3 reasons co-living is rising in popularity among tenants and investors
Co-living accommodation is evolving from a niche option to a popular solution to the UK’s housing challenges as investors step up their investment in the sector.
By Jonathan Long
The UK’s housing market faces a familiar set of challenges: affordability pressures, a shortage of supply and changing patterns in how people live and work.
Against this backdrop, co-living is emerging as an increasingly vital part of the housing mix Designed around private living space combined with shared amenities and services, the model appeals to residents looking for high-quality housing, that also delivers flexibility, convenience and community.
But despite this sector appealing to both investors and developers alike, units aren’t being built at the scale we’re likely to need.
I believe there’s three reasons why the sector makes sense and why we need to build more:
1. The convenience of co-living for individuals is fuelling demand
Investec We recently surveyed 50 global institutional investors and found the strongest expected demand for co-living is expected to come from single young professionals, followed by remote workers and recent graduates.
This follows the trend towards single-person households and the barriers many young people face to home ownership ONS data shows that 29.5% of UK households are occupied by individuals, a proportion that has increased over the past decade.
The model’s holistic offering, which combines rent with utilities, Wi-Fi, cleaning, amenities and communal space, gives tenants a clear view of their “all in” costs at a time when household budgets are under pressure. And, at the same time, it can deliver a suite of lifestyle benefits such as on-site gyms and community space often within city centres. It’s no wonder many people are turning to the sector as a solution to their rental needs.
2. Regulatory changes could help expand supply and normalise co-living
The Renters’ Rights Act introduced a new regulatory framework for landlords from 1 June 2026, increasing the operational and administrative requirements across the rental sector.
The end of Section 21 evictions, the move to periodic tenancies and more formalised rent review processes are likely to favour professional, well-capitalised operators because they have the systems, expertise and scale to absorb these changes more efficiently.
The sector isn’t immune from the impact of the Act, but co-living is designed to create flexibility, which means that investors aren’t reliant on renters staying for the long-term. If tenants chose to leave, then the units can be quickly re-let and the impact on rental yields maintained. The flexibility co-living offers tenants doesn’t come at the expense of rental income for landlords.
3. Co-living is proving financially viable for investors
Finally, while this is currently a niche sector for investors, it’s one that I believe is set for growth. Our research shows that over a third of investors are optimistic about co-living, up from 30% in 2023. Moreover, 40% of investors expect to increase their capital allocation to the sector over the next 12 months.
Taken together, this suggests that we’ll see a rapid growth of interest in the sector, which will give developers the confidence to build more units. Greater supply will create more investment opportunities, and – for the tenant – lead to even higher standards across the sector as landlords battle to attract renters. This could be a win-win for the sector.
Conclusion: Opportunity exists, but planning will be key
I believe that co-living has an important role to play in the UK’s housing market, particularly in cities where demand for high-quality, flexible rental accommodation continues to rise.
Changing living patterns, growing tenant expectations for higher quality homes, pressure on traditional rental models and the potential for attractive financial returns all point to a sector that’s primed for growth.
But this momentum alone will not be enough. Despite its attraction, co-living is still not being delivered at the scale required to meet the need I believe is coming. Planning rules remains one of the biggest barriers to growth, and unless that is addressed, the sector’s potential will remain constrained.
If policymakers and local authorities can get behind co-living, then I believe we’ll enter the golden era of co-living, and see it become a crucial part of the UK’s property landscape.