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The interior of one of the Toronto condo and townhouse units available through co-living rental provider SoulRooms.

SoulRooms

A growing trend in rental property management is to convert apartments, houses and townhouses to so-called “co-living” spaces, that attempt to add a service layer onto the age-old practice of lodging with roommates.

For Gaurav Madani and his business partner Arnab Dastidar, who founded co-living startup SoulRooms in July, their own experiences in Toronto’s property market convinced them of the need for co-living options.

“Finding a roommate on Craigslist is actually searching the darknet,” Mr. Dastidar said, expressing a fear he felt personally as he searched for accommodations in the city. They target their service at people who have no trusted friend or partner to share a room with, and may have no credit score because they recently immigrated to the country. He and Mr. Madani were, until recently, international students from India getting their MBA degrees at York University’s Schulich School of Business. When they moved to Toronto, “we went through the whole experience … we figured out that there was something we could do about this.”

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The pair got started by signing up to take over management of several condominium apartments from Zahra Properties, which claims to have more than 200 apartments under management in the city.

“Zahra Properties is our major strategic partner. We lease properties owned/managed by Zahra Properties since they greatly align with our vision,” said Mr. Madani, who also said that Zahra has no financial stake in SoulRooms. “We are working out of their offices currently and using their resources and network to acquire new properties … using their office space and supplies, utilities, vendors, reception facility and, most importantly, coffee machine.”

In 2018, two Zahra Properties employees were connected to a Landlord Tenant Board case in which a condo investor found out the tenant she was leasing to was listing her apartment on Airbnb without her knowledge or consent. One of the Zahra employees was ultimately fined $4,400 for damage to the unit. Zahra owner Afzal Nathoo told the CBC his company had no connection to his employee’s activities.

Unlike some co-living properties that try to sandwich anywhere between six and 10 people into one shared house, SoulRooms focuses on three-bedroom apartments or townhouses.

Co-living rental provider SoulRooms has about 45 individual clients now and is adding about 15 rooms per month.

SoulRooms

“We started in June. We have about 45 individuals renting now. We are adding 15 rooms every month,” Mr. Madani said. “We have people from Ireland, Croatia, Brazil, Nigeria, China, India, France, Australia. We are trying to get to 100 units by the end of November.”

There are already a number of home-grown co-living companies operating in Toronto, including Milyou, founded by real estate investor Mat Abramsky, who comes to co-living with a family history of student housing management in Kingston and has opened two houses in Toronto with seven residents so far. He saw co-living take off while working in private equity companies in Britain, and is looking to finance Milyou’s first purpose-built rental in the 25-50 bed range. "We had a 20-per-cent increase in the number of people roommating in Toronto in the last two censuses,” he said. “We’re sharing space as it is, so how do we take the pain out of that?”

In Toronto, the number of non-family households with two or more residents (the Census description captures roommates and sibling cohabitation) increased by 38 per cent in 10 years: from 49,045 in 2006 to 59,750 in 2011, hitting 68,010 by 2016. Across the GTHA, the number of such households hit 104,545 in 2016. That is the fastest-growing cohort of household types in the entire region, although it still represents a minority in absolute terms (Census 2016 recorded 2.5 million households in the GTHA, up 372,280 since 2006).

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Toronto tenants are under pressure to buddy-up because of record low vacancy rates and rapidly rising rents. Take the example of Matthew Palm, a postdoctoral research fellow in human geography at University of Toronto, Scarborough.

“I saw an ad to live in a den in a one-bedroom new condo, and I gave it a go. The landlord stitched up some curtains, put a bed in there and said, ‘okay, you can rent this for $1,100.’ It’s sort of like a luxury boarding room in the sky,” he said. He didn’t know his roommate before he moved in, but tiptoeing and earplugs have helped to keep the peace between the two. “To the average person, that might sound crazy, but I’m not going to lie to you, I see it as a bargain. If you’re a single person and you make $60,000, your posttax income is $35,000 and you just can’t find a studio for $1,300. I could spend half my income on my rent, and then I’m not saving up and I’m seeing my family less often [he’s from California, originally].”

Mr. Palm’s income is right in the sweet-spot for co-living operators: A study by commercial real estate services company Colliers International pegged the ideal demographic as earning between $30,000 and $75,000 and hoping to live in the densest most expensive parts of the host cities.

But becoming a roommate matchmaker for these middle-income young people is not what draws operators to this model. In a report on co-living by Cushman and Wakefield published in May, the commercial property specialists said, “typically, co-living providers include additional services and perks, including fully furnished units, all utilities included, hosted community events and even housekeeping, which in the aggregate represent as much as a 20 per cent discount to living alone.

“For the operator, this opens new avenues to differentiate their product, taps into a large renter base not currently served by top-end luxury product, and maximizes revenue on a per square foot basis. Given long-term demographic trends and the continued tightening of the housing market, co-living sits on the precipice of rapid expansion.

The co-living company seeks to make a virtue of sharing by emphasizing downtown location and services.

SoulRooms

“Ultimately, due to societal shifts, renting has become a viable, destigmatized housing choice, rather than just an economic necessity,” the report concludes.

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For SoulRooms, renting each room separately maximizes revenues per square foot and lowers vacancy rates; SoulRooms claims 96-per-cent occupancy, with a minimum term of three months. Unlike traditional single-room occupancy housing in Toronto, often the domain of some of the city’s poorest residents, the co-living operators seek to make a virtue of sharing by emphasizing downtown location and services: WiFi and social-group programming (barbecues, movie nights and so on) seem to go a long way toward creating a price premium.

The upshot is they charge almost the same price for a single room in downtown Toronto that a renter might be able to find in a less-desirable basement apartment or inner-suburb studio.

For instance, Milyou offers rooms in Cabbagetown for $1,900 a month, and while a solo-renter could pay $2,000 a month for a one-bedroom basement apartment, there’s not many one-bedroom’s available above-ground at Milyou’s price. A three-bedroom house could run close to $5,000 a month, but then roommates would be on the hook for a year’s rent (at a cheaper rate, closer to $1,600 a room) and roomies are stuck with a chore rota to clean up the bathrooms and kitchens themselves.

SoulRooms, which has units in a few different neighbourhoods, has three price tiers: a 95 square foot “cozy” option ($1,425 for single-room-occupancy, shared bathroom), 130-square-foot “mid-size” ($1,595 for slightly larger single room) and similar sized en-suite, which has a private washroom ($1,900-$2,050).

The SoulRoom guys do not see their company as catering to long-term renters, though. They are after people in transition: into or out of schools, the city or the country. Quite simply, the tradeoffs may not be affordable long-term and not workable for anyone who’s not single.

“I study housing affordability, and as an early career academic I tend to end up in cities’ that are not affordable,” Mr. Palm said. “I don’t want to have to sweat about, ‘Can I afford to buy a cup of coffee?’, so I rent out a den. If I had kids, I don’t know what I would do.”

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