Part 1 – Part 2 will be published tomorrow.
Space sharing is an important part of the fast-growing sharing economy. New co-living paradigms are emerging which could have significant implications for the way we live and the type of housing we need. … One of the main applications of the sharing economy is in accommodation, particularly for holiday/travel and student share housing.
What is the sharing economy?
Rachel Botsman, an Oxford University academic and leading commentator on collaborative consumption, has described the sharing economy as:
Airbnb is a good example, relying as it does on the underuse of accommodation to service holiday-makers and travellers.
Evolution of the sharing economy in Australia
Deloitte Access Economics, in their October 2015 report “Review of the collaborative economy in NSW” for the NSW government, estimated that the collaborative economy then represented only some 4% of the NSW holiday accommodation market.
Yet this figure belies the sharing economy’s significance, given its rapid growth rate. Deloitte pointed to survey results suggesting that some 53% of Australians had participated in some form of collaborative economy in 2014 and that 63% planned to do so in the near future.
Key drivers of the sharing economy
Key drivers include:
- More opportunity for easy and inexpensive peer to peer engagement via the internet;
- A growing awareness that you don’t need to own an asset to use it;
- Mutual rating systems and social media, which encourage transparency and build trust between complete strangers who might not otherwise have been willing to deal with one another. Trust and reputation “capital” are essential in helping build confidence in a peer to peer collaboration or sharing relationship.
Accommodation and the sharing economy
One of the main applications of the sharing economy is in accommodation, particularly for holiday/travel and student share housing.
Airbnb is probably the largest and best known international player in the holiday accommodation segment of the sharing economy, though there are many market participants, including Stayz and even Couchsurfing – “payment in kind” accommodation for the budget conscious traveller.
Sydney is Airbnb’s 10th largest market worldwide. Across Australia, Airbnb advertised some 40,000 rooms in 2015, double the number of the previous year. By comparison, 26,000 hotel rooms were operated in Australia by the Accor group, our largest traditional hotel operator.
Flat sharing among students has been around from time immemorial, but in the internet age there are many more platforms for promotion. These platforms share many of the characteristics of the more recent sharing economy businesses.
A spectrum of co-living models
Co-living in one form or another is gradually becoming more common. It takes on a wide variety of forms, ranging from co-living “light” where only a few facilities are shared (eg. laundry and/or WiFi) to much more communal models, where for example living areas, kitchens and bathrooms are shared.
Some millennials are even living in dorm-style communal accommodation where they don’t have their own bedroom.
At the sharing-intensive end of the spectrum is New York based home sharing concept, common, which offers a facilitated shared living model in which you rent your own fully-furnished bedroom in any of their growing number of “shared houses” in NY, San Francisco or Washington DC.
Aside from your bedroom, everything else is shared, including all other living spaces, utility costs and WiFi, as well as supplies for the shared kitchen, bathroom and laundry. Frequent and well promoted communal events at each shared house help engender a sense of community among residents.
New York City’s Carmel Place micro-apartment project, completed in mid 2016 amidst huge fanfare and interest, involves less intensive sharing. It incorporates a communal laundry, communal lounge and outdoor seating areas and a community room. Along with the clever and flexible use of space within the individual units, these communal spaces partly compensate for the micro scale of the units.
Manhattan based “WeLive” represents yet another model of shared living, which includes communal kitchens and laundries (together in some cases with private kitchens) and some other communal living spaces. WeLive’s focus is on community and social interaction. Although WeLive currently caters mainly to millennials, its co-founder believes WeLive can in time cater for older cohorts, including families.
Housing collective type models, and their many variants, are also emerging in Australia. One such example is multi-award winning “The Commons”, an apartment block in Brunswick (Melbourne) completed in 2013. Based on the “Nightingale Model”, its shared amenities include rooftop garden, laundry facilities, car use and solar power.
These and other evolving co-living models suggest there is a growing interest in and experimentation with notions around accommodation sharing and communal living.
Granted, sharing is not for everyone and may not become mainstream anytime soon. However, the growing momentum of the sharing economy and its manifestation in the accommodation sector are forces which cannot be ignored.
These forces may even help to address the housing affordability crisis. For example, think of the capital savings and improved speed of delivery we could generate by simply leveraging some of the under-used capacity in our existing residential built environment. In my next post I’ll explore this and other ways that the sharing economy might provide speedy and effective solutions to housing affordability.
Oliver Frankel is a former corporate finance and M&A lawyer, who has spent the second half of his career in finance, investment and management. Most recently, he has taken a strong interest in how to address the affordable housing crisis.