It's no secret among young adults that the price of housing in cities such as San Francisco and New York is likely to ravage a fresh college grad's paycheck.
And to venture capitalists, those rising prices could signal the rise of a completely different kind of housing: adult dorms.
According to the Wall Street Journal, the concept, known as "coliving," is being brought to life by startups such as WeWork, an office sharing company, and Common. The setup involves multiple bedrooms clustered around a shared lounge and kitchen—and it sells itself on a sense a community.
The theory is that the high price of rent and stress of starting in a new city will drive young adults to coliving spaces, where rooms are fully furnished, amenities are included, and communal spaces full of fellow new grads.
Prices start from $1,500 a month at Common. WeWork, which is currently testing its coliving program and has not opened it to the public, previously estimated building 70 coliving locations with over 30,000 residents by 2018.
For venture capitalists, the opportunity is doubly exciting since the housing practice would theoretically grow exponentially, showing start-up like profit, unlike investing in real estate which generally reaps in moderate returns.
“You have this incredibly large category, which there’s not that much venture activity in, that needs to be reimagined,” said Jason Stoffer, a partner at Maveron, which is backing New York-based coliving startup Common to the Wall Street Journal.
Coliving companies target urban areas with high rent prices such as San Francisco, where rent is the highest in the U.S., at a median of $3,346 per month according to Zillow's January survey.
Though like other areas of the startup space, failure is a lingering possibility. Campus, which had 34 houses in New York and San Francisco, ceased operations in June after two years of business.