December 2, 2023

With the easing of the pandemic, rents in New York City have risen significantly over the last six months, with the average rent now above $5,000 a month.
Residents of Bungalow, one of New York’s largest co-living platforms, say they are victims of an egregious housing “scam” and are accusing the company of terminating their leases early and duping them into subpar living conditions that are far from what was promoted.
The start-up, worth an estimated $600 million, is one of dozens of companies acting as real estate middlemen in New York’s nascent co-living market: they rent out apartments from owners, then sublease individual rooms to tenants who share bathrooms, kitchens, and common areas.
The companies have been the subject of mounting complaints by tenants, which are now being eyed by New York’s top lawyer.
New York Attorney General Letitia James’ office told Gothamist that companies like Bungalow, which began operating in New York City in 2018, are being “monitored.”
In interviews with Gothamist, co-living residents described a range of dubious behavior on the part of their property managers, including abrupt lease terminations, poor communication, and fake roommate profiles. Some residents reported finding strangers in their bedrooms – which are banned from having locks – and frustrating encounters with tech platforms masquerading as maintenance supervisors.
As tenant horror stories have made the rounds online, legal experts have raised another concern about the business model: many of the operators may be violating New York’s strict laws against renting out individual rooms.
Bungalow, like other co-living companies that spoke to Gothamist, maintained it is acting legally. But even as the city and state have avoided enforcement so far, those who follow the industry closely said they believe it is simply a matter of time before the companies draw legal scrutiny.
“I keep asking myself: Why isn’t anyone taking action?” said Michelle Itkowitz, an attorney who previously represented co-living companies. “Because at some point, there’s going to be a lawsuit that’s going to whack the entire foundation of this business model.”
For the tenants of a three-story brick building in South Williamsburg, the news of their coming eviction wasn’t delivered by a letter or phone call from their landlord, but from a short message sent over the Bungalow app.
Bungalow had decided to end its master lease with the building. At least 15 tenants, including those who still had close to a year left on their leases, were given 90 days to pack up and leave, according to the message signed “John (Bungalow)” viewed by Gothamist.
“My first thought was this has to be a scam, just ignore it,” said Robert Bevill, a 34-year-old accounting assistant who leased a spot at 30 Meserole St. in Brooklyn. “I expected to live here for this period of time. They can’t just kick me out.”
A spokesperson for Bungalow confirmed they sent the message, but declined to share information about why they were ending tenants’ leases prematurely.
The door in Robert Bevill’s Williamsburg apartment, where he says a roommate who he was paired with through the app Bungalow turned violent.
Communal living hadn’t been painless. Bevill said he put up with broken appliances, a violent roommate who left blood splattered on a shared wall, and slow responses to basic maintenance requests. But the odds of finding a better deal in New York’s tight housing market seemed slim, so Bevill signed a one-year extension lease at the start of this summer despite his concerns.
His experience is hardly unique among tenants.
Laura Pederson, who rents a Bungalow apartment in San Francisco, said her requests for maintenance – made through the app – were frequently ignored.
When the company eventually sent someone to fix a sink that had been clogged since she moved in, Bungalow charged her $150 for the work, she said. Emails shared with Gothamist showed they were threatening to send the charge to collections.
Pederson had a warning for renters on the east coast.
“If you’re considering renting through [Bungalow], I would say run as fast as possible,” she said. “This is not properly functioning property management.”
The communal living area in the Williamsburg apartment Robert Bevill shared with other roommates he was paired with through the co-living app, Bungalow.
The co-living business model arrived in New York City in the mid-2010s, drawing inspiration – and funding – from the Bay Area’s “hacker houses.” The companies scaled up rapidly in the years leading up to the pandemic, with some estimates putting the number of tenants around 25,000 citywide.
Dozens of new start-ups have since promised a suite of solutions to the perennial headache of moving. The rooms come pre-furnished with weekly cleaning services and flexible lease terms – and in some cases, no leases at all – along with a like-minded community of roommates.
Sherad Louis-Charles, a life coach who has lived in multiple co-living apartments in Brooklyn, said he appreciated getting to know other entrepreneurs. Like many tenants, he shared a room with multiple beds, which he suspected was a violation of occupancy restrictions.
But it was not always clear to him whether the unusual arrangement he agreed to meant he’d give away his legal protections as a tenant.
“Co-living is definitely not something anyone should do long-term,” he said. “It should be a transitional thing, and then get the hell out.”
The start-ups have been open about their market: young professionals who don’t mind sharing tight spaces, but are still willing to pay a premium for certain conveniences.
When it first arrived in New York, Bungalow pitched itself as “SoHo House for millennials moving into new cities.” But in reality, the model more closely resembles single-room-occupancy hotel rooms, or SROs, where tenants could rent a small and cheap private room, often without a bathroom or kitchen. Once a ubiquitous feature of city life, SROs were largely zoned out of existence in the 1950s amid complaints of urban decay and violence.
In recent years, a movement to bring back SROs has sprung up, based on the belief that their legalization could provide affordable housing to homeless New Yorkers. But those caught operating SROs – often small landlords renting out cramped spaces to immigrant workers – are still subject to hefty fines by the Department of Buildings.
Since 2019, there have been roughly 3,700 violations of New York’s multiple dwelling law, with more than 60% of cases reported in the Bronx and Queens, according to city data.
But that same enforcement vigor still hasn’t come for co-living platforms, many of which appear to be violating the same law that requires strangers renting an apartment to sign onto a single lease that covers the entire apartment.
While operators can get around that law by placing multiple tenants on a master lease, few of them do in practice, according to industry experts.
“There’s no regulation of that. I don’t think the city cares what your lease says. They care what you’re actually doing,” said Lindsay Garroway, an attorney who represents co-living companies. “The government goes after low-hanging fruit.”
A mayoral spokesperson also acknowledged that the city was not focused on enforcing its law against renting individual bedrooms.
“In order to issue a violation, an inspector would need to physically observe illegal conditions at the property,” spokesperson Jonah Allon said in an email. “They cannot issue violations solely based on viewing a lease.”
If the city were inclined, experts said, it could follow a similar model deployed against Airbnb, empowering the mayor’s office of special enforcement to expand its mandate and file lawsuits against the companies.
But the reality of co-living means that “tenants are forced to carry the baton,” according to Itkowitz, the former co-living attorney, who also runs the Tenant Learning Platform. She said she frequently comes across cases of small landlords in Bushwick and the Bronx who received hefty fines for illegally renting out bedrooms.
“Then I see all these companies come along with the start-up vibe doing the same thing and no one is touching them.”
For an industry reliant on strangers living in close quarters, the arrival of the COVID-19 pandemic dealt them a near fatal blow. Both the Collective, which planned to open a 500-unit co-living space in Williamsburg, and Quarters, the self-described “WeWork of co-living,” went bankrupt.
Meanwhile, WeWork’s own co-living spinoff, WeLive, was abandoned by the company last year. But its controversial co-founder, Adam Neumann, is reportedly still interested in launching a housing-centered business.
“The space has been a bloodbath for the last few years,” said Brad Hargreaves, the founder of Common, one of the largest co-living companies in the country. “But everything’s coming back, projects are up again, rent is up, and we’re not building enough housing.”
That realignment, Hargreaves said, has seen a flood of “small-time co-living operators popping up,” some of whom operate on the wrong side of the law.
“It runs the gamut from bed and breakfast to genuine slumlords,” he added.
For tenants, the line between legal and sketchy accommodations is not always clear.
On SharedEasy, which leases roughly 400 bedrooms in New York, many of the site’s listed roommates – almost all of them young and attractive – appear to be stock photos with fake names.
Jayla Pollack, a Fordham student who moved out of a SharedEasy apartment earlier this year, said she once came home to a random stranger sleeping in her bed. In response, she said, SharedEasy provided her with a $5 credit to change her bedding, and not much else.
When she finally decided to leave in May, she said the company threw out her belongings before she had finished moving out.
Valentine Rehbinder, the owner of SharedEasy, said the company had made “human mistakes,” but insisted they were operating within the law.
A screengrab from the SharedEasy website shows how the company packs 11 beds into one apartment.
Kelsey Grady, a Bungalow spokesperson, declined to make the company’s leadership team available for interviews. She said Bungalow was not violating the city’s law against renting out individual apartments – despite the fact that leases provided to Gothamist showed tenants agreeing to “the exclusive use of bedrooms.”
In the case of 30 Meserole St., Grady said, the company does not comment on specific lease terminations. A representative for the building’s owner, Schlomo Karpen, said Bungalow had elected to end the lease for unspecified purposes.
“At times, there are reasons why a lease agreement has to be terminated, and we know this can be very frustrating,” Grady added. “We work closely with our renters to communicate transparently, help them find a new home, or cancel and fully refund any outstanding deposits or rent payments.”
Last summer, the company tripled its valuation, after raising $75 million in private equity funding.
Bevill, meanwhile, said he remains uncertain about his living prospects. Some of his roommates have threatened to take Bungalow to court.
While the company has offered to help tenants move into its network of Bungalows, most of them are more expensive than Bevill’s current $1,100 monthly rent. He raised that issue in a recent message on the Bungalow app, noting the “closest rooms available are more expensive than my current lease, which is what I agreed to.”
The answer arrived a few hours later, an uncharacteristically short response time: “We cannot offer a discounted rate.”
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