Our May blog  delved into the growth of co-living accommodation in London and its rise to become an important part of the city’s rental market. In this earlier post we summarised the benefits of co-living accommodation which includes flexible tenancies, fixed living costs, communal living, and on-site amenities such as gyms, workspaces and cinemas.
The co-living sector in Manchester remains in its infancy when compared to the sector’s growth in the Capital. However, several prominent North West developers have tabled proposals for co-living schemes and there are already approximately 4,000 co-living units in the pipeline in Manchester. Downing’s First Street scheme comprises 1,780 units whilst Vita’s Union at Water Street comprises 1,676 units, both of which are coming out of the ground.
Image Credit: Simpson Haugh Architects
Why is co-living accommodation beginning to gather pace in Manchester?
The emergence of co-living schemes in London follows similar patterns in North American cities where there are increasing property prices, soaring rental costs, and a lack of quality rental choices, amongst other factors. Manchester is now experiencing a similar set of market conditions. According to Rightmove, between Q3 2021 and Q3 2022, average rents in Manchester and Salford increased by 20.5% and 17.6% respectively. This places both locations in the top ten nationally for rental growth. With wages struggling to keep up with inflation, and the interest rate pressure on mortgage costs, ‘generation rent’ continue to be squeezed towards the rental market. Co-living offers a new choice in this sphere, at often slightly lower all-inclusive prices than comparative Built-to-Rent schemes.
There are a number of factors which are driving rental demand in Manchester. As touched on in my January blog, there is a shortage of Purpose Built Student Accommodation [PBSA] in Manchester which is pushing students into the private rental sector. Manchester is also good at retaining and attracting graduates. It is the only English city outside London that gains more graduates than it loses. Both Manchester and Salford have a much higher proportion of 18-35 year-olds than the regional and national averages. This demographic is more likely to live in rented accommodation, and is renting for much longer than previous generations.
This demand for rental properties, coupled with increasing construction costs and additional requirements such as second stairs for tall buildings, has meant that developers in many major cities such as Manchester are re-imagining their market facing products. It is becoming recognised that co-living can make a meaningful contribution to addressing rental demand as schemes are well suited to graduates and transient young professionals – the demographic primarily driving rental demand. Flexible tenancies and communal living spaces in particular are seen as pull factors that give co-living an edge over more established rental products. This is particularly true for recent graduates – some of whom may be moving to a new city, or on a rotational graduate contract, for instance.
How has planning policy responded to the growth of co-living in Manchester?
Unlike in London, where the 2021 London Plan provides policy criteria for new co-living developments (in response to a small number of early Co-living developers like The Collective), the emerging Places for Everyone Joint Development Plan for Greater Manchester stays silent on co-living. It does, however, state that housing provision to accommodate specific groups will be addressed through the districts’ local plans. Whether this will lead to the emergence of specific co-living policies in districts’ local plans remains to be seen. Nonetheless, in authorities where schemes are already coming out of the ground or are in the planning pipeline, we would expect to see future development plan policies ‘catch-up’ with the market.
Up to now, co-living schemes in Manchester have been centred around two market locations – Manchester City Centre and Salford Quays. Both of these locations are in authorities that have some level of guidance for co-living developments.
Salford, which is the only Greater Manchester authority to adopt a Local Plan in the last five years, provides some limited policy guidance for co-living developments. The Salford Local Plan exempts co-living accommodation from space standards but requires that they provide 20% of the dwellings in the form of affordable private rent.
Manchester City Council does not have any formal policies to direct development. It did, however, produce a report in Summer 2020 that provides a suggested policy approach for co-living developments. The report recommends an initial ceiling of 5,000 units restricted to key areas of employment growth in the city centre, in an effort to test the market for co-living accommodation. This interim policy approach also sets out ten additional criteria for co-living accommodation, which includes a requirement to let units to working households and not students. Schemes in Manchester are also required to submit a conversion plan to demonstrate how the buildings could be repurposed in future, if required.
The remaining eight Greater Manchester authorities do not have policies or guidance on co-living. Most of their individual plans remain on hold until the Places for Everyone plan is adopted (not expected to be until at least 2024). Stockport withdrew from the Joint Development Plan but also paused progress on its own plan, citing uncertainties with the direction of national planning policy.
Beyond Greater Manchester, Liverpool City Council published a co-living advice note in March 2022. The note clarifies that its development plan policies on residential size and mix will apply to co-living accommodation. This means that schemes in Liverpool are required to offer a greater proportion of 2-bed+ units than 1-bed units, all of which are required to accord with space standards. This is a marked difference from the policy approach in London, Salford, and to some extent Manchester. The variation across authorities’ policy approach will remain until there is clear national policy guidance or a specific use class for co-living developments. The latest DLUHC planning consultations in July 2023 offers no further guidance, so we await mooted consultation on the NPPF later this Autumn.
Image Credit: Folk at The Palm House, Halcyon Development Partners
Where there is a policy vacuum, or where there are conflicting policies across districts, it can be difficult for co-living developers, investors and operators to understand authorities’ criteria for consenting co-living. The real estate market, and in particular those needing forward funding, often prefer clarity and reassurance about the planning context before committing significant capital. This will be particularly pertinent in districts where a local authority is yet to determine a co-living planning application and there are no precedents to draw upon. In such instances we recommend presenting a compelling case for co-living at pre-application stage using clear evidence of the suitability of the location for co-living, including the market demand for such scheme, together with an explanation of the benefits that this type of accommodation can bring. Case studies and visits to operational co-living sites is something we have also advocated in London, for instance our recent walking tour of Sunday Mills in Earlsfield (delivered by our client Halycon Development Partners) for officers and members of another authority.
Lichfields is developing a significant track record in co-living and can provide a robust evidence-based solution to demonstrate the need for co-living development in certain market locations. Please get in touch if you want to discuss co-living opportunities in the North West market.
 Co-living in London (lichfields.uk)