The growth of a new sector

There is no doubt that London is facing an intensifying housing crisis. The delivery of enough homes to meet the capital’s growing population while remedying a backlog of unmet need is becoming ever more challenging. Alongside the housing crisis, the way people live and work continues to rapidly evolve.

There are many factors at play underpinning the burgeoning housing crisis and informing the changes to Londoners living and working arrangements. These include the ability to build enough homes to meet demand, increased remote working opportunities, changing household dynamics, rising levels of loneliness and the cost of living crisis. All of these factors are changing the ways people live in one of the most expensive cities in the world.

In this context, the co-living sector has emerged as an increasingly popular option. There has been a significant increase in the demand for co-living units amongst occupiers and, in turn, a growing appetite for c o-living development from developers, operators and investors.

There remains though, considerable undersupply of good quality co-living accommodation in London. The BPF [1] report on co-living identified that, as of September 2023, there was a 48% shortfall in the number of co-living units to rent compared with demand. There is also a growing pipeline of c.12,000 co-living units in London at the planning stage[2]; suggesting a planning system which is becoming more aware of the role co-living can play in meeting acute housing need while accommodating lifestyle and household changes.

Lichfields view is that the co-living sector in London presents a significant opportunity for growth in an otherwise flatlining housing market.

Planning for co-living in London

Planning, of course, has a critical role to play in supporting the delivery of new co-living developments in London. The purpose of this Insight Focus is to explore the opportunities presented by co-living in London; assess the patterns of co-living development in the capital; and, identify the common planning challenges faced by these developments as well as potential planning solutions.[3]

This Insight Focus comprises the following sections:

What is the Use Class?
An overview of planning policy for co-living in London
Co-living myths
Which LPA’s are supportive and which are more resistant?
Patterns of development - the types of co-living applications which are coming forward in terms of location, scale and form of development
Typical Issues - A summary of the typical issues encountered in applications for co-living development and how these can be overcome

Throughout the planning sector, and in particular in planning policy, reference is often made to large-scale shared living or large-scale purpose built shared living (sometimes called ‘PBSL’). These terms refer to a similar form of use and for the purpose of this report, ‘co-living’ is used to encapsulate these different terms.

Co-Living: What is the Use Class?

There is some debate around the use class of co-living developments, which to some extent reflects the discussions had when PBSA and BtR emerged as a significant form of development. The London Plan states, for the application of policy H16, that “…large-scale purpose-built shared living developments…in planning terms are sui generis non-self-contained market housing.” The accompanying GLA guidance (Large-Scale Purpose-Built Shared Living LPG February 2024) seeks to draw a distinction between co-living and other forms of accommodation, including self-contained housing (use class C3), homes in multiple occupation (HMOs) (use class C4 or sui generis), hotels (use class C1), hostels (sui generis) and residential institutions (use class C2).

Co-living can in some instances operate under a C1 use class, allowing short stays subject to the specific criteria and restrictions imposed by the planning permission. These schemes typically involve conversions of existing buildings. However, the majority of bespoke large scale schemes which have been delivered in the last few years have been brought forward as sui generis use. While there is likely to be a range of uses coming forward under the banner of co-living, this report focuses on sui generis co-living developments as defined by the London Plan.

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The GLA Perspective: Strategic Policy and Guidance on Co-living

Strategic Policy – London Plan

At the national level, there is no existing planning policy that relates to co-living development, including within the latest iteration of the NPPF (Dec 2023).

At the strategic level, the London Plan has a bespoke policy for co-living developments which was adopted in the 2021 version of the plan. Policy H16 ‘Purpose Built Shared Living’ sets out ten qualifying criteria that schemes must meet and broadly establishes the principles against which co-living schemes will be assessed.

Policy H16

qualifying criteria

Large-scale purpose-built shared living developments must meet the following criteria:

it is of good quality and design
it contributes towards mixed and inclusive neighbourhoods
it is located in an area well-connected to local services and employment by walking, cycling and public transport, and its design does not contribute to car dependency
it is under single management
its units are all for rent with minimum tenancy lengths of no less than three months
communal facilities and services are provided that are sufficient to meet the requirements of the intended number of residents and offer at least:
1. convenient access to a communal kitchen
2. outside communal amenity space (roof terrace and/or garden)
3. internal communal amenity space (dining rooms, lounges)
4. laundry and drying facilities
5. a concierge
6. bedding and linen changing and/or room cleaning services.
the private units provide adequate functional living space and layout, and are not self-contained homes or capable of being used as self-contained homes
a management plan is provided with the application
it delivers a cash in lieu contribution towards conventional C3 affordable housing. Boroughs should seek this contribution for the provision of new C3 off-site affordable housing as either an:
1. upfront cash in lieu payment to the local authority, or
2. in perpetuity annual payment to the local authority
In both cases developments are expected to provide a contribution that is equivalent to 35 per cent of the units, or 50 per cent where the development is on public sector land or industrial land appropriate for residential uses in accordance with Policy E7 Industrial intensification, co-location and substitution, to be provided at a discount of 50 per cent of the market rent. All large-scale purpose-built shared living schemes will be subject to the Viability Tested Route set out in Policy H5 Threshold approach to applications, however, developments which provide a contribution equal to 35 per cent of the units at a discount of 50 per cent of the market rent will not be subject to a Late Stage Viability Review

Notably, the policy requires a cash in lieu contribution towards conventional C3 affordable housing either through the provision of an upfront cash in lieu payment or an in perpetuity annual payment. However, the GLA’s Draft Affordable Housing LPG (May 2023), and the recently published Large-Scale Purpose-Built Shared Accommodation LPG, confirm that co-living schemes can progress via the GLA fast track affordable housing route when onsite affordable housing is provided. Further information will be provided in the revised affordable housing LPG (due to be published in Summer 2024) and so this is likely to continue to evolve.

Overall, the London Plan is clear that co-living has an important role to play in meeting London’s housing need.

Large-scale shared living developments may provide a housing option for single person households who cannot or choose not to live in self-contained homes or HMOs. This policy is required to ensure that new purpose-built shared living developments are of acceptable quality, well-managed and integrated into their surroundings.

London Plan Policy H16 supporting text

London Plan Guidance

Following the publication of the draft in January 2022, the GLA published the final Large-Scale Purpose-Built Shared Living London Plan Guidance on 29 February 2024. Following consultation with many of the major co-living operators, the LPG has been significantly updated to provide a more flexible, yet still robust framework supporting the delivery of co-living schemes in London.

Lichfields covered the changes between the draft and final versions of the LPG in the blog ‘A Leap Forward for Co-living’ in which was published in March 2024.[4] We summarise some of the key points as follows:

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London authorities’ approach

In the light of the strategic London Plan support and the recent growth in planning applications for co-living, how are London boroughs reflecting co-living within their Local Plans?

To answer this question, we have looked at co-living policy across all 32 London boroughs, the City of London and London’s two development corporations (London Legacy Development Corporation (LLDC) and Old Oak Common and Park Royal Development Corporation (OPDC)).

As demonstrated above, the policy position is very mixed and there is little consistency in the approach taken by the London authorities. The acceptability of co-living schemes and the prospects of securing planning permission is heavily dependent on the location and authority.

We expect this picture to change as Local Plans are reviewed and co-living continues to grow in popularity across London. The success of a planning application for co-living is dependent on many factors, but from a purely planning policy perspective, we consider that those authorities with the most supportive policy position include the City, Southwark, Waltham Forest and Brent. However, as the co-living policies within each authority are very different, it is important to review the precise local policy requirements.

The results of this research are summarised in the interactive map below.

The research shows the following:

Co-Living Myths

There are many misconceptions and ‘myths’ surrounding co-living schemes. As co-living is still in its early stages, there is continued need for education at the planning stage to address misunderstandings and raise awareness of the prospective benefits of co-living. We summarise common co-living myths below:

People choose co-living as they cannot afford other forms of development - Whilst co-living can, in some cases, be more affordable than other forms of accommodation price is only a part of why people choose co-living. Research undertaken by Harris Associates and VervLife[5] identified that people choose co-living for convenience and community. Flexible contracts, all inclusive amenities and the ability to make new connections are central to residents choosing co-living over more traditional forms of housing.
Co-living is for young people – Many people who live in co-living developments are young people but not exclusively so. Harris Associates and VervLife’s research identified that the average age of a co-living resident is 28 years old but approximately 20% of residents were 35 years old and above. As the sector evolves there are opportunities for age specific schemes to emerge which cater to specific demographics.
Co-living leads to transitory communities – People stay in places and foster a connection to a place if they feel part of a community. Co-living helps build communities in a way which many residential developments do not. In recent years there has been a reported increase in loneliness and co-living actively addresses this by creating schemes with community at their heart. Research undertaken by Conductor[6] found that 45% of respondents would be more inclined to consider co-living if there were community events or activities organised within the development’s communal space.
Poor quality of accommodation – In order to attract tenants and create successful places to live, co-living schemes must be well designed to ensure that people want to live and stay in the development. Co-living developers and operators also have a long-term interests in their co-living schemes. It is critical to the success of the sector that developments are attractive, well designed and meet the needs of tenants.
Co-living is a form of short-stay accommodation – Co-living is a form of rented permanent accommodation providing long-term tenancies. The London Plan requires co-living developments to establish minimum tenancies of three months. Co-living is very different to short-stay accommodations such as hotels and serviced apartments which have a limit of a 90 day stay. Over 70% of current co-living residents in the UK express their intention to stay for 12 months of more.[7]
Co-living does not contribute towards housing need – Co-living has an important role to play in meeting housing need in London. The London Plan, and LPG, both confirm that co-living schemes contribute to housing need at a ratio of 1.8:1. Meaning that a co-living scheme of 300 units will make a housing need contribution equivalent to 167 self contained homes.

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Patterns of development

Number of Applications

Lichfields has reviewed all planning applications for co-living submitted in the last six years (January 2018 to June 2024). This research focuses on bespoke sui generis co-living schemes. We are aware that there are a number of co-living schemes which operate under a C1 Use Class. However, for the purpose of this research we have focused on those that align with London Plan Policy H16 and the LPG. These are applications which have been submitted following publication of the draft version of the latest London Plan.

This research identifies 29 applications, of which 19 have been approved, 3 refused and 7 are still to be determined. Many of these schemes included other uses, particularly at the ground floor. Other uses typically comprise commercial space including offices, retail of food and beverage which compliments the co-living use.

The chart below summarises these recent co-living applications, breaking them down into GLA referable applications (those exceeding floorspace and/or height thresholds for Mayoral referral) and non referable applications, determined locally.

Of the applications which have been refused, the impact on existing housing or the ability to deliver conventional C3 housing on the site was cited as a reason for refusal for two of the applications. This was either because there was an extant permission on the site or the site was in existing residential use.

Geographical Spread

London authorities adopt different approaches to co-living in planning policy. In Lichfields’ experience, developers and investors focus on those boroughs which have a positive policy position and are politically supportive of co-living.

The map below shows the distribution of the 29 co-living schemes Lichfields’ has reviewed.

Our research shows that:

[Graphics – can the following be small infographics which sit alongside the map or toggle switches which highlight specific boroughs?]
- 44% of schemes are within Central London. 56% are in outer London.
- 50% of authorities have not seen any co-living development.
- Only 8 authorities have more than one co-living schemes.
- PTAL 4 to 6 – the majority of schemes fall within areas of high PTAL.
  Development Quantum

Development Quantum

Our research has found that there is a broad range of scheme sizes, with the quantum of units ranging from under 50 to over 800 co-living units. The average quantum of these schemes is 295 units.

Scheme Details

We have undertaken a detailed review of the schemes that have been approved and reviewed each development in terms of affordable housing, unit size, communal facilities, car and cycle parking and tenancy agreements. The following section provides a summary of these findings.

Housing Need and Affordable Housing

Our research shows that co-living developments are being brought forward on a range of sites including former office buildings, commercial units, storage and distribution yards, car parks, pubs and vacant sites.

A common requirement for these co-living applications is the need for a housing needs assessment to evidence the local demand for co-living and the role co-living accommodation will play in the local community and an area’s housing stock. Whilst out research identified that many did not provide housing needs assessments, this is partly due to the applications being submitted prior to the adoption of the LPG.

The provision of affordable housing in co-living schemes is varied and dependent on a range of factors including location, authority and scale.

Our research shows that:

Less than 50% of schemes are supported by a Housing Needs Assessment.
54% provided on-site affordable housing provision (discount market rent or conventional affordable housing).
75% of referable schemes followed the GLA’s fast track affordable housing route.
Those schemes which provided on-site affordable housing, typically achieved 35% affordable housing.

Unit Sizes

Within the co-living developments analysed, unit sizes vary from 16 to 24sqm and the average unit size is 20sqm (excluding accessible units).

There is little correlation between the size of the co-living scheme and unit sizes. A scheme’s unit sizes are instead typically determined by the developer, the location and character of the site and the market the units are targeted towards.

Communal Facilities and Amenity Space

The quantum and type of communal facilities provided within the co-living schemes analysed varied considerably. The most common communal facilities are summarised below:

The analysis shows that the average area of a co-living development’s internal communal facilities is 5.5sqm per unit.

There is a broad range in the areas given over to communal facilities in the individual developments analysed; varying between an average of 2.6sqm and 8.1sqm per unit.

Similarly, the average area of communal external amenity space provided is just over 2sqm per unit. The range of amenity space across the developments again varies considerably, with a range between 0.6sqm and 4.2sqm per unit.

Cycle and Car Parking

Cycle parking provision varies considerably across the schemes (0.2 to 1.9 spaces per unit) with an average of 0.9 spaces per unit.

Interestingly, two of the referable schemes in the research provide a cycle hire scheme for residents to use free of charge. In both instances, the developments provided cycle parking levels below London Plan standards, but cycle hire provision was considered by the determining authorities to be a more appropriate offer for future residents.

All of the schemes reviewed were car-free with the exception of accessible car parking spaces.

Tenancy and Management

Our research shows that, in accordance with the London Plan, all of the planning permissions (100%) have a minimum tenancy of three months and two schemes committing to longer minimum tenancies of six months.

All approved schemes were required to provide a management plan as part of the application or post-planning via a condition or S106 obligation.

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Co-living: Common Planning Challenges

This section provides an overview of the key planning challenges experienced by co-living schemes and sets out how these issues can be addressed based on Lichfields’ project experience.

Land Use and Housing Need

key challenges

A common issue in those authorities which are concerned about co-living schemes is that such developments will replace either sites in existing residential use or those identified for residential development.

It is typical for applications for co-living schemes to be supported by housing needs assessments to assess, amongst other issues, the local demand for the co-living accommodation, the impact of the development on existing housing stock and its role in delivering mixed, balanced and sustainable communities objectives. This is supported by the LPG which sets a suggested approach for such assessments.

Housing need assessments typically provide a summary of the existing housing market and supply assessed against the demand with a focus on co-living. Local demographic composition and household size as well as the area’s housing unit mix and tenure enable an assessment to be made of the role of co-living in the area’s mixed and balance community.

The research and our project experience illustrates that many authorities also resist co-living schemes on existing housing sites, sites allocated for residential use sites with an extant residential permission and those which are otherwise considered suitable for residential development. It is important to understand both the position of the specific planning authority and the existing or prospective use of the site in the context of local policy.

Affordable Housing

key challenges

The London Plan states that co-living schemes are expected provide the same proportion of affordable housing as traditional C3 developments (35% of 50% subject to circumstance). However, the approach to the threshold approach to viability is slightly different. London Plan Policy H16 states that all large-scale purpose-built shared living schemes will be subject to the Viability Tested Route, however where schemes provide an affordable housing contribution equivalent to 35% (or 50%), then the permission will not be subject to a late stage viability review.

The London Plan expects a co-living development’s affordable housing obligation to be delivered in the form of a cash in lieu contribution towards traditional C3 affordable housing in the borough, secured either as an upfront payment or in perpetuity annual payments.

The Mayor’s LPG and the Draft Affordable Housing SPG recognises that on-site affordable housing provision can also be acceptable. Lichfields’ experience is that, where appropriate, local authorities will often be more supportive of on-site provision as this results in a more tangible delivery of affordable housing. Clearly, on-site provision is only appropriate where a site is of sufficient scale to allow the scheme to include a separately delineated C3 affordable housing building (or core).

In some cases, discount market rent co-living units can be considered appropriate. However, in practice sub-market co-living accommodation remains rare. Most authorities priority is C3 affordable housing, either delivered on site o secured through a commuted payment.
Schemes over a certain size are referable to the London Mayor. Unlike traditional residential schemes this is not determined unit numbers. Instead, schemes are referred to the London Mayor where they exceed certain height or floorspace thresholds. Where schemes are referred to the London Mayor additional scrutiny on the viability and affordable housing provision can be expected.

Unit sizes

key challenges

Rightly or wrongly, unit size has become a key area of discussion in the delivery of co-living schemes in recent years. From schemes delivered in the late 2010s which provided small units of below 17sqm, to early examples of ‘micro-living’ there have been many examples of small unit sizes. The LPG now sets a minimum requirement of 18sqm and resists units above 27sqm.

The precise unit size within a scheme will be dependent on many factors, including location, market, form of development, amount of communal space and viability. In our view, qualitative considerations like the residential quality and layout efficiency of a unit, and the amount, range and quality of residents’ facilities are of equal or greater importance to unit size. As with all forms of residential development, flexibility is also key, to allow schemes to respond and adapt to changing requirements over the lifetime of a scheme.

Communal Facilities

key challenges

The communal facilities in a co-living scheme are an important part of the resident experience. The communal facilities can take many forms and this is something which is continually changing as the market evolves and matures. Like unit size, the range of amenities, alongside the core kitchen, dining and living spaces, can be a key attraction and differentiator in the market for a co-living development. Again, inbuilt flexibility in the design of residents’ facilities can be critical to the scheme’s long term success These communal facilities can include private dining areas, gyms, games units and even karaoke booths.

The quantum of residents’ facilities is also extremely important and became a key area of discussion in the preparation of the LPG. Providing the right amount of communal facilities is a balance between providing enough space to meet residents’ needs whilst ensuring that spaces are used and places where residents actually want to spend time. Ultimately, these communal spaces are part of people’s homes so their design is critical in the same way as the design and scale of a house is key to its success.

The LPG recognises that residents’ facilities which are open to the public may count towards residential communal space where they are integrated within the co-living accommodation, share management and are accessible to residents at least 12 hours a day and at least six days a week.

Cycle Parking

key challenges

As discussed in the preceding section, cycle parking provision varies considerably across the schemes.

For the first time, the recently published LPG now provides a bespoke cycle parking standard for co-living; requiring 0.75 spaces per person with flexibility applied based on a site’s location.

Lichfields understands that cycle use in co-living schemes is lower than other forms of residential development. We anticipate that the flexibility now afforded by the new LPG, and in particular the ability to provide cycle sharing schemes as part of the tenancy agreements, could transform the approach to cycle parking in co-living developments. The opportunity to have a range of bike types at residents’ disposal without any upfront or associated maintenance costs is unique to co-living and provides many exciting opportunities.

Tenancy and Management

key challenges

Understandably, the length and type of tenancies and the associated management of co-living schemes is a key consideration when preparing and determining planning applications. Management plans have become a requirement of planning applications for co-living.

Developers with a track record of delivering co-living schemes are able to draw on evidence to demonstrate how their other schemes operate. This enables a clear and well-evidenced approach to the development’s management and operation, which reflects the specifics of a scheme. In other cases, identified operators often produce the management plans.

Similarly, unlike other forms of rented accommodation, minimum tenancies are the norm with three months being the starting point. Research suggests that the length of stay in a co-living development is actually closer to 12 months, which is more closely aligned with tenancies for build to rent developments. Where developers are able to commit to tenancies longer than the three months sought by policy, this can be considered a material benefit which weighs in favour of the planning application.

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Summary and Conclusion

Co-living is a dynamic and burgeoning new entrant to London’s otherwise embattled housing market. In the face of an intensifying housing crisis and amidst stagnating housing deliveries, co-living remains singularly buoyant. It fulfils a housing need, responds to lifestyle changes and contributes meaningfully to the capital’s communities.

The opportunities for well-designed co-living schemes in the right locations across London are significant. The appetite for co-living amongst prospective tenants, developers and investors is growing. The number of planning applications for co-living is following suit.

Yet, despite this growth and its mounting role in the housing market, co-living is a still-nascent sector imbued with myths and misgivings. There is much to do to educate stakeholders and decision takers on the benefits of co-living, its role within London’s communities and its contribution to the capital’s acute housing need.

With this in mind, this Insight Focus discusses the varied approach of each London borough to co-living, it explores patterns of co-living development across London, and it sheds light on the myths and common planning challenges facing this growing sector.

The Approach of London Boroughs to Co-living

Firstly, we have looked at co-living policy across all 32 London boroughs, the City and London’s two development corporations.

While the GLA has in place bespoke and constructive co-living policy, the position at borough level is inherently mixed. Only 25% of London boroughs have supportive (adopted or emerging) co-living policy in place. Others are still mostly silent on co-living.

Those boroughs endorsing co-living frequently also set additional requirements beyond the criteria in the London Plan. This can include prescriptive locational requirements, alternative affordable housing targets and onerous expectations on evidencing housing need.

A co-living development’s planning prospects are, of course, heavily dependent on the borough in question and it is critical to understand these local policy nuances. Lichfields’ interactive policy map at Section 3 is a useful starting point.

Patterns of Co-living Development in London

We have then analysed all planning applications for co-living development submitted in London during recent years. Our research shows that half of London boroughs have received co-living applications with the most applications submitted in Brent, Ealing and Wandsworth [check]. Around one third of these co-living applications were referable to the Mayor.

The approved co-living schemes assessed include an average of 295 units and just over half provide on-site affordable housing. Their units are typically 20sqm in area; with an average 5.5sqm of internal residents’ facilities and 2.2sqm of outdoor amenity space per unit.

While there is of course variation in these parameters, it does appear that policy and the market are driving co-living schemes towards an optimal development quantum, unit size and approach to amenities. Given the embryonic nature of the sector, there is much to learn from these previous co-living applications.

Planning Challenges Encountered by Co-living Developments

Finally, drawing on Lichfields co-living experience, the Insight Focus explores the common planning challenges encountered by these developments.

A fundamental starting point for many co-living developments is establishing support for the land use. We outline how co-living applications can encounter resistance where they are considered to prejudice conventional housing delivery and we discuss approaches to housing needs assessments for co-living.

While the London Plan encourages payments in lieu towards affordable housing, more recent GLA guidance supports on site C3 affordable housing alongside co-living. We consider the affordable housing options open to co-living schemes, tenure considerations and viability matters.

The Insight Focus then discusses the approach to co-living unit sizes and the quantum and type of communal facilities being delivered in co-living schemes, as well as approaches to cycle parking and tenancy and management considerations.

In conclusion, it is clear to Lichfields that the opportunities presented by co-living in London are significant. Our research shows a marked increase in planning applications for co-living during recent years. Co-living schemes continue to improve as lessons are learnt, as the sector matures and as the profile of co-living grows. Co-living is now establishing itself as an important component of London’s housing market. We fully expect the sector to continue to evolve, expand and flourish in the years ahead.

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Sectors

Services

Co-Living

Co-Living: What is the Use Class?

The GLA Perspective: Strategic Policy and Guidance on Co-living

Policy H16

London authorities’ approach

Co-Living Myths

Patterns of development

Housing Need and Affordable Housing

Unit Sizes

Communal Facilities and Amenity Space

Cycle and Car Parking

Tenancy and Management

Co-living: Common Planning Challenges

Land Use and Housing Need

Affordable Housing

Unit sizes

Communal Facilities

Cycle Parking

Tenancy and Management

Summary and Conclusion

Footnotes

Our story

ESG

Blog

Careers

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Products

People

News

Co-Living

Co-Living: What is the Use Class?

The GLA Perspective: Strategic Policy and Guidance on Co-living

Policy H16

London authorities’ approach

Co-Living Myths

Patterns of development

Housing Need and Affordable Housing

Unit Sizes

Communal Facilities and Amenity Space

Cycle and Car Parking

Tenancy and Management

Co-living: Common Planning Challenges

Land Use and Housing Need

Affordable Housing

Unit sizes

Communal Facilities

Cycle Parking

Tenancy and Management

Summary and Conclusion

Footnotes

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