The South Korean government has announced a KRW 25 billion (US$21 million) fund to support co-living startups in response to the growing housing crisis.
With housing prices skyrocketing and outpacing income growth, single-person households are expected to reach 35.7% by 2037.
The current government hopes to stabilize housing prices and reduce the rent-to-income ratio before the next presidential election in March 2022.
South Korea's housing rental system, Jeonse, requires tenants to pay a large upfront deposit for a rental unit.
However, as housing prices have become increasingly unaffordable, co-living spaces have emerged as a solution, with an average monthly rent ranging from US$385 to US$430.
These spaces attract tenants by offering competitive prices and additional amenities, including utilities, maintenance, and furniture.
Co-living startups such as Commontown, operated by Kolon Global, differentiate their offerings by targeting specific tenant demographics and providing high-quality housing.
For example, Commontown's Treehouse building in Gangnam offers a penthouse room with a monthly rent of US$1,554. In addition, 82% of the co-living spaces are female-only, providing a safe environment for female tenants.
Like co-working spaces, co-living startups are trying to create a sense of community by organizing events and activities for residents.
For example, Mangrove, which operates its building, offers regular yoga and writing classes for its members.
The co-living sector is operationally complex, with high operating costs and similarities to the hotel industry.
Commonhouse, another co-living startup run by Kolon Global, reported a continuous net loss from 2018 to 2019.
Funding from the South Korean government aims to improve living conditions for young adults.
Co-living startups must develop sustainable business models to avoid becoming a bottomless pit.