Shared housing is nothing new but the number of young people living with roommates has doubled since 1980 and some entrepreneurs see an opportunity

Right inside the main door at Euclid Manor, there is a pile of shoes. Their owners are scattered throughout the 6,200 sq ft house in Oakland, California. There is music coming out of the kitchen where Sarah Cabell and Kailey-Jean Clark, two of the home’s permanent residents, are preparing dinner for about 25 people, consisting of their roommates and friends.

At the first sight, Euclid Manor doesn’t look much different than any other home shared by friends. Yet, after looking closer, there are small details that stand out. On a door across from the entrance hangs a sign that reads: “Residents only”. The entrance itself has two small signs with instructions reminding everyone to lock up when they are coming and going. The reason: Euclid Manor is a communal living – or co-living – house.

With wages stagnant and rents soaring, young people in New York, San Francisco and other hot (read expensive) cities are increasingly moving in with roommates. The number of 18- to 35-year-olds living with roommates has doubled since 1980. Young people have always needed housemates, especially when times are tough. But this time it’s different. A new generation of co-living companies are trying to make shared housing a billion-dollar business.

Euclid Manor is part of Open Door, a co-living company founded by Jay Standish, 31, and Ben Provan, 32. The pair run three co-living homes: the 5,600 sq ft Canopy, home to 12 housemates, the 6,200 sq ft Farmhouse, home to 16 people, and Euclid Manor, where they moved in back in July. Euclid Manor is currently home to eight permanent residents, which will eventually rise to 10.

Facebook Twitter Pinterest Sarah Cabell and Kailey-Jean Clark cook together a dinner for their friends and housemates. Photograph: Josh Edelson/The Guardian

The houses self-manage, with Provan and Standish stepping in for conflict resolution if needed. Ideally, the houses should be “self-running, self-sufficient organisms” with different members of the house taking on different tasks and roles.

“Being in a community is like being in a relationship, it does take work and it takes good communications and you have to be proactive,” says Standish. “There are many benefits with having that lifestyle. And, who would want to live their life alone?”

Facebook Twitter Pinterest Residents and friends enjoy dinner in the dining room of Euclid Manor. Photograph: Josh Edelson/The Guardian

In Brooklyn, at two co-living homes run by Common, another co-living company, the menial tasks of living with others, such as buying the toilet paper, buying furniture or cleaning the communal spaces once a week, are all handled by the company.

Brad Hargreaves, 29, got the idea for Common while running General Assembly, a global education company. Students and instructors at GA lived with roommates in expensive cities like New York, San Francisco and Los Angeles, but their homes were not designed with roommates in mind.

Co-living companies like Common, Open Door and Pure House are looking to change that.

“The biggest misunderstanding of co-living is people think it’s this totally new crazy and radical thing. It’s not. People have been living with roommates for a really long time. That’s how so many people in cities live,” says Hargreaves. “Really what we are doing is just taking this way of living and making it better, designing an experience for what people are already doing.”

Facebook Twitter Pinterest Co-Founders Ben Provan, left, and Jay Standish, right, greet guests as they arrive for dinner at Euclid Manor. Photograph: Josh Edelson/The Guardian

Also trying to break into co-living is WeWork, the staggeringly valued property manager. The landlord to a new generation of tech startups (and the Guardian’s New York office) is hoping to justify its $16bn valuation by making it big in co-living with WeLive. Their model – call it dorm 2.0 – is to rent space from a landlord, convert it to cookie-cutter bedrooms that come with access to shared common space – to foster a feeling of community – and rent them out to members on a month-to-month basis.

An investor presentation leaked online last year estimated that by 2018 WeLive would pull in $636m and earlier this year, Adam Neumann, founder of WeWork, confirmed to the Guardian that he expects WeLive to have as many as 34,000 members.

Facebook Twitter Pinterest Photo of a WeLive bedroom. Photograph: Courtesy of WeWork

WeWork would not comment for this story except to say it is “in the early stages of beta-testing a new, community-driven living concept in New York City” and is listening to the feedback from its community. The first co-living space, where about 80 WeWork employees and members are living in 45 apartments, is located at 110 Wall Street and is expected to house 600 people on 20 floors.

For some, those kind of numbers and cookie-cutter room design bring to mind adult dorms, but those who have experienced communal living dislike that label.

The word dorm has “a negative connotation once you are over the age of 20,” says Ash, 28, who lives at Common’s second building in Brooklyn. The house he lives in – with 10 bedrooms, starting at $1,500 a month – is far from a dorm, he says.

“It’s like moving into a building where you know people are friendly already. You used to move into an apartment building and it was this awkward period where you had to walk around and knock on doors and meet people and make friends that way,” he says. “This takes out that aspect of it. It doesn’t take out any of the privacy or of having the apartment, it just takes away the awkwardness of meeting people in the big city.”

The co-living homes are not party houses or packed with the Silicon Valley entrepreneurs and coders, who hang around the house all day with their computers. Ash used to work in oil rigs in the Gulf of Mexico until the price of oil went down and he was laid off. He now works in fiber optics.

“Looking at our membership, at least 80% of them have full-time jobs in [New York] city,” says Hargreaves. “These are generally not people working from home.”

Common’s next project in Williamsburg, Brooklyn, consists of four five-story buildings connected to create a 20,000 sq ft space with 51 bedrooms. Most of the apartments will consist of four bedrooms, two bathrooms and one kitchen-living area. The members will also have access to communal space in the basement and the rooftop. The space is set to open later this spring with bedrooms starting at $1,800 a month for a 12-month commitment. Tiered pricing will be available for six-, three- and one-month stays.

Whether the sense of community and friendliness can be replicated in that large a space remains to be seen.

Facebook Twitter Pinterest A bedroom at Common building in Crown Heights, Brooklyn. Photograph: Courtesy of Common

With the insatiable demand for housing in areas like New York and San Francisco, scaling up – going bigger – can be tempting.

“We have seen huge demand,” says Hargreaves, pointing out that Common had received “over 2,000 applications for our first 30 spots at this point”.

Yet, he warns, co-living companies that grow too fast do so at their own peril. For example, the now-defunct Campus – one of the first co-living startups that, according to Hargreaves, was “a lot more aggressive with their expansion”.

Campus shuttered its 30 co-living houses in August 2015 leaving about 150 people in New York and San Francisco having to find a new home.

In a message posted on the company website, Tom Currier, Campus founder, wrote that he was “unable to make Campus into an economically viable business”.

With the help of investors and developers who are hoping to break into the “roommate” market, some of the co-living companies are attempting to perfect their business model and scale it. Common raised $7.35m last summer for its expansion. At Euclid Manor, Open Door founders are also working with investors.

“Essentially, we have spent two years perfecting the model and improving our track record,” says Standish. “We understand all the details of how co-living works on the ground. We can consult with the developers and help them reality-check the building because we know how it works.”

Facebook Twitter Pinterest Euclid Manor is a 6,200 sq ft co-living house with eight permanent roommates in Oakland, California. Photograph: Josh Edelson/The Guardian

In the future, the Open Door founders would like to partner with developers on new ground-up projects – similarly to the way that Common has on its 51-bedroom location in Williamsburg.

“It’s about being able to fully customize the program and layout of the building for co-living,” explains Provan. “Using the existing mansions, you are kind of working with an imperfect product and layout and after the fact changing it to co-living.”

Before Euclid Manor was a co-living space, it was a bed and breakfast. Each room has its own feel and reflects the personality of its occupant.

According to Provan, the more companies do co-living the better, since each space and attendant services might appeal to a different group of people.

Co-living is so hot now, interest rates are so low, rents are so high – all the factors seem to be in the new landlords’ favor but will all the competition and hype build a new housing bubble?

“I’m not worried [about competition],” says Hargreaves.

“Anything that brings more housing on to the market in an incredibly housing crunched city is a positive thing. The only way that we might harm each other as competitors is if we both brought so much inventory on to the market that we were forced to lower our prices in order to compete. And you know if [Common] and WeWork going at it has such an effect that it lowers the cost of living in New York City, wouldn’t that be a thing? Wouldn’t that be awesome?” he adds, smiling.