By Any Other Name: A Look at Rent as a Subscription Service

Agreement to use a service for a particular duration? Check. Paying for the service on a monthly basis? Check. Keeping customers satisfied so they continue to renew? Check. It seems the rental business and the subscription business have a lot in common.
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Source: BigStock

When you make your monthly household budget, you look at your recurring costs. There seem to be more and more subscriptions in there all the time. Also in the budget mix: housing costs. For those who pay rent for their living space, it all kind of blurs together.

 

They say it on Reddit. They say it on Facebook. And they say it on Twitter.

But don’t just take the word of everyday people on social media; take the word of Forbes Magazine. Rick Braddy writes, “We’ve all been subscribing to various services for many, many years. Electric power, telephone, cable television, internet access and even a rented apartment all qualify as subscriptions. You regularly pay a periodic amount to make use of the service.”

For the first decade of this century, rents were low and empty units were plentiful. It was the time of the housing bubble, and many people were buying houses, even folks who really could not afford to do so. After that bubble popped, people returned to the rental market — and naturally, rents rose as supply constricted.

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<p class=Source: US Census Bureau, via Statista

 

According to the Census Bureau, the overall U.S. rental vacancy rate fell from 42% in 2009 to 25% in 2018. Over a comparable period, rents rose 40%.

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<p class=Source: Census Bureau, US Dept. of Housing and Urban Development, via Statista

 

If rental vacancies are low and rents are high, then one might expect to see lower-than-average homeownership. And you do:

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<p class=Source: Census Bureau via Mother Jones

 

Make what you will of that little recent uptick among millennials, but rates are still below historical averages.

Last December, Diana Olick at CNBC reported on rising apartment rental as housing slumps:

  • Apartment absorption, which is the rate at which new units are rented out, is now at the highest level in three years, according to the U.S. Census. Apartment construction took off in 2012 and reached a 20-year high in 2017. It remained elevated this year, despite warnings that demand would slow as more millennials aged into their homebuying years.

With the size of the housing rental market so huge, and with venture capital always looking for the next big thing, it will not surprise to learn that there are those trying to take apartment rental a step further into the subscription economy. CNBC reporter Xin En Lee reported earlier this year that “The next big thing may be co-living.” She says:

  • The idea of co-living has been around for a while. But it is increasingly becoming an area attracting deep-pocketed investors, even as companies experiment with the format to attract customers in different markets.

These dormitory-like living options, often with private bath and bedroom alongside common kitchens and living space, are gaining some traction. Shared workplace innovator WeWork is now offering a WeLive option for shared housing, according to Architectural Digest’s Timothy Latterner:

  • With WeWork’s coworking spaces now fairly ubiquitous in the U.S. and growing worldwide, the newfound push into the real-estate space could be could be an effort to translate the system that worked so well for them in office spaces to the real-estate market.

Writing in IotaHispano, Rafael Presa sees trends including the tiny home movement and lifestyle minimalism driving a new “housing-as-a-service” model. He writes that a new mindset will lead to a new tech-enabled way of doing business:

  • Housing-as-a-Service goes way beyond the property rental business model, in which relays an inefficient system of bookkeeping, where granular details are almost impossible to account for … a much more fluid payment process that happens in real time instead of a more traditional and restrictive daily or monthly period … Investors and property owners will see a reduction in their operational costs, a decrease in vacancy, and a more trust-able way to avoid problems with bad users.

In an installment of Quartz’s “What Happens Next” series on future trends, Alexandria Lafci predicts:

  • In order to augment smaller home units, we will continue to see a rise in shared spaces. Don’t have enough room to entertain? Imagine renting a dining room for a few hours via a service like Airbnb. This is common practice in many parts of the world.

Speaking of Airbnb, new services are evolving to take advantage of the “digital native” trend. These are services for people who work online and are not tied to an office or a house. Instead, they pay a subscription fee and are free to travel the world, living in co-located housing as they roam. Take the example of Roam.com, as reported by Xin En Lee at CNBC:

  • Roam, which has raised $3.4 million in seed funding, is poised to open more locations this year in New York City and London. It already has spaces operating in Miami, San Francisco and Tokyo. The start-up requires newcomers to stay for at least a week for their first visit, but said that most of their members tend to stay for about three weeks. About 15 percent of their members also joined their flex program, a loyalty scheme that helps participants get priority bookings and better prices.

Insider Take

The subscription economy is a big part of a household budget, and it’s even bigger if you add in the cost to have a household. As consumers continue to look at all their monthly costs through a recurring payment lens, they come to see rent as just another service, just like streaming entertainment, food boxes, and that car lease. Moreover, a growing number of housing-as-a-service startups are seeing it that way too.

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