Co-living 2.0: Proposed NYC law would legalize shared housing in new development to ease housing crisis
- New legal protections include providing individual leases for each co-living renter
- Outpost CEO: Co-living companies today avoid ‘cutting corners’ with unsafe layouts
Common space at Outpost Club's Williamsburg location.
Outpost Club
A safer, more regulated approach to co-living? Years after a surge in communal housing that in some cases broke the rules, New York City is taking another look at co-living as part of the solution to the housing crisis.
Newly proposed legislation would legalize co-living in new development to provide more housing options for single- and two-person households. The move would create stronger legal and safety protection for co-living tenants.
If you’re not familiar with co-living, it is akin to dorm-style living with nicer furnishings and fixtures. In this turn-key approach to renting, a co-living company typically supplies the roommates, furnishings, even the toilet paper. It’s often touted as ideal for newcomers, thanks to a built-in community.
Brick Underground extensively covered the growth of this new type of housing in its pre-Covid heyday, for example here, here, and here. Some co-living experiences were not so kumbaya, a result of companies flouting housing laws and regulations. Some renters experienced frustrating, even dangerous experiences, which Brick covered here, here, and here.
But the CEO of Outpost Club, now the largest U.S. co-living company, said the concept has matured since its early days and bad apples were forced out of the business by the pandemic (more on that below).
More options for single people
The new legislation was sponsored by Council Member Erik Bottcher in November and would legalize shared housing units (which includes co-living) in new construction or redeveloped buildings created after January 1st 2027. However, the bill, Int. 1475, has not made it out of the Committee on Housing and Buildings. (Council Member Bottcher did not respond to media queries; Brick Underground will update this article when he does.)
The bill supports NYC’s Department of Housing Preservation and Development’s Shared Housing Roadmap, which lays out a path for reintroducing shared housing to create more options for single New Yorkers, and capitalizes on City of Yes for Housing Opportunity, which removed zoning barriers to shared housing.
“NYC has a growing number of single-person households. Many of them are new arrivals to the city and many double or triple up” for housing, Michael Sandler, associate commissioner at the Office of Neighborhood Strategies at HPD, told Brick. These groups of roommates compete with families for a limited number of family-size housing units in NYC.
“This effort is aimed at creating new options for single persons,” Sandler said.
New development only
The city’s goal is to create purpose-built, new shared housing, Sandler said. It is not a pathway to legalize units in existing shared housing, which is a “more challenging endeavor,” he said.
The legislation modifies the Housing Maintenance Code, Building Code and Fire Code to make new construction and conversion of nonresidential floor area to shared housing legal, as-of-right, in NYC. A range of share-housing layouts stand to be approved, including traditional Single Room Occupancy and dorm-style co-housing.
New shared housing built to these standards would be safer than what exists today, he said. It would include soundproofing, front-door level security, and more privacy.
Currently, it is against the law to rent out individual bedrooms unless the building has a certificate of occupancy allowing single-room occupancy. That’s significant because SROs are required to have additional fire safety measures in place like sprinklers, otherwise exterior bedroom locks would be a major fire hazard.
There will also be management guidelines built into housing code amendments, Sandler added.
Individual leases
Significantly, the legislation would require companies to offer individual leases to co-living tenants. This protects co-living tenants when a roommate (who could be a stranger) doesn’t pay their rent.
Housing law currently requires all tenants in a unit to be on the same lease and be jointly responsible for the apartment. If one roommate leaves or stops paying rent, the remaining roommates typically have to make up the difference, and a landlord is within their rights to sue all tenants on a lease.
Providing individual leases offers additional protections: When a co-living company is the primary leaseholder and tenants hold subleases—the tenants do not benefit from the protections of Good Cause eviction law. And when tenants have their own leases, if a landlord violates the terms, a tenant can bring an action against them in housing court.
If they zone it, will they come?
But changing the city’s housing code isn’t enough to entice one developer back into co-housing.
Spencer Levine, president of RAL Companies, previously developed a co-living property in Philadelphia with Common, once one of the largest co-living firms in the world.
“We went through a co-living craze in the late teens. Everyone thought it was the solution and we did too,” Levine recounted. “We participated in the experiment. Co-living was supposed to do for housing what co-working did for office space.”
Many of the big names in co-living are no longer around after major infusions of venture capital funding fueled unsustainable growth that was punctured by the Covid pandemic.
Common, founded in Brooklyn in 2015, had at its height a portfolio of over 5,000 units in 12 cities but went on to file Chapter 7 bankruptcy in 2024 and shuttered its doors. Thousands of Common’s units were taken over by Outpost Club.
Broadridge, the Philadelphia development, has 478 units, 158 of them are co-living, the rest are traditional rentals. The urban location near universities is ideal, Levine said, “but we found pros and cons” when it came to running the co-living portion.
Levine said the co-housing model has aspects of hospitality and a transient demographic associated with short-term leases, which makes it different from a traditional rental property.
“What we also found about co-living universally is the cost per square foot is often higher for the consumer. It’s more expensive because you are renting a furnished unit often with some level of service,” Levine said. “It’s more of a lifestyle experience.”
He ticked off a list of other challenges, including utilities. “Owners end up including them in the rent so they don’t have to account for them by room,” but that drives operating costs higher.
Ultimately, he said, co-living “is a lot to figure out.” The challenges for developers building under the new model, if the legislation succeeds, will be in the execution and the details.
Bad apples have left
Sergii Starostin, CEO of Outpost Club, said NYC’s co-living plan offers a pathway out of its housing crisis.
Outpost has absorbed many units from other operators to become the largest co-living company in the U.S. Thanks to a December merger with June Homes, the company has over 4,000 units across seven major U.S. cities, with 2,500 units in NYC.
In an interview with Brick, Starostin said co-living is viable and growing in places around the U.S. Cities like Miami and Colorado have adopted new co-living laws that regulate square footage and loosen restrictions on unrelated persons living together.
It’s a shift from the teens, Starostin said, when many co-living companies “cut corners,” such as with layouts. Some co-living apartments were carved up to create additional bedrooms that lacked windows or were otherwise illegal.
Starostin described an industry that is now more sophisticated and knows the laws.
“It’s our responsibility to comply with legislation,” he said. Companies that took risks on illegal practices have ceased to exist, pushed out in part by the pandemic.
“We invested a lot in technology and people whose job is to onboard tenants. As in every new industry, when some things go wrong you try to learn from it,” he said.
The industry’s consolidation makes it better primed to handle the current economy. “The larger companies can better survive today’s higher inflation and mortgage rates. They have more power to negotiate,” he added.
There’s one sticking point for him: Int. 1475 only applies to shared housing in new construction, but Starostin said he’s pushing to broaden this legislation. He has been a part of discussions on shared housing with HPD and Council Member Bottcher, he said.
“I understand where they are coming from. They don’t want old inventory,” he said. It is too difficult to bring older buildings in compliance with the changes in the Housing Code. If passed, the law would apply to new units created after January 1st, 2027.
That’s a long time off. “We are pushing for the legislation to include recent, purpose-built co-living,” he said, adding that these properties can be brought up to the amended code.
