PropTech Analysis — Various Business Models of Subletting Properties

6 min readMay 19, 2021


With the advancement of online platforms and the popularity of sharing economy (or collaborative economy), various new business models of subletting property have been developed. The most well-known three models I suppose are Airbnb, Danke and WeWork. Here I use the names as a representation of the business models. For example, Airbnb is only one of the peer-to-peer (P2P) platforms for short-term accommodation. There are many other similar platforms, both online and offline, under different brands that are also engaging in the same business.

I am not going to discuss the details of their business models as I think many of you have first-hand experience on how they work. Rather, I want to put forward a holistic framework of the three major financial engineering approaches that subdivide the resources differently to build different business models. This framework can differentiate most of the property subletting businesses by a subdivision theory. Figure 1 shows the three approaches of subdivision — Time, Space, and Money.

Figure 1 Three Subdivision Approaches of Property Subletting Businesses
  1. Time-slicing

Traditional rental tenancy is a typical time-subdivision approach that the tenants enjoy an exclusive possessive rights of the property for a period of time, say two years. Before the emergence of Airbnb, hotels and guesthouses are built to provide shorter-term of accommodation, say a few days by granting only ‘licenses’ to the occupiers. Their business model, including Airbnb, is a time-subdivision model.

The most extreme time-subdivision model is the timeshare resort-homes. A timeshare gives you partial ownership in a vacation property by paying an upfront price plus annual maintenance fee. But the partial ownership would only grants you access (possibly exclusive possessive rights) to the property for a time slot each year. Similarly, each co-owner will gain access to the property at a designated time slot each year.

2. Space-time-slicing

Renting a room and sharing common facilities is very common in expensive cities or students’ dormitory. For example, the cage homes, ‘space capsules’ and subdivided units in Hong Kong are considered the smallest housing units in the world (less than 20 s.f.), they are subdivided from a large flat into many smaller units. Space-sharing strategies can range from sharing common outdoor space and clubhouse facilities as in a large-scale housing estate, to sharing interior kitchens and bathrooms as in a dormitory, to sharing the corridor and entrance only as in a subdivided unit in Hong Kong (Leung & Yiu, 2020 —

Co-housing and co-operative housing are special models of space-time slicing, especially when a community land trust (CLT) is involved. Since the land is owned by the CLT, the co-op members are owners of the improvements upon it. In other words, it does not only subdivide the space vertically among co-op members, but it also subdivides the space horizontally between the CLT and the co-op.

Co-working is another space-time slicing model, when a large office is subdivided into shared workspaces, people can rent office space of various sizes and locations for different lengths of tenure. This is the business model of WeWork, which allows all-access subscription option and on-demand option, etc. (Coworking Resources, 2021 - )

Ground-lease and cross-lease are another two very special vehicle to subdivide space for subletting. A ground-lease can be perceived as renting the land, but selling the built properties on the land. In other words, it is a horizontal subdivision of space into the land portion and the improvements on the land portion. It is good for a landlord whose aim is to receive land rent and does not want to invest in redeveloping the built properties on the land. Its tenure usually ranges from 7-year to 21-year.

Cross-lease is an unique land tenure arrangement in New Zealand, it is de-facto a sale of property, but the arrangement involves long-term leasehold interests and co-ownership of freehold land. Image in a large piece of freehold land, if it is large enough to redevelop into three detached houses, the high land price in a city would drive the landlord to subdivide it into three separate freehold lots and build a detached house on each lot. However, it can be costly and time consuming to subdivide land into sublots. Cross-lease is a market invention to overcome the land-subdivision policy. This arrangement enables people to co-own detached houses on the land without administratively subdividing the lot in the Deposited Plans. However, without subdividing the lots, if the three houses are sold separately to three owners, they would have to co-own the whole lot and co-own the three houses. Co-owning the land seems to be easier to be accepted and handled, but co-owning the detached houses is not acceptable. Thus, a cross-lease arrangement was engineered to make several leases among co-owners such that each house is granted to one of the co-owners a 999-year lease by the rest of the co-owners. It does not involve any rental payments, but theoretically the co-owners do not own but rent the built properties. Thus they are not entitled to make any structural alterations or additions to the houses without the consent of all the co-owners. It also does not have regulatory protection such as the Unit Title Act of the facilitation of forming body corporates (Cheung, Wong, Wu & Yiu, 2021 — The Land Governance Cost on Co-ownership: A Study of the Cross-lease in New Zealand)

3. Money payment slicing

Owning and renting a property can be hard to differentiate. In general, people would consider an owner as the person holding freehold interest of the property, whereas a renter or tenant as the person who holds leasehold, i.e. an exclusive possessive rights for a leasehold period. However, interestingly when the leasehold period is long and the payment of rents is a lump-sum upfront payment, then it is usually regarded as an ownership. For example, in Hong Kong, even though almost all properties are leasehold, ranged from 50-year to 999-year tenures at the time of the first sale, the payment of the rents is a lumpsum upfront payment. Since the lump sum can be amounted to several millions to billions US dollars, the buyers are usually considered the owners of the properties. In fact, they are only holders of leasehold interests. Some buyers may argue that they expect the leases to be renewed to perpetuity without paying premium, but it is another issue with uncertainty.

A similar payment slicing approach is exploited by Danke, which is described as “a Chinese WeWork for Apartments” by a WSJ article (, but I think the business models of the two are quite different. The business model of Danke is that the renters pay the full two-year rents in advance to solicit the tenancy for an apartment with some discounts in rent. The legal protection on the rights of the tenants is another issue that is beyond our discussion in this article (BBC, 2021 —

Another interesting payment slicing model is Korean’s Chonsei (Jeonse) Key Money model. In other countries, key money of a tenancy is only up to one or two months’ rents as a deposit, but in Chonsei system, instead of paying monthly rent, a renter pays a lump-sum deposit at about 50% to 80% of the market value of the properties. Unlike a typical tenancy, it works more like a loan lent from the renter to the landlord. The interest of the loan is compensated by a right to live in the property for a period. In fact, this payment slicing model is also commonly used in some retirement homes. It is a kind of fund raising model by using PropTech.

PropTech refers to technologically innovative products or new business models for the real estate markets. WeWork, Danke and Airbnb are examples of PropTech on new business models, whether they are successful or not is subject to debate. However, it requires a framework for analyzing the similarities and differences among these business models so as to help new entrepreneurs to develop their innovative startups. The crux is to embrace trials and let the market tells whether the ideas work or not, as entrepreneurship is defined as risk taking to start a new business.




ecyY (Edward Yiu) — easy to understand why, easy to study why. Finding the truths scientifically is the theme.