This very question came up at a recent London Proptech conference, and nobody managed to find an answer. It is certainly not surprising, because there is no simple solution to this very complex problem, and technology alone is unlikely to solve it.
We read about the housing crisis everyday. A shortage of homes combined with a growing population has led to median house prices in the UK increasing by 259% over the last 20 years, whilst earnings only rose by 68% (ONS).
No wonder renting out our own home – let alone buying one – has become unaffordable for many. The problem is most acute in large cities, particularly in London, where renting a one-bedroom flat is out of reach even for professionals in their thirties or forties. Just look at the high price levels on the London Rent Map, which shows the monthly rent by tube station.
A growing amount of professionals and seniors live in a flatshare
Sharing a home with others has therefore become a necessity for many, forcing them to do so way beyond student times.
As a consequence, the flatsharing website Spareroom saw the number of users aged between 35 and 44 increase by 186% between 2009 and 2014, whilst the number of sharers aged 45 to 54 rose by 300%. Users over 45 now represent almost 10% of total site users, bringing the average age close to 30. Last but not least, the number of flat sharers between 55 and 64 has increased by 343% over the last five years, and the number of those aged 65 and higher by 600%.
But is this really due to the lack of supply which, in turn, makes housing so expensive?
The housing crisis paradox
That’s what the problem seems to be at the surface. In reality, the irony is that there are plenty of spare rooms in London and the UK. They are just, simply, left spare. Granted, many households have one or even several rooms they keep for guests, as a study, or for their children when they grow up: there is a good reason why these rooms are not being used. But other households have a room which could be rented out – it is all about setting the right incentives, and helping them find the perfect flatmate.
Very often, those are households where the children have left home or where a partner has moved out or passed away. It can also be temporary homes, used as a pied-a-terre by the landlord who is based elsewhere.
According to our research, there are around 11 million such spare rooms in the UK – and this number already excludes the rooms we believe will never be rented out.
Finding a compatible flatmate is key
But, like in love, finding the right match – in this case, a lodger or flatmate – is hard, especially for middle aged professionals or seniors who may, in the past, well have spent many years living by themselves. Compatible lifestyles – work hours, cooking habits, diets, social life – are key, and matching personalities are a pre-condition for an enduring, lasting co-living arrangement.
It is lack of trust, as well as people staying in their comfort zone, which prevents many from sharing their home in spite of the availability of spare rooms in numerous UK households. If only some of those with an empty room could be convinced that, with the right flatmate or lodger, trust is no longer an issue, and that their lifestyle would improve rather than worsen: it would be a first step towards increasing the supply of rooms and bringing the market towards an equilibrium.
Beside the positive aspect of sharing a home with a person you get on with, the extra income from the spare room could help you finance trips, undertake a new hobby, or even just leave a 9 to 5 job. In a nutshell, renting out a spare room could really improve your lifestyle.
So, how can better technology help?
Whilst the UK lettings market is changing rapidly with the emergence of online agents and better technology used by traditional letting agents, the flatsharing market remains opaque and underserved.
As a result, technology needs to get better at convincing people to share their home. To do so, what is needed is, above all, more trust in the flat-sharing market, and removing the friction and uncertainty a rental transaction can cause.
Trust can be created by giving users a better idea of who their counterparts on a rental platform are: verified profiles or a data driven algorithm to show personal compatibility between potential flatmates.
In addition, transactions generally happen offline, after the two parties have agreed to meet or strike a deal. In the UK, about 50% of flatshares have no rental contract. This will often lead to misunderstandings or disputes, and makes it easy to defraud the other party.
In summary, better technology will allow users to save time and gain more control over the search process and transaction. Airbnb is the perfect example of how trust mechanisms and transaction processing empowered consumers and injected trust into a market riddled by fraud and inefficiency. Maybe even more importantly, they expanded their market by convincing new users to increase their income and improve their lifestyle through better technology.
11 million rooms in the UK might just be waiting for technology to do the same for them.