Across the country, overall rent values are rising at an unprecedented rate. In the Triangle region (Raleigh, Durham, Chapel Hill), median gross rent has risen nearly 12%, compared to the national median gross rent increase of 6%¹.
In 2017, there were 200+ people a day who moved to Durham and Raleigh² — Raleigh had the 3rd fastest growing MSA in the US, with 20.5% population growth from 2010 to 2018³.
To meet this increasing demand, property developers have been building out more luxury apartments, condominiums, and townhomes.
However, this construction approach is typically accompanied with 2+ year project completion times (from breaking ground to move-in). During this lag, renters are spending more on housing while new housing supply catches up with increasing demand. The efficiency of supply is quite low compared to the amount of demand the market is facing.
The rise of new construction begs the question: Is building more supply the only way to meet the growing demand?
Currently, there is an average vacancy of ~6% in the Raleigh-Durham region, representing an inventory of around 8,000 rental units⁴ . The growth rate of demand in the region (especially for renters) outpaces the number of units that are up for lease. Alcove believes that the existing supply, already constructed homes and condos, can be optimized to better fit incoming demand rather than building.
Alcove was founded to solve this optimization problem. Our approach to this problem is simple: Convert existing supply into easily consumable Co-Living properties.
As the region continues to grow, the demand for less efficient rental units (studio apartments, 1 bedroom units) will rise, and we believe that shared living arrangements can allow existing multi-family units to be converted instead to meet this demand. In Co-Living properties, tenants receive a better price/sq ft. ratio, in addition to other benefits. Because of this, consumer education is important for this concept to work and grow.
From a property management perspective, owners have a harder time filling vacancy of larger homes (3+ bedrooms) vs. single bedroom units due to lower transaction volumes. As a result, property managers on Alcove are converting their portfolio of multi-bedroom homes into Shared housing homes, creating new rental products that cater to the young professional searchers who are flocking to the area.
Additionally, their inventory of bedrooms in multi-bedroom properties are more price competitive than single bedroom units due to lower Net Square Footage/bedroom ratios (it’s a more efficient use of space).
With a software-based solution, we’ve been able to offer per-bedroom leases in vacant homes. Additionally, we make it easy to rent by the room in a convenient way through the bundling of services (utilities, furnishing, cleaning, insurance etc.). Before move-in, roommates are matched on our platform so that they do not have to search for roommates on their own.
By turning homes into a new type of rental supply, we‘ve made supply more efficient and created downward pressure on rental prices. This is great news for renters, and thanks to this price pressure, property managers fill vacant homes with qualified roommates faster than leasing traditionally.
Ever since we introduced the concept of “Shared housing” to the Raleigh-Durham area, we’ve placed hundreds of people in per-bedroom leases in beautiful homes. Alcove has made this possible by coordinating move-in dates, budgets, and lease lengths of users and matching them into compatible groups. We are filling vacant homes that were not previously the bulk of renters searching for single bedroom units.
Alcove offers landlords the opportunity to rapidly fill their rental homes, decrease vacancy risk and turn-over costs, generating greater returns — 50% increased NOI over standard leasing on average.
Homeowners partner with us because we provide an operating system for them to achieve higher average occupancy and returns for their single family homes. We make it as easy to manage roommates as it is to manage any traditional family tenant.
All this being said, we’re excited to be at the forefront of the shared housing industry helping both renters and landlords. We’ll soon expand to cities across the country. Let us know if you’d like to see us in your city.
If you want to learn more, visit our landlords page