Is co-living the answer to urban housing unaffordability crisis in Asia?

Especially in Asia, one of the grave concerns for many low- and middle-income households is access to affordable and adequate housing. This is even more acute now after the prolonged, multi-layered crises caused by the COVID-19 pandemic. 

Based on Asian Development Bank’s research in 2019 on housing price involving 211 cities in 27 developing countries in Asia, the average price-to-income ratio across all cities is at 16:1. To compare, the ratio in developed countries sits at around 4:1; and affordability falls within the range of 3:1 to 5:1, or about 25 to 30 per cent of the household income. This simply means that home ownership is practically unattainable in many Asian cities.

In Hanoi, Vietnam, despite recent improvement on the public housing sector, the supply capacity is way below the demand. Private-sector housing providers now participate in housing investment and development, but they take up only a small portion of the housing market. The same is true for India, the middle class may be able to access affordable housing now, but it has failed to facilitate the marginalised group of people who survive in cities on daily wages.

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The 2021 price-to-income ratio is yet to be seen, but we can easily predict how the pandemic could only make the picture even more bleak. And if prices are out of reach, households will be forced to live in substandard dwellings; to sacrifice other needs as a large share of income goes to mortgage; or to take substantial financial risks—extra burdens that could become harder to bear, especially for families dealing with economic losses during this crisis, from either loss of business or employment.

Some believe that one of the solutions is co-living, but will it be enough to tackle the complexity of urban housing problems in Asia cities?

FuturArc asked Graham Zink, Head of Corporate Development and President of OpenDoor Asia, an online company for transacting in residential real estate. According to him, co-living has grown quickly in Singapore and Hong Kong due to the changing shifts in desires by young professionals who are starting families later and are increasingly priced out of home ownership at the earlier stages of their career.  

He said, “They are seeking an alternative to the high friction with traditional strata titled rental units. Co-living provides a professionally managed option with design-led amenities in urban locations with the benefits of a built-in community of like-minded residents. I believe that as more developers and institutional investors embrace build-to-rent opportunities, this sector will enjoy a sustained trajectory of growth in Singapore, just like the variants of co-living currently being tested in Jakarta, Manilla and Kuala Lumpur.”

The housing needs of urban populations are getting diverse. Co-living could indeed be a solution for those who cannot afford or are not interested in long-term finance for housing, such as young professionals and students, especially those who have travelled or migrated to city centres from rural areas in search of jobs and opportunities. While this is a promising solution in its own right, we must also remember that this covers only a niche market. Could this also work with the elderly, people with disabilities, older singles, poor households, or those who are chronically ill and require constant assistance?

It could, if the design focus is not only on utilitarian value, but also on the importance of communal spaces and social cohesion. The connectedness between home and neighbourhood is essential to create a sense of belonging, which can subsequently contribute to sustainable and resilient urban strategy.

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Co-living can offer this benefit in addition to its affordability. Even in a city lacking of land resources like Singapore, it is possible to create well-planned, well-designed accommodations with adequate space, both for private and communal use. In the context of COVID-19, if the concern is about density, co-living may not always translate into higher risk of virus transmission. According to Liak Teng Lit, Chairman of the National Environment Agency, density per se does not lead to a higher number of infections. The question is not how many people per square kilometre but how much space each person has.

Sameep Padora, Prof Dr Lou Yongqi & Liak Teng Lit

What needs to be underscored is perhaps how the design should be tailored to suit the needs of the targeted dwellers. In Singapore, for example, in February 2021, the government launched the first-ever community care apartments aiming to expand the continuum of residential options for seniors. Tenants pay basic packages to access 24-hour emergency and to live in a space with senior-friendly design features and programmes that enables meaningful participation and social interactions.

In other words, with proper planning, design and controls such as price ceilings, rental housing will make some units in the market accessible to various targeted groups. This is more viable than homeownership as it requires little or no savings on the tenants’ end, and it also lends the flexibility to navigate income/employment changes.

Economists could also take a closer look at the market and provide stakeholders with proper rental market data. If real estate companies can understand the supply and demand more thoroughly, as well as rental housing economic viability, they could develop more affordable rental units that suit well with market needs. Targeted subsidy programmes and government collaboration with lenders could be strengthened in order to avoid problems, such as affordable rental housing being leased to tenants who are wealthy enough to afford market-priced units.

In terms of fiscal policy, governments could offer tax exemptions or ease the access to credit to developers venturing into this area. Their policies should also include land use and occupancy regulations that support rental housing investment, as well as formal regulations to protect tenants against, for example, eviction or discrimination. Contracts must be clear and disputes mediated by legal advocacy organisations.

To return to the question, is co-living a viable solution? It could be, if it is part of a bigger plan to restructure housing policies.

Affordable housing can reduce poverty and sustain economic growth as its quality is positively correlated with educational and employment opportunities. But policies cannot favour one group over another; and so, alternatives to homeownership must offer benefits not only to young professionals and students, but also to the other groups of consumers. If the high price-to-income ratio in Asia cannot be brought down anytime soon, then at least tenure choices are made more diverse and accessible.

What’s equally important is for planning authorities across Asia to issue more coordinated land use policies and carefully review their development agreement and approval. Population growth is so rapid that development is unable to keep up with its pace. Economic growth comes together with it, but income remains unequally distributed and homeownership a far cry for some. Sound land use policies and zoning systems will prevent businesses from developing housing that people do not need or cannot afford.

To conclude, creating sustainable and socially responsible cities that welcome all sections of society, especially in a ‘post-COVID’ landscape, starts with the valuation of land and housing beyond design processes, followed by a vision to create more liveable and inclusive environments.

Interventions are needed, not only in the form of market response such as the supply of co-living spaces for those with just-enough purchasing power, but also ones that seek to help other groups. Because after all, affordable, integrated mixed-use development with a diversity of users, when done well, not only directly benefits the economy and society, but also indirectly by contributing to efficient energy use, air and water quality protection, public health and the general well-being of the populati