For many New Yorkers, the biggest challenge of city living isn’t the subway at rush hour or late nights at the office; it’s finding a place to live.
As New York’s single population grows, accounting for 1 in 3 households across the five boroughs, the need for single-room occupancy housing (SRO) has grown along with it -- and developers are taking notice.
Although traditional SRO housing fell out of favor in recent decades, replaced by studio and 1-bedroom apartments that property owners viewed as more lucrative, single-room housing is staging a comeback.
Rebranded as “co-living,” a wave of modern, flexible properties are hitting the market, leveraging a growing appetite for amenities over space access to a community, while turning a higher profit for property owners.
The diversity of co-living options is vast, ranging from apartment-style buildings with indoor pools and fitness suites, to charming brownstones offering a homey atmosphere and highly curated experience. This diversity has made running a co-living business a lucrative option for more than just large-scale developers. By focusing on a specific niche, townhouse owners can profit, too.
In this guide, we’ll look at the re-emergence of SRO housing in New York and how property owners can leverage this growing trend.
Understanding SRO Housing
Defined simply as any housing that gives tenants private room on an individual lease, SROs have varied widely. Although some suites offer a private bathroom, tenants often rent a single room, sharing the bathroom, kitchen and other communal spaces.
If this sounds a lot like sharing an apartment with roommates, it’s because the living experience isn’t all that different for tenants -- with an important caveat. SROs allow tenants to rent individual rooms without shouldering the risk of the entire lease amount should other tenants fail to pay their share. Under a traditional lease, each roommate agrees to bear responsibility for the full amount, which can make leases inflexible and expensive.
As recently as the 1960s, single-room occupancy housing dominated the New York market between residence hotels, boarding houses and communal apartments. Ironically, as the demand for SRO housing has risen, the supply has all but disappeared.
SRO Housing Today
Today, SROs are a fraction of the housing stock, according to CUNY Law Review, a trend that has fueled the trend toward roommates. Facing sharply rising rents, stagnating wages and crushing student loans, even well-established professionals cannot afford studio and 1-bedroom apartments in desirable neighborhoods.
Societal norms are also driving greater demand for SRO housing. With more and more New Yorkers choosing to remain single, splitting a lease with roommates often feels like the only option, even if it’s less than desirable.
This disconnect between what New Yorkers want from their housing and the type of housing currently available has led to significant opportunities in the co-living space, with upstarts like Ollie, Common and Roomrs driving massive growth.
What many New Yorkers desire, even as they seek privacy and an individual lease, is a stress-free home life and a sense of community -- the keys to success for many emerging co-living companies. Conveniences like housekeeping, toiletries, WiFi and premium cable packages, coupled with the flexibility to participate in communal activities without having to fight over the cable bill, have made co-living a wildly popular alternative to roommates. Some spaces have seen waitlists for 100 available rooms hit more than 10,000 applicants.
Benefits to Property Owners
With more privacy, greater flexibility, lower overall rents and more amenities, it’s clear how tenants are winning in the shift toward co-living -- but what about property owners?
For landlords and developers, the co-living trend means more units per building and greater tenant demand, translating to a higher rent per square foot and a deeper pool of qualified applicants. This is particularly true at luxury buildings, where developers have struggled to find enough high earners to fill studios and single bedrooms, and at townhouses, where landlords have more legal options to maximize their ROI without the wear and tear or questionable legal status of short-term stays. Indeed, many successful co-living spaces, like Outpost Club and Dwell, started out in single-family townhouses, where tenants can enjoy a homey, communal vibe with a feeling of privacy.
Townhouse owners in emerging neighborhoods like Crown Heights, Bushwick and East Harlem are finding particular success, although I see even greater opportunities throughout greater Harlem, where the need for SRO housing is largely underserved.
Townhouse owners in Harlem can leverage the co-living trend by focusing on curation and adapting their properties to fit the needs of single adults who want privacy and amenities. Low interest rates have given existing homeowners favorable conditions to remodel.
Tips for Townhouse Owners: Starting a Co-Living Business
One of the greatest advantages of starting a co-living business is a low barrier to entry, but it pays to seek out expert advice. Here are a few tips for a smooth and successful launch:
- Make sure your leases are legal. You’ll need a certificate of occupancy to legally rent individual rooms in a townhouse. Before marketing your business, seek out a good real estate lawyer who specializes in property management to make sure you have a green light from the city.
- Hire a professional property manager. Since renters of co-living spaces often expect more flexible lease terms and greater amenities in exchange for smaller spaces, you may find that managing even a single building is more work than expected. A number of co-living specific management companies have emerged to help keep rooms filled and tenants happy.
- Remember that even in a well-curated community, tenants are likely to be strangers. As you remodel with a co-living business in mind, consider a layout that favors privacy: add sound-proofing between tenant rooms, consider a ‘micro-apartment’ style in favor of a traditional bedroom setup, and design common areas to accommodate multiple adults living different lives. This might mean compartmentalizing the fridge, creating clearly marked shelf space in the kitchen, and converting bathrooms to feel more dorm-style.
- Given the communal nature of co-living spaces, amenities like weekly housekeeping and refrigerator stocking can go a long way toward minimizing friction between tenants. Adding amenities like WiFi and Netflix, or hosting a series of community events, can make your space more competitive. The current market has shown that tenants are happy to pay more for an all-inclusive experience.
Interested in starting your own co-living business in Harlem? Let’s talk. Get in touch at email@example.com or call me at 212-574-6963.