Coliving in NYC Office-to-Residential Conversions Under 467-m

Sergii Starostin

March 14, 2025

NYC’s 467-m Tax Incentive: Conversions with Affordability

New York City’s RPTL 467-m program (Affordable Housing from Commercial Conversions) is a new tax incentive to encourage turning underused offices into housing. It offers up to a 90% property tax exemption for as long as 35 years to make conversions financially viable [1]. In return, developers must include at least 25% affordable units (with a weighted average rent at or below 80% of Area Median Income, including 5% of units at 40% AMI) [1]. These affordable apartments must remain rent-stabilized, ensuring long-term housing benefit to the city [2]. By coupling tax relief with mandatory affordability, 467-m aims to tackle NYC’s housing crisis (500,000 residents left NYC since 2020) while repurposing obsolete commercial buildings [1].

This incentive, part of New York’s 2025 housing initiatives, is already being put to use. For example, the SoMA project at 25 Water Street (a 32-story former office tower) became the largest office-to-residential conversion in U.S. history with 1,320 apartments, and it is the first project to utilize the 467-m tax break [4]. Mayor Eric Adams has highlighted office conversion as key to adding housing, with 467-m and related efforts expected to produce 20,000+ new homes in NYC over the next decade [4]. The city even launched an Office Conversion Accelerator with 83 buildings already in design for residential conversion [4]. In this context, coliving operators like Outpost Club can play a pivotal role in making these conversions more profitable and community-oriented while meeting affordability requirements.

Coliving as a High-NOI Conversion Strategy

Housing model with private bedrooms and communal amenities – has emerged as an attractive strategy to maximize a building’s net operating income (NOI) in residential projects. Industry analyses find that co-living boosts NOI through higher revenue per square foot and reduced vacancy rates [5]. By renting out individual rooms or micro-units, a converted building can house more paying tenants than a traditional apartment layout, driving up total rental income. At the same time, the communal living model tends to attract steady demand (often young professionals or students seeking affordability and flexibility), which keeps occupancy very high and turnover low [5]. In short, more units + fewer empty rooms = greater income stability for investors.

Crucially, coliving’s efficiency doesn’t just pad the top line – it can also trim costs in conversions. New research by Pew Charitable Trusts and Gensler found that a dorm-style co-living design (small private units with shared kitchens/baths on each floor) can cut conversion construction costs by ~25–35% compared to standard apartment conversions [3]. This is achieved by clustering plumbing and kitchens in shared spaces (often aligned with existing building infrastructure) and avoiding duplicative installations in every unit. The co-living floorplan also roughly triples the number of units per floor versus conventional apartments, significantly increasing the density of rent-generating units [3]. Even if each co-living micro-unit rents for less than a full-size studio, having three times as many units means the building’s total revenue can slightly exceed that of a traditional layout [3]. This makes it easier for a co-living conversion to meet the 25% affordable housing requirement without sacrificing the project’s viability.

From an investor’s perspective, coliving conversions marry social impact with strong financial performance. By design, a co-living building can dedicate 25% (or more) of its units to rent-capped affordable housing and still remain profitable, thanks to the scale and tax breaks. The property tax savings under 467-m further boost NOI by slashing one of the biggest operating expenses for up to three and a half decades [1]. In effect, the incentive offsets the lower rents on the affordable quarter of units, while the co-living model maximizes income from the remaining units. As the Development Site Advisors note, 467-m “reduces tax burdens on conversions, making it financially viable to repurpose office and commercial buildings” even with the affordability set-aside [2]. Coliving simply takes that viability a step further – creating more rentable units to generate cash flow and spreading operating costs across more tenants. This can dramatically improve an investor’s net returns compared to a standard conversion scenario.

Outpost Club’s Coliving Model and Projects in NYC

Outpost Club is a leading coliving operator that is uniquely positioned to capitalize on office-to-residential conversions in NYC. Founded in 2016, Outpost has grown rapidly by providing fully furnished, community-oriented shared housing in prime NYC neighborhoods [6]. The company manages over 1 million square feet across dozens of properties and maintains historical occupancy around 94% – an exceptionally high rate that speaks to consistent renter demand [6]. Outpost’s portfolio (formerly ~51 properties) includes coliving houses in Manhattan, Brooklyn, and Queens, serving roughly 1,300 tenants in 1,000+ bedrooms as of 2023–24 (a scale expanded further by absorbing units from other co-living firms like Bedly, Quarters, and Common) [7]. This track record of stable operations and rapid lease-ups makes Outpost an ideal partner to underwrite and manage new conversion projects.

Notably, Outpost Club has already demonstrated how converting a traditional rental building into a coliving format can unlock superior returns. In one case study at Outpost’s Hell’s Kitchen House (West 47th St., Manhattan), the property was reconfigured into 9 shared apartments (32 bedrooms total) targeting young professionals. The outcome in 2023 was striking: it achieved 31% higher monthly rental revenue per unit compared to conventional leasing, sustained 98.3% occupancy, and ultimately delivered a 25% higher NOI even after accounting for 31% higher operating costs (due to amenities and furnishings) [6]. In other words, the coliving setup’s revenue gains more than compensated for its expenses, yielding a significantly better bottom line for the owner than a standard apartment model. This aligns with Outpost’s broader experience – the company estimates that landlords can earn 15–35% more NOI by converting properties into coliving spaces under Outpost’s management [6]. These figures illustrate how co-living can supercharge an asset’s income-producing potential.

Importantly, Outpost’s mission also dovetails with the affordability goals of 467-m. CEO Sergii Starostin emphasizes creating cheaper, community-centric housing by reusing existing buildings:

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Regulations make it extremely difficult to build something new… The only way to create affordable options is to work with existing inventory. We make the existing inventory nice by design and community, and provide a proper alternative

Sergii Starostin

CEO at the Outpost Club

Outpost’s model inherently offers lower rents than typical solo apartments (since residents rent a room, not an entire unit), which helps address the city’s affordability gap. By offering flexible lease terms, no broker fees, and move-in ready units, Outpost lowers barriers to entry for renters, effectively making city living more affordable and accessible [8]. This focus on affordability means Outpost-managed conversions can more easily meet the 25% affordable unit requirement, and Outpost is experienced in keeping rents reasonable. In fact, Outpost partners with programs like security deposit alternatives and rent guarantors to ensure cost isn’t a prohibitive factor for renters [8]. All of this positions Outpost Club as both a financial boon to investors and a socially conscious operator aligning with NYC’s housing policy objectives.

Financial Impact: Coliving vs. Traditional Conversions

Data and case studies strongly support the financial benefits of using a coliving model in office-to-residential conversions, as opposed to creating standard apartments:

Higher Density, More Revenue: A co-living conversion can fit significantly more units into the same building. The Pew/Gensler study showed roughly 3× more units per floor when using micro-unit “dorm style” apartments with shared common areas [3]. Even with lower rent per unit, this density yields slightly higher total rent roll than a traditional layout [3]. Essentially, coliving captures revenue from many small units instead of a few large ones.
Cost Savings on Build-Out: Shared kitchens and bathrooms mean fewer fixtures and less duplication in construction. Concentrating plumbing, HVAC, and appliances centrally on each floor can reduce conversion construction costs by 25–35% versus a conventional apartment approach [3]. For investors, this lower capex directly improves the project’s return on investment and can be the difference that makes a conversion pencil out.
Strong NOI Performance: As seen with Outpost’s Hell’s Kitchen project, rental income per square foot is substantially higher under coliving (31% more per unit in that case) and occupancy remains near 100%, driving up effective gross income [6]. After operating expenses, the Net Operating Income was 25% greater than a traditional rental model in the same property [6]. Other operators have reported similar trends – JLL noted that an owner could boost NOI by increasing revenue per square foot through a co-living setup while keeping vacancy minimal [9]. In short, coliving properties often achieve better yield on the asset.
Tenant Retention & Low Vacancy: Co-living communities foster social connections and offer flexible terms, which encourages residents to stay longer and refer friends. High retention maintains stable cash flow. According to one analysis, the community-driven model of co-living “enhances tenant retention, ensuring stable cash flow,” while diversified room offerings mitigate the risk of full-unit vacancies [5]. For an investor, this reliability reduces downtime and leasing costs.
Affordability Compliance Made Easier: Because of the mix of larger coliving units and smaller affordable units, a conversion project may naturally hit affordability targets. The Pew analysis expected co-living micro apartments to rent for rates affordable to people at under 50% of AMI [3]. Thus, setting aside 25% of units at 80% AMI (per 467-m) is quite achievable without deeply discounting market rents.
Case Example – WeLive at 110 Wall Street: A notable early example of office-to-coliving conversion is WeWork’s WeLive project at 110 Wall St. in Manhattan. A former office building was converted into fully furnished micro-apartments in 2016, co-located with WeWork offices [10]. The project created about 45 communal units housing 80+ residents initially, and eventually aimed to house 600 people in the 20-story building [11]. While WeWork’s WeLive had mixed corporate fortunes, the concept proved that large office buildings can successfully be repurposed into modern co-living spaces. Residents enjoyed amenitized living with shared lounges and community events, validating demand for this housing style in NYC’s Financial District. This real-world case underscores that the co-living model is physically and legally feasible in converted buildings – a precedent companies like Outpost can build upon (now with far better incentives available, like 467-m, which did not exist at that time).

In sum, the evidence from studies and real operations shows that coliving conversions can outperform traditional residential conversions financially. The combination of more rentable units, high occupancy, and lower construction cost per unit leads to higher NOI margins for investors [6]. And because coliving inherently targets the middle-market renter, it aligns well with the affordable unit mix required by NYC’s incentive program. This synergy means investors don’t have to sacrifice returns to fulfill the 25% affordability mandate – they can do both, profitably.

Maximizing NOI While Meeting 25% Affordable: How Outpost Club Can Execute

Outpost Club can leverage its expertise to plan, underwrite, and supervise office-to-residential conversions under the 467-m program in a way that optimizes returns and compliance. Key steps for success include:

Upfront Planning & Feasibility: Outpost begins by carefully selecting suitable buildings and crafting an efficient co-living design. The ideal structures are those now eligible under updated rules (built before 1990 and in zones allowing residential) [2], with floor plates that can accommodate multiple small units plus common areas. During due diligence, Outpost’s team analyzes each property’s layout and potential for adding shared spaces.

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We do an analysis of where the property is located, if it has three or more common area spaces… If a property requires additional investment, we outline it. We also check the ratio between bedrooms, private bathrooms, kitchens, etc.

Sergii Starostin

CEO at the Outpost Club

This ensures the building can physically support a coliving concept (e.g. enough room for at least three communal areas like kitchen, lounge, coworking space, etc., which Outpost prefers for a good resident experience [8]. By the end of planning, Outpost will have a floor-by-floor game plan: how many micro-units per floor, locations for shared amenities, and any structural modifications needed (like adding bathrooms or splitting larger spaces). Crucially, the plan will designate the 25% affordable units in a way that spreads them fairly (to comply with NYC Housing Preservation & Development guidelines) – typically integrating affordable rooms within each floor or tower section rather than segregating them. Early coordination with architects and city agencies at this stage sets the project on a strong footing.
Financial Underwriting & Deal Structuring: With a viable design in hand, Outpost can underwrite the project to demonstrate its profitability to investors and lenders. The pro forma financial model will incorporate cost savings from the co-living layout (using benchmarks like the 25-35% construction cost reduction found by Gensler/Pew [3] and the expected premium in rent per square foot that Outpost has achieved historically (e.g. 31% higher per unit revenue in the Hell’s Kitchen house) [6]. Outpost would also factor in the 467-m tax incentive: a potential 90% reduction in property taxes for decades [1] is a huge boost to NOI and will be a line item dramatically lowering the projected operating expenses. On the income side, assumptions will account for the 25% affordable units at restricted rents (e.g. pegged to 80% AMI levels), while the remaining 75% of units are rented at market co-living rates. Thanks to the coliving density, even those “market” rates can be moderate – often affordable to middle-income renters – yet still yield strong aggregate rent. Outpost can cite its track record to justify low vacancy (they consistently maintain ~94% occupancy [6] and even during lease-up they can fill units quickly through their existing waitlists and marketing channels. Overall, the underwriting would likely show that investors get a higher NOI and return on cost with the co-living model than they would by creating traditional apartments, even after setting aside affordable units. For instance, Outpost projects 15–35% greater NOI for landlords who convert to coliving under its management [6] – a range that would be reflected in the deal’s projected yield. With these robust numbers, securing financing and investor buy-in becomes easier. Outpost can structure partnerships where a building owner or developer handles construction, and Outpost comes in as the operating partner (sometimes even master-leasing the finished building to guarantee rent to the owner, which de-risks the owner’s position while allowing Outpost to capture upside from leasing the rooms).
Design and Compliance Management: During the design development and approval phase, Outpost can act as a bridge between architects, engineers, and city regulators. Conversions in NYC must navigate zoning, building codes, and HPD rules for affordable housing. Outpost’s experience with residential layouts means they can advise on code-compliant solutions (for example, ensuring each micro-unit has required light/air by placing them along windows [3], or making sure the shared kitchens meet NY health and safety standards). They will ensure the plans align with the 467-m requirements (minimum 6 units, proper affordable unit distribution, etc.) [1] and help prepare the necessary filings for the tax abatement and any affordable housing agreements with the city. Having an operator involved early can prevent costly redesigns – Outpost knows what configurations work in practice for coliving (like how many bathrooms per number of bedrooms is acceptable to tenants, or how to cluster roommates). They will also push for features that enhance revenue and community value, such as adding amenities in underutilized spaces (basements, rooftops, former conference rooms) to increase the property’s appeal. All of this planning is done in tandem with meeting the construction start deadline (to qualify for the full 35-year tax benefit, permits must be pulled by 2026) [1]. By coordinating closely with the project team, Outpost helps keep the conversion on schedule and on spec.
Construction Oversight and Timeline: As the conversion build-out progresses, Outpost can provide oversight or consultative support to ensure the design vision is executed correctly. While a general contractor will handle the physical work, Outpost’s supervision protects the operational integrity of the future coliving space. For example, they might inspect model units to confirm the durability of finishes and furniture (since coliving spaces see high turnover in use, materials must be robust). They may advise on low-voltage installations as well – Outpost equips its houses with smart locks, security cameras, and enterprise-grade Wi-Fi to manage access and utilities efficiently [8]. Installing these systems during construction (rather than retrofitting later) saves money and time. Additionally, Outpost ensures that the affordable units are finished to the same quality as market-rate ones (to comply with NYC’s requirement that affordable units have comparable finishes), and that each affordable unit is indistinguishable in design from others – a critical compliance and ethical consideration. By staying involved through construction, Outpost helps prevent delays and ensures the final product is perfectly tailored for coliving use on day one.
Lease-Up and Operations: Once the converted building is ready, Outpost switches to its role as a property manager and community operator. Here, the company’s systems really shine. Outpost can rapidly lease up the units through its platform and marketing network, which is a boon to hitting pro forma revenue targets quickly. (In fact, Outpost often has a waiting list of prospective members looking for rooms in certain neighborhoods.) For the affordable 25% of units, Outpost will work with the city’s housing lottery or other prescribed process to find qualified tenants – ensuring full occupancy of those units as well. By filling the building with vetted members who appreciate the co-living lifestyle, Outpost creates a positive community atmosphere from the start. Their team handles all the day-to-day management: collecting rent (via an online platform), organizing cleaning of common areas, scheduling maintenance, and facilitating events for the residents. This hands-off management approach is a major selling point for landlords – Outpost takes care of everything, providing a turnkey solution [6]. For investors, this means the property is professionally run to maintain high satisfaction and low turnover, which protects the NOI long-term. Outpost’s tech-driven management (apps for tenant communication, maintenance requests, etc.) and economies of scale (bulk furnishing, centralized billing systems) keep operating costs efficient. They also enforce community guidelines to avoid issues and use 24/7 security monitoring to keep the building safe [8]. Over time, Outpost’s careful stewardship should keep the building’s occupancy near capacity (≈97%+) and income steady, even as market conditions fluctuate [6].

By following this structured approach – from careful planning and underwriting through construction, lease-up, and ongoing management – Outpost Club can effectively guide office-to-residential conversion projects to success under the 467-m program. The result is a win-win: Investors and owners unlock new value in underutilized buildings (higher NOI and a valuable tax break), and New York City gains much-needed housing, including dedicated affordable units, in modern co-living communities. This model not only maximizes financial returns but also delivers social impact, showing how coliving can be a powerful tool in tackling the housing shortage while rejuvenating old office properties [3] [1].

Conclusion: Outlook for Coliving Conversions in NYC

As New York pushes to create housing out of vacant offices, coliving concepts led by firms like Outpost Club are poised to play a significant role. They offer a proven template for boosting NOI – leveraging higher density and community appeal – that aligns perfectly with the city’s affordability mandates. Early evidence from studies and real projects indicates that co-living can “unlock” many conversions that would otherwise be financially infeasible [3]. With incentives like 467-m in place and zoning barriers eased, more developers are likely to explore coliving in their conversion plans. Outpost Club’s past successes in NYC (and its agility in taking over struggling coliving assets [7] have positioned it as an expert in this niche, capable of delivering both operational excellence and strategic guidance to conversion ventures. By planning smart, building cost-effectively, and managing for high occupancy, Outpost can help investors maximize net income while fulfilling the 25% affordable housing requirement, truly demonstrating that profitable development and affordability can go hand in hand. The coming years may see many more office towers reborn as vibrant co-living residences – a trend that can maximize returns for owners and provide affordable homes for thousands of New Yorkers ([4]).