As the UK rental market evolves to meet the needs of a new generation of tenants, one model is emerging as a smart, future-focused option for property investors: co-living.

At its core, co-living is a modern take on shared housing. It combines private bedrooms or studio spaces with access to communal areas like kitchens, lounges, co-working zones, and outdoor spaces.

Unlike traditional HMOs, co-living spaces are often design-led, community-focused and packed with tenant-friendly amenities. Utilities, cleaning and Wi-Fi are typically included in the rent, offering simplicity and appeal to younger professionals and remote workers alike.

But it’s not just tenants who benefit. For buy-to-let landlords, investing in co-living spaces offers the potential for higher yields, low void rates and long-term relevance in a shifting rental landscape.

With increasing demand for urban housing, rising costs of solo renting and a greater emphasis on lifestyle and flexibility, co-living is ticking a lot of boxes for today’s renters, and creating exciting new avenues for those looking to diversify their property portfolios.

In this article, we’ll explore:

• The key drivers behind the rise of shared housing trends
• The financial and practical benefits of investing in co-living spaces
• Current shared housing trends in the UK and globally
• Challenges to consider before diving in
• How City Borough Housing can support investors looking to explore this fast-growing market

The rise of co-living: Key market drivers

Over the past decade, the UK has seen a steady shift in housing preferences. This has been driven by affordability pressures, changing lifestyles and a desire for more connected, community-based living. This shift has paved the way for a new model: co-living.

While co-living shares some similarities with HMOs (Houses in Multiple Occupation) – such as multiple tenants sharing a single property – it differs in its approach.

Co-living developments are typically professionally managed, thoughtfully designed, and focused on tenant experience.

Think high-quality finishes, stylish interiors and communal lounges that encourage socialising. Many include perks like cleaning services, gym access, and events – features that go well beyond the traditional HMO setup.

So what’s behind the rise in demand for shared housing?

Urban affordability crisis

In cities like London, Manchester and Bristol, the cost of living alone has become increasingly unviable for younger renters. Co-living offers an affordable alternative, without compromising on quality or location.

The loneliness epidemic

A growing number of tenants – particularly young professionals and digital nomads – are seeking a sense of community. Co-living promotes shared experiences, reducing social isolation while maintaining privacy in personal spaces. 

Flexibility and lifestyle

Unlike standard lets, co-living spaces often offer all-inclusive rents, shorter contracts and amenities like co-working areas. These appeal to mobile tenants looking for convenience and flexibility.

Local authority and planning support

With councils under pressure to deliver more housing in dense urban areas, co-living has been embraced in some boroughs as a way to increase occupancy without expanding building footprints.

In fact, co-living has now been formally recognised in planning frameworks. In 2021, the London Plan introduced Policy H16, which set out a framework for large-scale purpose-built shared living developments. The policy aimed to accommodate “new ways of living” and required developments to meet certain criteria, including:

• High design quality
• All-inclusive rent structures
• Minimum room sizes
• Robust management plans
• Adequate shared amenities
• Affordable housing contributions

While some developers initially raised concerns about the rigidity of the policy, the Greater London Authority published updated guidance in February 2024, offering clarification and greater flexibility – potentially encouraging more co-living schemes to come forward across the capital.

This kind of policy recognition reflects the growing credibility of co-living as a solution to urban housing pressures, and gives further confidence to investors exploring this space.

Modern, efficient use of space

Co-living schemes are typically built or refurbished with shared living in mind, maximising both rentable space and tenant comfort. From en-suite bathrooms to smart home tech, this is shared housing for the 21st century.

The result? A compelling model that works for tenants and landlords alike, setting the stage for a surge in co-living investment opportunities.

Co-living investment opportunities: What’s the attraction?

As traditional buy-to-let (BTL) margins continue to tighten thanks to tax changes, increased regulation and rising interest rates, property investors are seeking new, higher-yielding models.

Enter co-living: a contemporary housing solution that not only meets tenant demand, but also unlocks a host of financial benefits for landlords.

So, what exactly makes investing in co-living spaces so appealing?

Higher rental yields

Co-living properties typically command higher rental income per square metre than single-occupancy or standard BTL units. Renting out individual rooms (with bills included) at a premium adds up to a strong monthly return, especially in high-demand areas like London, Manchester or Birmingham.

Even after accounting for shared bills and management costs, the net yield can significantly outperform a standard let.

Low void periods

With affordability challenges making solo renting less feasible, co-living offers a smart alternative, keeping demand consistently high.

The all-inclusive, community-focused nature of these properties attracts steady interest from young professionals, students and remote workers, helping minimise voids.

Value uplift through refurbishment

Investors who convert or renovate properties into modern co-living spaces often see capital appreciation as well as rental growth. Thoughtful layouts, high-end finishes and shared amenities can significantly increase both appeal, and property value.

This is particularly attractive for those taking the “BRRR” (Buy, Refurbish, Refinance, Rent) approach, as co-living tends to boost the post-refurb valuation.

Longer-term stability vs short-term lets

Unlike short-term lets (which face increasing regulation), co-living offers longer tenancies and fewer turnovers, meaning less admin and reduced wear-and-tear.

With the right management, these properties can provide a more stable and sustainable income stream than holiday rentals or serviced accommodation.

Tax and mortgage efficiencies

Depending on your setup, co-living investments may benefit from:

• HMO mortgage products with competitive rates
• Claimable expenses for communal area maintenance
• The potential for incorporation (e.g. letting through a limited company) for tax efficiency

Note: Always seek specialist mortgage and tax advice when considering co-living investment opportunities, as rules vary by structure and location.

All in all, co-living offers a compelling combination of demand, yield, and long-term relevance. And with more planning frameworks embracing the model, these opportunities are becoming more accessible to private landlords and investors.

UK and global shared housing trends

The co-living movement is reshaping rental markets worldwide, and the UK is no exception. As urbanisation intensifies and housing affordability becomes a pressing concern, co-living emerges as a compelling solution for both tenants and investors.

Demographic shifts and tenant preferences

In the UK, a significant number of young adults are opting for co-living arrangements. According to the Institute for Fiscal Studies, an estimated 1.7 million adults aged 24–34 are living with their parents, highlighting the demand for affordable and flexible housing options.

Co-living caters to this demographic by offering:

Affordability: Shared amenities and all-inclusive rents make urban living more accessible.

Community: Communal spaces and organised events foster social connections.

Flexibility: Shorter lease terms and furnished units appeal to mobile professionals.

Global perspectives

Internationally, co-living has gained traction in cities like New York, Berlin, and Singapore. These urban centres face similar challenges: high property prices, limited space, and a growing population of young professionals seeking community-oriented living.

In response, developers are creating purpose-built co-living spaces that blend private accommodation with shared facilities, such as co-working areas, gyms and lounges. This model not only maximises space efficiency but also enhances the living experience.

Technological integration

Modern co-living spaces leverage technology to streamline operations and improve tenant satisfaction:

• Smart Access: Keyless entry systems enhance security and convenience.
• Digital Platforms: Apps facilitate rent payments, maintenance requests, and community engagement.
• Energy Efficiency: Smart thermostats and lighting reduce utility costs and environmental impact.

The UK’s position in the co-living landscape

The UK co-living sector is experiencing rapid growth. Savills reports that there are now close to 9,000 operational co-living units across the UK, with an additional 5,500 units under construction.

Cities like London, Manchester and Birmingham are leading the way in shared housing trends, driven by strong graduate retention rates and a high demand for flexible living arrangements.

The sector’s expansion reflects a broader shift towards diversified housing solutions that meet the evolving needs of urban dwellers.

Challenges and considerations when investing in co-living spaces

While the co-living model is increasingly popular, it’s not without its challenges. For landlords and investors, understanding the practical and regulatory hurdles is essential before diving into this fast-evolving sector.

Planning permission and licensing

Co-living properties often fall under sui generis planning use – distinct from standard C3 residential use or C4 HMOs. In some boroughs, particularly in London, developers may face rigid planning conditions, especially for larger schemes.

For smaller conversions, landlords may need to comply with HMO licensing requirements, including space standards, fire safety systems, and local amenity expectations.

Tip: Always check with the local planning authority and consider seeking pre-application advice for larger-scale projects.

Upfront costs and design standards

Whether building from scratch or converting an existing property, co-living spaces require a significant initial investment in quality design, durable furnishings and modern facilities. These include:

• En-suite bathrooms
• Private kitchenette areas or high-quality shared kitchens
• Attractive, functional communal areas

Unlike basic HMO conversions, aesthetic appeal and functionality are essential to attract the modern co-living tenant.

Ongoing management complexity

Managing multiple tenants under individual agreements, shared bills, and communal areas adds a layer of complexity. From resolving disputes to coordinating cleaning schedules, co-living spaces demand hands-on property management or the use of an experienced agency.

Tip: Consider working with a co-living operator or guaranteed rent provider to reduce the burden.

Compliance and safety

Landlords must meet strict fire safety, health, and hygiene regulations, particularly in properties with high occupancy levels. This includes:

• Fire doors and extinguishers
• Regular gas / electrical safety checks
• Smoke / CO alarms in all relevant areas

Some councils require a management plan as part of the licensing or planning application, covering everything from cleaning rotas to maintenance response times.

Regulatory differences between boroughs

Each local authority may have its own rules and attitudes towards co-living or HMOs. In some boroughs, restrictions on room sizes, amenities and total occupancy numbers can affect viability.

Tip: Doing due diligence before investing in a particular location is crucial, especially in London where some boroughs actively encourage co-living, while others remain cautious.

Despite these challenges, many investors are finding that the returns and resilience of co-living spaces more than justify the extra effort, especially when supported by the right professional partners.

Who should consider investing in co-living spaces?

Co-living isn’t just for institutional developers or corporate landlords. As the model becomes more mainstream, a wider range of investors are beginning to explore this increasingly attractive sector.

So, who is investing in co-living spaces best suited to?

Experienced HMO landlords looking to upgrade

If you already own and operate HMOs, you’re likely well-acquainted with managing multiple tenancies, licensing requirements, and shared living dynamics. Co-living may be a natural next step, offering the chance to increase returns while also elevating the tenant experience.

By refurbishing existing HMOs to a co-living standard, landlords can appeal to a higher-paying demographic and reduce tenant turnover.

Portfolio investors seeking high yield and long-term relevance

With traditional buy-to-let margins under pressure, investors managing multiple properties may see co-living as a way to diversify while tapping into a trend with strong long-term fundamentals.

The demand for flexible, communal living is growing – especially in urban hubs – and investors who move early may benefit from first-mover advantage in underdeveloped local markets.

Developers and renovators

Property professionals with experience in conversions or new builds may find co-living a rewarding strategy. Purpose-built or retrofitted co-living properties can deliver strong rental yields alongside capital growth, particularly if designed with tenant preferences in mind.

Hands-off investors using professional management

Not every investor wants to manage the complexities of a co-living property themselves. That’s where co-living operators or guaranteed rent providers come in, offering a fully managed model where the investor enjoys predictable income without the day-to-day involvement.

This approach suits landlords who want to future-proof their investment without taking on additional risk or responsibility.

Looking for support as a co-living investor? Talk to City Borough Housing.

For many landlords, the idea of investing in co-living spaces is appealing—but the practicalities of managing shared living environments can feel daunting. That’s where City Borough Housing comes in.

Whether you’re new to co-living or looking to upgrade your existing shared property, our guaranteed rent scheme and property management services are designed to take the pressure off, so you can focus on the returns, rather than the responsibilities.

Guaranteed monthly income

With co-living properties typically hosting multiple tenants, the risk of partial void periods can be a concern. But under our guaranteed rent scheme, you’ll receive a fixed monthly payment whether the property is fully let or not – providing vital income stability.

End-to-end property management

We handle everything from tenant sourcing and referencing to day-to-day maintenance, interim inspections and compliance checks. That includes managing communal areas, coordinating repairs, and ensuring your property continues to meet the latest safety and licensing standards.

For landlords entering the co-living space, this is especially valuable – shared housing requires proactive management to run smoothly and remain profitable.

Compliance and licensing support

Navigating local authority licensing requirements and staying up to date with co-living regulations can be a headache. Our team is here to help you stay compliant and avoid fines, whether it’s with HMO licensing, fire safety or local authority planning expectations.

Simplified record-keeping and rent collection

Managing multiple tenants can quickly become admin-heavy. With City Borough Housing, you’ll receive clear monthly statements and single-source payments, making tax returns and income tracking much simpler.

By working with a trusted guaranteed rent provider like City Borough Housing, landlords can embrace co-living investment opportunities without the stress, ensuring their properties stay compliant, well-managed and profitable.

Co-Living – a smart move for forward-thinking investors

As the rental market continues to evolve, co-living presents a unique opportunity for landlords and investors looking to stay ahead of the curve. With growing tenant demand, impressive yields, and the backing of local policy in places like London, it’s clear that investing in co-living spaces isn’t just a passing trend – it’s a sustainable model for the future of urban housing.

From shared housing trends driven by affordability and lifestyle changes, to the appeal of higher occupancy and community-focused design, co-living ticks the boxes for both residents and landlords. Yes, there are practical and regulatory considerations – but with the right support, these can be managed confidently.

At City Borough Housing, we’re here to help you make co-living work. Through our guaranteed rent scheme which includes full-service property management, we give landlords the tools to tap into this exciting sector without the stress of day-to-day involvement.

Ready to explore the potential of co-living? Get in touch today to request your free rental valuation, or to discuss how we can support your next investment move.