Emergence of Co-Living Properties as Buy-to-Let Investments
This article explores Co-Living vs. HMOs, outlining licensing requirements, co-living investment benefits, and the growth of the co-living sector.
09/06/2025By Pauzible Team · Editorial Team
In recent years, the way people live and rent has started to change. Traditional rental models such as single lets or Houses in Multiple Occupation (HMOs) are now being compared with more modern ideas such as co-living. Many landlords and property investors are beginning to look at co-living as a serious alternative to the more conventional options.
Why Co-Living Is Outpacing Traditional HMOs | Pauzible
What Is Co-Living?
Co-living is a housing model where people rent a room or studio, but share communal areas such as kitchens, lounges and sometimes even co-working spaces. These properties are often professionally managed. They may include utilities, cleaning services, Wi-Fi and even events for tenants as part of the rent.
Unlike traditional shared housing, co-living focuses on creating a sense of community. Design and layout are planned with social interaction in mind. Co-living properties are often deliberately designed or heavily refurbished to suit this new way of living. They tend to attract young professionals, remote workers and people who want the social benefits of shared living.
Why Co-Living Appeals to Modern Tenants
The way people live and work has changed a lot over the last decade. Many tenants are no longer just looking for a place to sleep. They are looking for homes that offer a sense of community, flexibility and convenience. Co-living spaces meet these needs by offering not just a private bedroom, but also shared social spaces, fast internet, work areas and even organised events. This makes co-living a much more attractive option compared to traditional flats or house shares that do not provide the same lifestyle benefits.
Affordability is another big reason why co-living is so popular. In many cities, the cost of renting a one-bedroom flat on your own can be quite high. Co-living allows tenants to enjoy quality accommodation with shared bills. This can make monthly budgeting simpler and more predictable. For people who are just starting their careers or moving to a new city, this type of all-in-one living can be quite appealing.
Flexibility is also a key factor. Many co-living spaces offer shorter letting agreements or rolling contracts. This is ideal for tenants who may need to move relatively frequently for work or personal reasons. The combination of affordability, flexibility and social connection explains in part why co-living is growing so quickly and why more property investors are starting to focus on this sector.
Licensing Requirements
HMO Licensing Requirements
An HMO property is tightly regulated. If you rent out a property to three or more tenants from more than one household who share common facilities, it is classed as an HMO and almost invariably requires an “additional” HMO licence from the local council. If your HMO is rented to five or more people from more than one household, it will be considered a large HMO.A large HMO requires a “mandatory” HMO licence from your local council.
The council will check that:
The property is suitable for the number of occupants
The rooms meet minimum size requirements
Fire safety measures are in place, such as fire doors and alarms
Facilities such as bathrooms and kitchens are adequate for the number of tenants
The landlord or property manager is considered a fit and proper person to manage the property
Applying for an HMO licence usually involves providing detailed floor plans, safety certificates and information about how the property will be managed. In some cases, councils will also ask for a formal management plan. There is a fee for obtaining the licence and it generally needs to be renewed every five years.
Co-Living Licensing Requirements
Co-living properties can sometimes fall into a grey area when it comes to licensing. Whether you need an HMO licence for a co-living property depends on the way the property is designed and how the tenancy agreements are set up. If a co-living property is rented out by the room with shared facilities and tenants have separate agreements, it will usually be treated the same as an HMO. This is the case even if the property is very well designed, offers luxury services or looks more like a hotel or student accommodation.
However, there may be exceptions. Some co-living properties are developed as purpose-built blocks with self-contained units and shared amenities. These types of property might fall under a different planning and licensing regime. If each tenant rents a private, self-contained studio with their own bathroom and kitchenette, and only shares large communal areas, licensing rules might not always apply in the same way.
Some councils are starting to treat large co-living developments differently from traditional HMOs. Each local authority makes its own decisions based on how it defines co-living spaces. Developers and investors should consult the local council before establishing a co-living property.
Advantages of Investing in a Co-Living Property
Investing in a co-living property can offer a range of benefits that appeal to both new and experienced landlords. While the upfront costs and design requirements may be higher than other rental models, the long-term returns and operational advantages could make it a worthwhile investment.
Higher Rental Yields
One of the biggest advantages of co-living is the potential for strong rental income. Unlike traditional single lets, co-living spaces are rented by the room and often include extra services such as cleaning, Wi-Fi and utility bills. Tenants are willing to pay a premium for this level of convenience and comfort. The result is that landlords can often achieve much higher rental yields than with standard rental models and even HMOs.
Strong Tenant Demand
Co-living appeals to a growing group of tenants, including young professionals, remote workers and people relocating to a new city. These tenants often prefer the social aspect of shared living and the flexibility that co-living provides. Many are willing to pay more for a space that includes modern furniture, fast internet and the chance to be part of a like-minded community.
Unlike traditional HMOs that may mainly attract students or lower-income tenants, co-living typically targets a higher-income group. This can help reduce the risk of rent arrears or long void periods.
Longer Tenancies
Co-living tenants tend to stay longer than those in standard HMOs. This is because they get more than just a place to live. They often get a sense of belonging, opportunities for social interaction and a well-managed environment. When people feel comfortable and connected, they are less likely to move frequently.
Reduced Management Issues
Because co-living properties are often professionally managed, many of the day-to-day issues that also affect HMOs are handled by more experienced professionals. These managers deal with tenant queries, coordinate cleaning services and generally respond quickly and professionally to maintenance issues. They may also use digital tools and apps to streamline communication and task management. Having a professional team in place can reduce the time and stress involved in running the property.
Greater Control Over Design and Branding
Investing in co-living gives you the chance to shape the layout and look and feel of the property from the start. You can tailor the design to meet the needs of your target market. This includes choosing furniture, décor and communal spaces that encourage interaction and create a welcoming atmosphere. Some investors even create a unique brand for their co-living properties. This makes it easier to attract tenants and build a strong reputation. A well-designed and branded property can stand out from the competition and potentially command higher rent.
Potential for Capital Growth
Because co-living properties are often newly renovated or purpose-built to a high standard, they can also attract higher valuations. A property that is professionally designed, fully let and generating strong rental income may be worth more than a standard HMO or buy-to-let house. This increases the chance of capital growth, over time.
Growth of the Co-Living Sector
Co-living is no longer just a trend and is considered a growing sector because it solves a real problem. It is essential to have affordable, flexible and social housing for professionals. Investors and developers are responding to this demand by building new co-living spaces or converting old office buildings and hotels.
Conclusion
Co-living spaces are emerging as a strong alternative to traditional HMOs. They meet the changing needs of modern tenants and offer several advantages such as higher yields, better tenant satisfaction and fewer management issues. While co-living does require more investment up front, the longer-term benefits can be significant. As the rental market continues to evolve, co-living may become a key part of the future for buy-to-let investors.
FAQs
Q. Is co-living more expensive to set up than an HMO?
A. Yes, in most cases it is. Co-living spaces often require a higher standard of refurbishment and design. You may also need to invest in high quality furniture, decoration and digital systems to manage the property. However, these costs can be recovered through higher rent and better occupancy.
Q. Do I need a licence for a co-living property?
A. This depends on how the property is designed. If it meets the criteria of an HMO, then you will need an HMO licence. However, purpose-built co-living blocks may fall under different rules and licensing regimes. Always check with your local council before starting a project.
Q. Can I turn my existing HMO into a co-living space?
A. Yes, you potentially can. Many landlords have upgraded their HMOs by improving the layout, adding services and creating a better living experience. This can help you charge more rent and attract higher income tenants.
Q. Who are the main tenants in co-living properties?
A. Most co-living tenants are young professionals, remote workers or people who are new to a city. They often value flexibility, good design and social interaction. Co-living is also popular with international workers who want a ready-made community.
Q. What locations are best for co-living investments?
A. Urban areas with a strong job market and good transport links tend to work best for co-living.
About the author
Pauzible Team
Editorial Team
The Pauzible Team consists of finance professionals and property market specialists dedicated to reinventing home ownership and BTL financing. With deep expertise across UK real estate and innovative financial products like Equity Partnership Agreements, we provide landlords and homeowners with the insights they need to unlock equity, navigate market volatility, and build sustainable wealth through property. Our mission is to make complex property finance simpler, quicker, and more accessible for everyone.
Ready to see what Pauzible could unlock?
Explore how accessing equity from your BTL property could support your business investment plans.
No obligation. Just a clear view of what might be possible.
Pauzible Asset Services (UK) Limited is registered in England and Wales with Company number 15917067. Our registered office is at 38 Lombard Street London EC3V 9BS. Pauzible is a trading name of Pauzible Asset Services (UK) Limited. Pauzible Asset Services (UK) Limited is registered with the Information Commissioner's Office with Registration reference ZC088971.
Pauzible Asset Services (UK) Limited's business falls outside the scope of financial services regulation & Pauzible Asset Services (UK) Limited is, therefore, not authorised and regulated by the Financial Conduct Authority. This means that you do not have any of the protections under the Financial Conduct Authority rules and do not have any cover from the Financial Ombudsman Scheme or the Financial Services Compensation Scheme in relation to any contract that you may have with Pauzible Asset Services (UK) Limited. Customers should ensure they understand what this means before they use the Pauzible product.
Telephone calls may be recorded for quality assurance, training, and monitoring purposes.
