Proptech’s Next Frontier: Shared Housing
Atticus is the CEO of PadSplit, an affordable, shared housing model that creates financial independence for workers.
The term “proptech” (property technology) was coined only a few years ago as a way to describe the bevy of innovation that has hit residential and commercial real estate. But the reality is that innovation has been a core part of real estate for as long as we’ve had dedicated home and work spaces.
As an example, as I write this from my home during a summer day in Atlanta, I don’t think of air conditioning as a novel idea, but you can certainly imagine what a huge deal it was for real estate when Willis Carrier invented the concept of modern air conditioning in 1902.
Even the most transformative of ideas still take time to take root, though. The first air conditioning units didn’t arrive at the White House until 1930, and they only became more common in suburban homes in the 1950s. They would, of course, go on to become commonplace in residential and commercial spaces, revolutionizing how and where we could live, work and play.
In the decades to come, as we look back at our current moment in time, I believe we will consider the concept of “shared housing” as a pivotal proptech innovation that has shaped how and where we live.
MORE FOR YOU
Shared housing is more efficient.
Resulting from the sharing economy, shared housing (or “co-living”) is the concept of simply sharing a home among individuals to maximize the available space and effectively reduce costs. It can also do so much more.
With shared housing, there’s an opportunity to create new bedrooms from formal dining rooms or extra living areas that currently add little to no monetary value to a rental property. Using these spaces, as well as previously existing bedrooms, as individual rentable rooms creates housing options that are both more profitable for landlords and more affordable for tenants willing to share kitchens and common areas.
Shared housing also means more efficient uses of resources, adding density to areas without actually adding square footage, moving workers closer to public transit or places of employment, reducing or removing car trips, and leveraging existing public infrastructure. The use of shared space reduces overall vacancy costs for housing providers, allowing them to mitigate the risk of short stays or nonpayment of rent, reducing minimum stay requirements or large deposits.
The result means that tenants are no longer constrained by a long-term lease in a single location. And combined with the trend toward remote work, many workers will be able to just pick up and move at their leisure all over the world. Even today, our concept of “ownership” continues to evolve because of shared models, where we can own a share of a home, a network of homes or rental properties, while also being a separate customer or tenant for other housing that provides the flexibility of choice.
Shared housing addresses the lack of housing supply.
It’s clear that there is a severe supply-and-demand imbalance right now, and it’s been brewing for more than a decade since new housing production dropped after the 2008 financial crisis.
The gap in available and affordable rentals for extremely low-income Americans in 2019 was 6.8 million, according to the National Low Income Housing Coalition (NLIHC), with more than two-thirds of extremely low-income renters severely cost-burdened. It’s safe to assume that this number has grown due to the pandemic and the latest tightening of the market.
Given the inability of cities to permit construction quickly enough, the expense and complexity of that new construction, and the more recent shortages of building materials and labor, we simply cannot build housing quickly enough to overcome the deficit in the near term.
Technology enables shared housing to scale quickly.
Sharing bedrooms among “strangers” in a single house or apartment requires a significant lift in operational complexity that’s best solved by technology, and this technology is quickly changing the landscape of housing. Compare the time and cost to build a new apartment versus moving someone into an empty bedroom. I’ve been operating shared housing for more than 13 years, and I know the cost of converting and furnishing these spaces for co-living is only a small fraction of the cost of a new studio apartment, and it is completed in significantly less time.
The challenge lies in building systems to create trust between roommates sharing a home. Developing and employing the right proptech solutions for your renters’ needs can manage the complexity of living situations. Once the technology is built, it can be scaled without much additional time or cost. For instance, proptech can ensure each user of the same building has a unique code for entry, their own room rate and billing cycle, flexibility in the term length, a network of other available housing options to choose from and the ability to rate/review their housemates or their landlord. These are among the functionalities of the platform my company designed to ensure a smooth experience for both our hosts and renters.
Shared housing is poised for growth in the years to come.
According to Cushman & Wakefield, the co-living sector grew to more than 7,000 beds by the end of 2019 (download required). In the last few years, more companies have entered the space, creating purpose-built co-living units, converting multifamily units or even turning hotels, warehouses and houseboats into communal living. While I can’t speak for others, I do know that my company alone expects to surpass the 2019 total within just the next 12 months.
Based on what I’m seeing, shared housing is poised to grow as a result of the nation’s unprecedented housing shortage and as more nonprofits, policymakers and affordable housing advocates work together to remove zoning restrictions that are largely predicated on discriminatory views. Ultimately, it’s much cheaper to change zoning laws than it is to subsidize housing creation. And perhaps most importantly, the result is much more affordable housing at a time of desperate need.
At the end of the day, innovation is about making systems more efficient, and I’m really excited to see how the sharing economy will continue to make housing dramatically more efficient in the coming years.
Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?