A Sydney council is pushing back against the rapid rise of co-living developments, warning a housing model intended to improve affordability is reshaping entire suburbs while failing to count towards the official housing target it must meet over the next three years.
Randwick Council has sounded the alarm amid a surge in co-living projects across Kensington and Kingsford — near the University of NSW — with 5200 co-living rooms planned or approved across the suburbs, without a single one contributing to the 4000 homes that must be built in the council area under its mandated housing quota by 2029.
A council report reveals a stark imbalance: just 494 conventional apartments — about 9 per cent of the total development mix — are planned across the same two suburbs. The disparity has raised concerns that a model originally designed to ease student accommodation shortages is now crowding out broader housing supply.
Co-living developments typically consist of multi-storey buildings with small private bedrooms — which can measure as little as 12 square metres under NSW planning controls — alongside shared kitchens, lounges and communal spaces.
Once largely aimed at students, the model has expanded rapidly across Sydney due to rising land prices and planning reforms promoting higher-density near transport hubs.
However, under the federal National Housing Accord, co-living rooms are not classified as “dwellings”, meaning they do not contribute to housing targets set for councils.
This creates a policy mismatch, according to Committee for Sydney policy manager Estelle Grech.
“Councils are in a bind because they’re facing penalties if they don’t meet housing targets, but co-living is taking up development sites that could otherwise be used for housing that does contribute to that target,” she said.
“Co-living plays an important role in providing affordable housing but if it’s taking up 90 per cent of the types of development in an area, it makes meeting housing targets very challenging.”
The surge in co-living has accelerated since 2021, when it was a distinct planning category in NSW, separating it from traditional boarding houses. Unlike boarding houses, co-living developments are not subject to affordable housing rent caps set by the NSW government and can charge full market rates.
A report by property consultancy firm Knight Frank found Sydney accounts for 83 per cent of co-living units planned nationwide, driven in part by favourable NSW planning laws. The report found average weekly rents for a co-living room sit at $675 – slightly below the $730 average for standard rentals.
While the savings for tenants are modest, the co-living model offers developers a clear advantage: density. Grech said smaller rooms and shared spaces allow more residents per square metre, making projects “more viable” amid rising construction costs and financing pressures.
Randwick councillor Aaron Magner warned the trend risked creating “single-purpose” neighbourhoods.
“Delivering housing for just one demographic group on sites that could serve the broader community is not a vibrant, mixed urban environment,” he said.
“That’s more of a monoculture.”
Randwick Council has escalated its concerns to the NSW government, calling for co-living to be included in its official housing target, while also warning the trend could undermine the “social cohesion” of its suburbs.
“A transient student population does not contribute to building a cohesive community, and the dominance of students is having an economic impact on local businesses due to their reluctance to frequent cafes, restaurants or pubs in the area,” a report by the council stated.
Randwick Council
That claim is disputed by students and housing advocates, who say co-living is one of the few relatively affordable housing options in Sydney’s tight rental market.
UNSW student Angus Thompson warned limiting such developments could push more students onto the broader rental market, intensifying competition.
“If we can’t build student housing next to a university, where can we build it?” he said.
In response to concerns, Randwick Council has introduced stricter design controls, including minimum room widths and requirements for a proportion of larger rooms.
Despite these tightened measures, the development pipeline shows no sign of slowing. Within days of the new controls being introduced, plans were unveiled for a nine-storey, 358-room co-living project in Kingsford town centre.
Major developments are also planned across Sydney suburbs including Alexandria, Ryde and Campsie, while an $800 million project by Mirvac near Green Square is proposing more than 500 co-living rooms alongside traditional apartments.
A NSW Department of Planning spokesperson said councils could guide development through planning controls, but final decisions would continue to be assessed under the state’s planning framework.
Debate over co-living is also intensifying across other parts of Sydney. In Glebe, residents have opposed plans to convert the former Wesley Mission aged-care facility on Glebe Point Rd into 67 co-living rooms, citing concerns about noise, traffic and privacy.
Similar objections have emerged in Canterbury-Bankstown, where councillor Wendy Lindsay has raised concerns about the mental health impacts of dense living conditions, particularly in smaller rooms with limited natural light.
Randwick councillor Dexter Gordon urged caution in the debate, warning of a “reputational risk” to the council if students were seen as unwelcome.
Developer Robert Sargis, who is planning an 82-room co-living development in Leichhardt, said co-living can also expand rental options for young professionals, key workers, and downsizers seeking a more affordable foothold in Sydney’s housing market.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.
David Barwell is an urban affairs reporter for The Sydney Morning HeraldConnect via email.
