what rents are looking like in these developments, you build a smaller unit, [and] there’s not a proportional decrease in what you can rent it for just because it’s smaller,” said the lab’s director, Paige Roosa, noting that the city’s proximity to Logan airport caps how high you can build up and the premium location adds to the cost.

“I think what we’ll find in the evaluation is that it allowed for new ways of designing buildings and creativity,” Roosa continued. “But, I think in a market like Boston, where the affordability statistics are so dire, we need to be looking at supporting solutions that really get at providing accessible housing, you know, affordable housing for all.”

Jessica Buonopane, senior vice president of residential properties at National Development, said the company was a guinea pig with its 7Ink building.

“We tested the market,” Buonopane said of the 2-year-old development, “and I think we’ve demonstrated that it is a feasible alternative.”

But Thatch, a branch of developer Boston Real Estate Collaborative, is transitioning some of its co-living apartments back into traditional rentals as it deals with more vacancies in these units, which require more operational costs.

“As the cost of housing rises, the cost of co-living goes up,” said Brent Berc, a founding partner of Thatch.

How co-living caught on in the US

This model has ballooned in just the past decade. Co-living units in North America swelled from fewer than 100 beds to more than 7,000 between 2014 and 2019, according to a market report from Cushman & Wakefield.

The commercial real estate services firm reported in 2020 that the model offers renters up to a 30 percent discount in total housing costs compared with renting a studio apartment, but tenants pay up to 50 percent more per square foot than those leasing comparable traditional apartments.

Roosa said shared common spaces, like kitchens and bathrooms, make co-living developments stand out. The larger buildings also typically have extra amenities such as co-working spaces, lounges, and gyms.

“Here in Boston, it can look like new developments like 7Ink,” Roosa said, “or it can look like a single-family home that’s rented to different people.”

The housing lab launched a pilot program in 2018 that set guidelines for the construction of “compact living units” that are smaller than typical apartments.” The project, which wrapped up in May 2023, sought to increase production and affordability, alleviate the demand on family homes, and build community in apartment buildings, among its goals.

The Boston Planning & Development Agency approved 17 projects under the pilot’s guidelines, and developers built eight of them. So far, Roosa said, the lab is looking for ways to support co-living that renters on a budget can afford.

“I don’t know that new co-living development is necessarily affordable,” except when the developments offer a high percentage of income-restricted units, Roosa said.

Michelle Gallego, 29, said the all-inclusive nature of 525 LINC — a new Allston building with more than 275 bedrooms that National Development operates — made it easier for her to commit to the building as she looked for income-restricted apartments.

“I guess especially because we’re close to Harvard, and like the Allston area, there’s that college vibe,” Gallego said about the development, which has a gym, roof deck, and co-working space that offers nearly 50 income-restricted bedrooms, including two studio units.

Diane Francillon, the building’s leasing manager, said the fact that the rent covers the furniture, utilities, and amenities makes the development stand out.

“You’re getting an apartment that you probably wouldn’t normally get for the price that we offer,” Francillon said about 525 LINC, where tenants can get a single bedroom for $1,900. The average list price for a studio in the neighborhood was $2,045 on May 6, according to ApartmentAdvisor. Sharing a two-bedroom unit would mean spending $1,600 per month on average, though.

AT 7Ink, a South Boston building National Development opened in 2022, tenants opted for its traditional apartments for the first four to six months as the company worked to educate renters about co-living, Buonopane said. While there’s more frequent turnover (renters can stay from six to 18 months), business is fantastic at the building, she said.

Aside from just young people, 7Ink appeals to people relocating to Boston, Buonopane said.

After accepting a job offer in Boston, Xavier Muriithi, 26, had just two weeks to find a place to live in November 2022. Muriithi has a message for relocating renters: People in Boston fork over thousands to secure an apartment.

He applied to six apartments, ran the numbers, and then signed on with 7Ink, which rents out fully furnished bedrooms for$1,600. The average list price for available studios in the neighborhood was $3,088 per month on May 6, according to ApartmentAdvisor. Sharing a two-bedroom unit would cost just under $2,000 per person, the online marketplace reported, but does not take into account whether utilities and other expenses are covered.

Muriithi didn’t have to pay a broker’s fee, which he said, “exists for no reason.”

Investment in co-living

National Development will consider creating more co-living projects, Buonopane said.

Thatch, though, is looking to do the opposite — convert some of its co-living spaces in its smaller buildings into traditional apartments.

When the pandemic began, Berc and his colleagues believed everyone was going to vacate these units. Instead, he said, renters kept paying rent, and co-living “became very desirable because it offered flexibility in a time of uncertainty.”

He said prices started to climb in 2022, and the premium renters were willingness to pay for flexibility tempered out. Its units include utilities, internet, common area cleanings, furniture, and they don’t charge a broker’s fee or a security deposit. You can customize your dates.

As the prices of housing have surged, Berc said, the cost of furniture, marketing, and operations associated with co-living make these units frequently more cost-prohibitive.

“We thought we could deliver value to the end user across the board,” Berc said, “and now we’re just having to be very selective in, you know, which properties we offer so that we can maintain that value proposition for the tenants.”

The company isn’t zeroing out its co-living units, Berc said, noting that purpose-built apartments at larger developments might have a better chance of surviving than smaller co-living operations. “It’s economies of scale.

“I think co-living is tied to the traditional housing market, and it has a great place in the market,” Berc said, but in an expensive housing market with an inventory shortage, “and the value diminishes, and as a result it won’t flourish.”

And the ones who can afford it are looking for their own places, Berc said. “At some point the cost gets to a point where traditional, unfurnished makes more sense.”

The Boston Globe
By Victor Stefanescu

7 Investigates: Co-living Communities

Media— Apr 16, 2024

May 14, 2024