Co-Living vs. Rooming Houses: What Property Investors Need to Know

As the housing affordability crisis continues and rental demand surges, investors are increasingly turning to multi-income properties. Two terms you will hear frequently are "Co-Living" and "Rooming Houses." While sometimes used interchangeably in marketing, they have distinct regulatory and structural differences.

Rooming Houses (Class 1b)

A rooming house is officially classified under the Building Code of Australia as a Class 1b building. It accommodates four or more unrelated people. Each room is rented individually, often featuring its own ensuite and kitchenette. They require specific safety features, including accessible bathrooms, fire-rated doors, and specialized emergency lighting.

Co-Living (Class 1a)

Co-Living typically refers to a standard residential home (Class 1a) that has been designed or adapted to lease individual rooms (usually up to 3 or 4 tenants max, depending on the state) without triggering the strict compliance requirements of a Class 1b rooming house. They are cheaper to build but generate lower total yield due to the restriction on tenant numbers.

Which is Better?

If you have the capital and the right block of land, a purpose-built Class 1b Rooming House offers superior cash flow. A 9-bedroom rooming house can generate upwards of $160,000 annually. However, if you are looking for a simpler entry point with standard residential lending, a high-end Co-Living home might be the right fit.