Set aside conventional housing, student housing and even build to rent for a moment; an alternative form of housing is now well and truly gathering pace in London - Co-living.
We delved into Co-living back in 2019 and despite our foresight, it still remains a relatively new and exciting alternative housing product. Notwithstanding this, there are now a number of successful operators across London who are providing high quality homes in Co-living schemes and the sector is gaining considerable traction.
Co-living is quickly emerging in London as a new alternative approach to delivering high quality accommodation in accessible locations. It provides a multitude of benefits including flexible tenancies, fixed living costs, communal living, combating loneliness and delivering quality accommodation with excellent facilities. Co-living accommodation is also let at more affordable rates than other forms of housing for those who cannot afford/do not want to buy and do not typically qualify for affordable housing.
In London, the number of households renting has now passed the 1 million mark, having risen 25% in the last decade, (ONS 2021). Rental rates continue to be on the rise, with London experiencing a 4.8% increase in rents between March 2022 and March 2023; the highest annual growth since December 2012 (ONS 2023). According to the Association of Residential Letting Agent’s (ARLA) latest Insight Report (March 2023), rental demand remains robust with limited new properties available to rent, offering little scope for a reversal in the current trend of rising rates.
As we discussed back in 2019 and as set out above, the benefits of Co-Living are clear. Co-living schemes provide residents with flexible housing, social interaction and high quality accommodation at more affordable rates and in accessible and central locations.
There is, understandably, a strong demand for Co-living and a clear needs case across London given the capital’s high housing costs. As the viability challenges of delivering conventional residential developments continue to bite, developers and operators are now also taking note and are seeking ways to capitalise on Co-living opportunities.
Only a couple of weeks ago, the GLA allowed LB Ealing to positively determine a 462 Co-living scheme housed in a 32 storey tower for Tide Construction. At the end of April, the Planning Inspectorate (PINS) allowed an appeal at Citylink House in Croydon for a 498 Co-Living scheme housed in a part 14 storey and part 28 storey building. LB Tower Hamlets has since also approved a scheme on Marsh Wall on the Isle of Dogs for the redevelopment of an existing office site to provide a 46 storey building comprising 795 Co-living homes (App Ref PA/22/00591/A1). For those who read my previous blog, this was a scheme that had to be redesigned to accommodate a second staircase. The sheer scale of these developments demonstrates the level of interest and pace at which Co-living is progressing.
Two years on from our previous co-living blog, Lichfields is experiencing a surge in requests for advice on Co-living. So why the sudden growth in interest?
The reasons for this growth are twofold: firstly, there is a recognition of the clear benefits associated with the Co-living product; secondly, there are the viability challenges of delivering conventional residential homes in London. Construction cost inflation, high land costs and multifarious planning policy challenges have been forcing developers to rethink housing models. Given the challenges facing conventional housing, coupled with the strong demand and a clear needs case for Co-living, it is clear to see why the product is becoming so attractive. But is the planning process in London also supporting and facilitating Co-living?
The London Plan (2021) does specifically support Co-living through Policy H16 Purpose Built Shared Living (PBSL; which we refer to here as Co-living). The policy sets out the qualifying criteria that such schemes must meet. This includes all private units being served by communal facilities including a kitchen, internal amenities and outdoor amenity space, and laundry and bed linen changing facilities. All schemes must also include a management plan; achieve a high quality design; be in well connected locations; and contribute towards inclusive communities. The policy also requires a cash in lieu contribution towards conventional C3 affordable housing - although last week’s draft London Plan Guidance on Affordable Housing, introduces an alternative approach, enabling Co-living developments to deliver affordable housing on site so they can follow the fast track route.
Alongside Policy H16 is the draft Large-scale Purpose Built Shared Living (PBSL) London Plan Guidance (LPG). The LPG provides additional guidance on how to ensure that co-living developments are of an acceptable quality, well-managed and integrated into their surroundings. The guidance is highly prescriptive and touches on matters that are not normally discussed at the planning stage. The draft PBSL LPG underwent public consultation last spring. We expect it to be updated in Summer 2023.
So, with strategic policy supportive of Co-living, are London Boroughs following suit? We have taken a closer look at how local Co-living policy plays out across the 32 London boroughs.
As with many policy issues, the picture is mixed in terms of each borough’s approach to Co-living;
The majority of London boroughs do not yet have adopted policy on Co-living.
10 London boroughs have standalone bespoke Co-living policy which does not refer to London Plan policy H16.
Only two boroughs have adopted up-to-date policy which is supportive of Co-living (LB Westminster and LB Southwark).
Eight London boroughs have policy which supports co-living schemes but with restrictive elements. Key restrictions include;
Requirements for schemes to be in located in specific locations (typically focused towards town centres) (LB Barking and Dagenham, LB Ealing, and LB Newham)
Higher alternative in lieu affordable housing contributions compared to delivering on site affordable homes (if required by policy) (LB Newham);
Requirement for affordable housing to be delivered on site, as opposed to a cash in lieu contribution (LB Royal Borough of Kensington and Chelsea, and LB Southwark);
Need to avoid overconcentration of single-person housing (LB Wandsworth);
Demonstration of identified local need for co-living housing in the borough (LB Barking and Dagenham, LB Barnet, LB Croydon, LB Hackney, and LB Lewisham).
Evidence that a site is unsuitable for conventional C3 housing (LB Wandsworth, LB Lewisham and LB Croydon).
Three boroughs explicitly do not support Co-living in their emerging plans (LB Islington, LB Royal Borough of Kensington and Chelsea, and LB Wandsworth) – albeit two provide criteria if such schemes do come forward (LB Royal Borough of Kensington and Chelsea, and LB Wandsworth).
No recognition of the draft PBSL LPG in any boroughs’ adopted or emerging policy.
We expect the position shown in our map to change as Local Plans are reviewed and are required to demonstrate general conformity with the London Plan and its updated guidance. The maturing Co-living market will also inevitably inform the still-embryonic local policy context. What is clear from the map to-date is that, as specific Co-living policy is making its way into emerging and adopted Local Plans, policies are not necessarily following the London Plan - for better or for worse. It is also important to note that this analysis only considers the planning policy position and does not consider the political context which could become a barrier as more schemes come forward and the Co-living market develops.
Lichfields’ view is that good quality Co-living in the right location has the potential to contribute meaningfully to London’s acute housing targets, while meeting a specific need, delivering a good standard of accommodation and strengthening communities. With clear strategic policy support in place and the emergence of supportive local policy in some boroughs, the planning system is playing a role in the growth of Co-living…but it could do far more.
As developers, operators and occupiers continue to embrace the growth in Co-living schemes, it is critical to review the intricacies of adopted and emerging Co-living policy and guidance at the outset of each specific project. As ever, Lichfields is on hand to help.
For further details of this borough-level research and our experience and insight into the evolving co-living sector, please do get in touch.
Image Credit: Folk at The Palm House, Halcyon Development Partners