Last week I met The Collective. This was not, as the name might suggest, a 1980s electro-pop cover band nor a midwestern evangelical Trump-voting cult. It is a group of young hipsters looking to bring the co-living vision of their entrepreneur-messiah Reza Merchant to the streets of our capital.
At the request of Hanover Communications, who list former Progressive Democrats leader Mary Harney as a senior adviser, I met The Collective’s senior development manager and associate planning director in Leinster House on Tuesday.
Three smart English twentysomethings came in with a soft but firm sell. Their slick PowerPoint presentation was filled with images of cool and happy millennials. The Collective is not just in the business of providing accommodation but is offering solutions to the loneliness, anxiety and cultural undernourishment of recent arrivals to the big city.
For 20 per cent less than the cost of a studio flat in central London, it promises to provide accommodation, utilities and services, communal workspace for the aspiring cultural entrepreneur, spas and swimming pools and a programme of edgy cultural events. All this for the handy price of €1,158 a month.
The pitch was backed up by graphs and percentages from surveys. With just the right amount of evangelical zeal, the bright young things almost convinced me that this was not a business proposition at all but a philanthropic mission to create a new global cosmopolitan community.
A quick read of the Financial Times, Forbes and Bisnow revealed something very different. The Collective is fast becoming the world’s largest and most profitable investor in co-living. Founded by 30-year-old Merchant, the company was initially backed by private equity funds from Britain and Singapore. Among the early cheerleaders was Jonathan Teklu, a high-flying German investor who previously helped bankroll Airbnb.
Last year Deutsche Bank and the Bermuda-based Catalina Re funded a management buyout of The Collective to the tune of €139 million. The company is reported to have raised almost €600 million in equity to date.
The Collective employs 148 people in London, Berlin and New York. It has 7,000 units of accommodation with a target of 100,000 by 2025. This is not the profile of a boutique developer investing in a niche product. This is a big company with an ever-growing global reach and the funds to back its chief executive’s ambition.
Now it is coming to Dublin. Earlier this year, The Collective bought a 0.22 hectare site on Fumbally Lane in Dublin 8 for €10.5 million – reportedly more than two-and-a-half times the price paid by the owners.
The site has planning permission for 34 apartments, 26,000 square metres of retail, a restaurant and car parking. The Collective intends to apply for 200 to 250 co-living units with no change to the ground-floor plan.
Reditum, a London-based boutique financier, and Cardinal Capital, a Dublin-based alternative investment vehicle, funded the purchase of the Fumbally Lane site, with the former stumping up €6 million. Mm Capital will be The Collective’s local development partner.
So is this new arrival to Dublin’s property-development ecosystem good news? Absolutely not. It is the latest in a series of developments that will be bad for tenants, communities, taxpayers, our housing system and the city.
The size of the micro-apartments in The Collective’s London developments ranges from eight to 16 square metres per person with an additional six square metres per person in the communal spaces.
Thanks to Housing Minister Eoghan Murphy’s co-living regulations introduced in March last year, The Collective needs to provide only 12 square metres of living space per person here with an additional six square metres of communal space.
So co-living means cramming people into apartments less than half the size of the minimum requirement of 37 square metres for a studio flat permitted under Murphy’s apartment guidelines, themselves a significant reduction on earlier requirements.
To make matters worse, the lucky co-living millennials will have to pay as much as 40 per cent of their net disposable income for the pleasure of living in micro-apartments with complete strangers.
It’s not just tenants who will lose out. Paying €10.5 million for the Fumbally Lane site sent out a clear market signal to all other landowners between the canals, pushing up the price of development land, further undermining the viability of standard residential development.
Meanwhile, as investors chase the highest possible yields, the attraction of sardine-like student or co-living developments continues to suck much-needed capital from more socially desirable residential developments such as affordable apartments.
If, as I suspect, the legal structure of The Collective’s first Irish investment is designed to take advantage of the grotesquely generous property investment tax breaks introduced by former finance minister Michael Noonan and his then secretary general John Moran, the taxpayer will see little or no return.
Initially I thought that, in a properly functioning property market, co-living as a niche option for upwardly mobile professionals would not be a problem. The more I think about it, the clearer it becomes that co-living is a child of our dysfunctional housing system. If people had access to genuinely affordable, good-quality accommodation in well-designed cities, they would never ‘choose’ to live in a gentrified prison cell, no matter what the discount offered at the in-house vegan bio-deli.
At the end of our meeting, I asked the three bright young things from The Collective if any of them actually lived in a co-living development. “No” was the answer, though one claimed to be considering it. I doubt that.
Co-living is not a solution to any aspect of our housing crisis. The Collective is not a boutique developer. It and its fellow travellers are global equity investors masquerading as hacker-house hipsters, hunting down the highest possible return irrespective of the social or urban cost. The only person I have heard welcoming its arrival in our capital is Eoghan Murphy. Surely that is the ultimate kiss of death.
Eoin Ó Broin TD is Sinn Féin spokesman on Housing, Planning and Local Government and author of Home: Why Public Housing is the Answer