How HMOs should be part of the coliving movement, and how they can learn from it.
Coliving is a new term, but the practice isn’t new.
Today, we define coliving as a housing solution in which more than two unrelated people live together. More specifically in the coliving industry, we define coliving as a shared housing offered as a service.
Most coliving operators focus on one keyword: community.
Whether their focus lies on designing common areas or creating resident experiences on a daily basis, coliving entails a question that each operator tries to solve:
“How can the shared living environment be more beneficial to residents than living by themselves?”
The current HMO industry offers shared living, but misses out on two main points:
- There is little focus on user experience: with almost no innovation in terms of living arrangements and resident experience, the classic HMO experience can be completely impersonal and not feeling homey at all.
- And while housing often comes with amenities, it often remains a service without a brand behind it. In coliving, most operators want to create an emotional attachment between their brands and their residents - creating stickiness, referral, and visibility.
Today, we are going to explain the major take-aways from the coliving industry to HMO owners, developers and operators. We are going to see why coliving will stand out long-term, how HMO players can adapt and learn from the movement to create better products and offerings.
Offering flexibility first
To date, there are around 700+ coliving brands out there, most of them in Europe, Asia and North America, and the movement is growing: three $1 billion funds have been created to fund coliving developments, institutional bank and investment funds are starting to consider it as its own asset-class, and industry organizations such as Co-Liv are helping to build a small but strong industry.
So what does coliving look like? Most coliving contracts last from 6 to 12 months, with an average of 9 months in urban cities. The majority of coliving operators lie in urban areas and an overwhelming majority of new city dwellers, often in the millennials category, are the target of the coliving offering. Coliving, similar to HMOs, is therefore a movement that attracts people who are in a transition phase, mostly young professionals at this point.
Coliving operators differ in terms of product - some coliving brands specialize on ground-up construction and development of 150+ resident spaces, similar to student housing adapted to young professionals; others focus on buying and operating houses and buildings of 10 to 30 residents, creating more intimate spaces for a larger group of people; while another part focuses on renting or entering managerial agreements with many apartments of 3-5 residents, becoming more of an aggregator of small shared living spaces.
Whether asset-light or heavy, whether appealing to a specific audience such as entrepreneurs or artists or being completely inclusive, all operators have two common denominators: flexibility of housing, and how they differentiate themselves from the market.
Flexibility of housing means creating housing as a service. This entails:
- Ability to book online and with little hassle (for example, only having to do a background chat or interview)
- No additional fee to the broker or landlord for moving in
- Amenities are taken care of and the space is furnished
- And utilities including water and electricity are taken care of
While HMOs often do not apply any additional brokerage fee, many booking processes are out of date or nonexistent: it is still common to find a place via phone, in-person visits and longer waiting times.
Creating housing as a service is the basis for coliving. But here comes the important point, namely, how you will differ from your competitors.
The experience game
Because coliving is shared living, operators need to figure out how to make this shared living enjoyable.
This is where the differentiation part comes in.
After visiting and interviewing 100+ coliving spaces last year, I realized that the differentiator changes from operator to operator. There are different ways to add value to a communal experience, and you can choose what is easiest for you.
Here are the main ways that coliving operators try to bring innovation and differentiation to the market:
- Making the product stand out. Investing into the interior design and architecture of the space is what most coliving operators try to do. Some of them focus on creating cosy, beautiful and large common areas, while others prefer to invest into small but comfortable and efficient personal spaces. Offering a great product that people want to live in is the first step to creating differentiation.
- Creating an enhanced communal experience. This is about thinking through the resident journey. What interactions, experiences and touch points can be created to make people bond and interact? Coliving operators differ in their approach - some of them invest into strong onboarding experiences with a personal welcoming dinner, while others invest into offering a variety of experiences and entertainment to their residents. The whole point is to not only offer a product, but a real human experience.
- Creating an irresistible price point. Housing is hard to find in today’s big cities and rising real estate market. It is obvious that affordable housing, especially in times of crisis, will always remain a primary necessity - and that affordable coliving will be a solution for that. While many operators have set their price points around the residential market rate, the ones that choose to create an affordable product have an advantage to tap into the affordable housing market.
Every HMO can learn from these three points and implement them. The investment is not only into creating satisfied residents, but to go beyond that.
Creating a brand
Creating a strong product comes with the key advantage of creating a brand. And with a brand comes brand value.
Brand value is something that unbranded services and products cannot build. It can be leveraged in several ways, with one goal: to grow faster.
Here are a few opportunities that a brand will create:
- Getting organic marketing: without a brand, you won’t be able to build out a platform that will organically attract residents. There will be no Instagram account to look out to, no website that represents your services for the end-user, and no content that will bring you organic traffic.
- Using the franchise model: strong brands have the leverage to sell their products or services under the franchise model. A lot of hotels already do that, and certain coliving operators have started, as well. In this scenario, your franchisee will apply your processes of operations and quality standards, while your brand will maintain the customer interaction and overall recognition.
- Higher word-of-mouth: with the ability to put a name on your HMO site, people will be able to talk about the experience - especially if you used the differentiation points to create an outstanding experience. In this case, telling your residents about new openings which they will promote through word of mouth and creating referral programs that can be rolled out to incentivize them, will lead to more stable streams of tenants.
Of course, the list goes on.
Here is the key take-away: simply running HMOs without a brand will put you behind. There are benefits of investing into a brand, meaning investing into the service, into the experience, and into operations. The benefits are higher returns, more stable cash flows, and the possibility to scale the shared living business.
Running an HMO as a coliving space is possible. And it’s not far from reach.
Learning from the coliving scene
As we’ve seen so far, HMOs can learn from coliving in two fronts:
- By creating a shared living service that stands out on the product, experience, or pricing side.
- And by creating a brand behind their services, growing their services and building up brand value.
HMO owners and operators can learn from the coliving scene to reach these goals.
At Co-Liv, we’ve built the largest association and network of coliving professionals. Every month, we host around a dozen of virtual events on coliving in different countries, create coliving-related publications and educate further through the Co-Liv podcast.
We hope that you will be able to implement the learnings of coliving into your HMO business and grow the relationship between both industries.