How the CoLiving business works in Mexico and in major cities around the world
According to estimates, the CoLiving industry in Mexico could reach an annual market of 550 billion pesos in the next five years. In Europe, this industry already reports an annual size of more than 64 billion euros.
CoLiving: the new real estate investment alternative in Mexico
In addition to being a solution to the main problems of modern urban life and offering a series of advantages for a more efficient and sustainable future, CoLiving can also generate significant returns for investors.
The real estate market in Mexico is undergoing a change in business model, and CoLiving is one of the new alternatives that are gaining ground. Among the antecedents as a business model are rental housing, rental clubs and the operation of small hotel chains.
Currently, renting a conventional property in Mexico City generates an annual return of between 5% and 5.5%. However, investing in CoLiving can generate an annual return of up to 12%. This is largely due to the growing demand for shared accommodation in urban areas, mainly by young professionals and students.
Investing in CoLiving is an opportunity for those looking to diversify their investment portfolio and earn significant returns. With proper management and a focus on quality of services, it is possible to offer an attractive experience to tenants and a solid return to investors.
When approaching CoLiving as a business model, the most important points to consider are:
- Price
- Size and/or number of beds
- Services offered
- Community factor
- Flexibility of stay
Types of CoLiving management systems
Commercial and standardized models: these are those originated by companies seeking business opportunities and using standardization processes.
Self-managed models: these are those originating from within the organized communities themselves.
What is the difference between CoLiving and CoHousing?
CoLiving and CoHousing are two alternative concepts to traditional housing. Although both schemes share some similarities, it is important to highlight the differences between them.
One of the main differences is in the type of leasing and the operators. In CoLiving, the units are rented, while in CoHousing they are acquired as private property. In addition, CoLiving is managed by an external operator, while CoHousing is operated and managed by the community that inhabits it.
Another important difference between the two schemes is in the temporality and permanence. CoLiving is a temporary housing option, while CoHousing is ideal for those seeking permanent housing in a community setting.
In short, CoLiving is a solution for those seeking a temporary place to live, while CoHousing is more suitable for those seeking a permanent community.
International regulation and standards of CoLiving
CoLiving is a housing model that allows more homes to be built at a lower cost, with better serviced amenities and better use of urban space. However, the rapid growth of this model has outpaced the capacity of the public administration to adequately regulate it.
Thus, the main challenges it faces are the creation of public policies and regulations, taxation and the form of financing.
Currently, most cities in the world lack a public policy and regulation for CoLiving, which requires new approaches to financing, organization and regulation. Despite this, some cities have become leaders in regulating this housing model.
Studying these cases can provide a frame of reference to search for a model adapted to Mexico City.
New York City
At the end of the 20th century, new zoning regulations affected the affordable housing industry, dictating minimum areas for living spaces and number of people allowed under one roof. This trend was reversed, and today there are about 60 cohousing programs nationwide.
However, the example of New York shows us pending issues surrounding these programs. In this city, strict SRO (Single Room Occupancy) certifications have been developed that require a shared housing building to have security measures with standards as high as those of hotels. As a result, most CoLiving operates under the guise of hotels or on an informal basis.
London
In the City of London, there are significant CoLiving operators. Despite the lack of a specific regulation for these schemes, most of them adhere to three regulations.
1. Policy 16, which establishes as requirements: accessible locations with nearby alternative mobility systems, minimum rents of three months, and sufficient space to cover needs. In addition, it prohibits individualization for sale and requires the implementation of management plans.
2. C1 Class (Hotel)
3. HMOs (House of multiple occupancy)
London regulations state that CoLiving units must have a kitchen, garden or roof garden, dining room, living room, concierge and cleaning services. Private spaces must be between 14 and 30 m2, and common areas must total 5 m2 per dwelling unit.
Amsterdam
In this city there are no specific CoLiving regulations. Most of the existing ones adhere to residential uses with special permits for two or more non-family tenants, which are limited and require special authorization.
The private spaces range from 22 to 50 m2. In addition, they are used for their operation as hotels, which allows them to avoid price controls.
Berlin
The German capital is the world's leading CoLiving investment and the lowest market for home ownership. Although there is no particular regulation, those who adopt this scheme tend to follow the following regulations:
1. Residential Tenancy Law
2. Lodging Agreement
Vienna
The spaces of this scheme are usually located in financial centers, universities and city centers. Current regulations allow commercial land use to be replaced by CoLiving in the form of PBSAs (Purpose built student accommodation)
Hong Kong
In this city, there are licenses for apartments with a capacity of more than twelve beds and minimum rents of 28 days. Likewise, hotels and guesthouses are allowed to rent on a daily basis and are required to have an external management or operator.
In extreme cases, the schemes are bunk beds with minimum space that risk competing with nano flats: 18.5 m2 apartments that can be rented for the same price.
Barcelona
It is one of the few cities in the world that has issued a specific public policy to regulate CoLiving schemes.
According to Decree-Law 50/2020 known as the "mini-flat", land uses designated as housing and equipment can be used for CoLiving.
The regulation requires minimum private spaces of 24 m2, common areas of 6 m2 and additional free spaces for each dwelling of 10 m2. According to this regulation, the sum between common and private space must not be less than the minimum housing. It also contemplates ventilation and lighting requirements, and controlled rental prices and increases.
It is worth noting that this is the only city where CoLiving is thought of as a solution focused on the elderly.
This set of urgent measures was implemented in an accelerated manner due to the crisis caused by COVID-19 and provides a preliminary legal framework to meet a new demand. It is intended primarily for three groups: young people in the process of emancipation with labor or educational mobility, professionals passing through the city, and isolated elderly people in solitude.
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