Economies of Scale of Co-Living – An Empirical Study of the New Zealand Rental Housing Markets

Co-living was commonly considered inferior compared to single-family occupied homes. However, with the chic of sharing economy and the sophistication of online peer-to-peer accommodation platforms, co-living has become more common and popular nowadays. Yet, there have been very few empirical studies on the co-living discount in rents and the economies of scale benefit to landlords, probably due to the lack of data. This study is a novel attempt to examine the disutility of co-living and the economies of scale effect by using hedonic price model to estimate the impacts of the number of co-living flatmates on total rents, ceteris paribus, in the New Zealand housing markets. The results confirm the hypothesis of non-linear economies of scale benefit of co-living to the landlords. There is a 17.3% substantial fall in rents between 0 and 1 flatmate, but a gradual marginal increase in total rents from 2 flatmates onwards. This study also provides comprehensive results on other key determinants of co-living rents