Making Co-Ownership Work
New models aim to help people live together affordably. Can they succeed and scale?
If the white picket fence and quiet suburban home were the Boomer American Dream, co-owning a piece of land and living with close friends is the Millennial American Dream.
But while the nation’s financing engine and land use regime were re-engineered mid-century to make the Boomer dream a reality, the Millennial version is facing far more significant headwinds, from lender skepticism to land use regulation to coordination problems.
That does not, however, stop people from trying to build housing co-ownership models that work. Today’s letter will dive deep into those models, profiling several companies aiming to make owning a home with one’s friends as easy as buying a big suburban house. Specifically, we’ll tackle:
The historical barriers to co-ownership;
Existing co-ownership models, including Radish, a co-ownership model in the Bay Area;
A look at reSpace, a new company piloting co-ownership in Seattle;
New laws that might make co-ownership easier;
The future of co-ownership as a concept;
The Co-Ownership Promise… and Challenge
As many Thesis Driven readers know, I’m quite familiar with “co” concepts in residential: I founded and ran Common, the largest coliving operator in the US, from 2015 to 2022.
Spiritually, however, rental coliving businesses like Common share little with the co-ownership models we’ll discuss today. Most rental coliving models are fundamentally about value—renters getting something nicer than they’d be able to afford otherwise—by renting a room in a shared unit rather than a studio apartment. They’re the spiritual successors of the middle class residential hotel, not the intentional communities of the 1970s.
(NB: The rental coliving companies doing the best today—like Tripalink and Outpost Club—tend to focus heavily on value and affordability while the pricier “luxury” coliving rental models all flopped, and in general the more “luxury” they were the harder they flopped.)
But rental coliving operators at least hosted resident events and fostered some connections. On the other hand, the past few years have seen an explosion of “co-ownership” models that are little more than financial engineering. Fractional vacation home company Pacaso, for instance, makes use of a “tenants in common” (TIC) structure that we’ll discuss later, but offers little in the way of interaction between co-owners. And some innovative companies in the single-family space enable “co-ownership” with investors to bring down the entry price of housing.