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Common Living, which was founded in Brooklyn in 2015, was a pioneer of a new venture in residential property management: Rather than leasing out entire units, rooms would be rented out to individuals. Utilities, WiFi, and cleaning costs would be bundled together with rent—and apartments would be fully furnished.

Since then, co-living has ballooned across the U.S. and around the globe, but Common Living’s journey as a trailblazer of the model ended unceremoniously late last month when the company announced it was filing for Chapter 7 bankruptcy protection and liquidating its assets. The firm, which operated a U.S. portfolio of 5,200 units in 12 cities, now joins a growing list of co-living operators who have flamed out, leaving questions about the future viability of the model.

In 2023, Common Living merged with a Berlin-based competitor, Habyt, creating a joined entity that operated more than 30,000 units in more than a dozen countries. Luca Bovone, Habyt’s CEO, said that while closing Common was unfortunate, its liquidation would make Habyt a profitable company.

“This decision, although not what we had hoped for, will make the remainder of the Habyt group more financially agile, with greater capacity to accelerate growth and generate value,” Bovone told Bisnow, a site dedicated to commercial real estate news.

Thousands of Common’s units are going to be taken over by Outpost Club, another giant in the model that already operates around 1,500 units in 40 buildings in New York City. Sergii Starostin, the firm’s CEO, told Fortune the company had taken over management of seven properties before the bankruptcy was filed, and that Outpost was targeting 50% of Common’s inventory.

While many co-living companies went out of business during the pandemic, Common was aggressively expanding its portfolio and raising funding. It acquired around 5,000 units between 2020 and 2022, and by 2023 it had raised more than $110 million in venture capital. However, in an interview with the New York Times, company founder Brad Hargreaves declined to comment on whether Common was profitable or not.

Outpost Club’s Starostin said he believed the massive funding that fueled Common may have actually contributed to its financial troubles, as investments drove the company to expand at a rapid pace in markets like Nashville, Ottawa, and Chicago.

“Common needed to grow in many places very fast,” Starostin told Fortune, explaining that picking up a single property in a new market requires building completely new staff and marketing operations. “And when you multiply that by 20…that becomes a pretty expensive journey. My opinion is that to scale this kind of business, it just takes more time.”

Habyt CEO Bovone told Bloomberg that Common’s bankruptcy was related to the company’s contracts and business, as well as the increased pressure of interest rates.

This isn’t the first time Outpost has stepped in to manage a former competitor’s contracts. It took over some of Bedly’s sublease agreements in Manhattan and New Jersey when the company shut down in 2019, and it did the same when the German company Quarters declared bankruptcy in 2021.

Like Common, Quarters failed despite its success in raising venture capital. The Medici Living Group raised $300 million for its German subsidiary to expand in the U.S. in 2019.

“Venture Capital is not working very well with real estate, because we see demands to grow in like 10 or 15 different markets pretty rapidly,” Starostin said. “So I think that those companies failed because they were demanded to grow too fast in many different markets, and that is very difficult to do in real estate.”

Clara Arroyave is the CEO of Co-Living Cashflow, a platform to buy, sell, and invest in co-living properties. While she said she was upset by the news about Common earlier this month, she also said it wasn’t surprising considering the amount of investment staked in the company’s expansion.

“When you raise venture capital, you’re pressured to grow and to deliver very quickly,” said Arroyave, who founded and ran a co-living company in Boston before it went out of business during the pandemic. “And many times you’re pushed to expand your amount of rooms or demand or market, and you keep growing without profitability or having a very high overhead cost.”

Unlike other prominent competitors that have flamed out, Starostin told Fortune that Outpost has chosen to concentrate its operations—and plans for expansion—in New York, where the company already has established staff and marketing networks.

The pandemic was a serious test for the model, and some of its biggest operators shuttered as many prospective tenants veered away from close-quartered living arrangements with strangers. When Quarters went down, it operated around 3,000 units and was developing 1,500 more. 2021 also saw the demise of WeLive, the co-living offshoot of WeWork, and The Collective, a U.K.-based firm that had almost 100,000 units in its portfolio when it declared bankruptcy.

Beyond the pandemic, problems with expansion, and high interest rates, co-living companies have to grapple with problems more specific to their still relatively new approach to housing. Many companies advertise themselves less as traditional landlords, and more as platforms to connect people with available rooms. Prospective renters don’t have to worry about finding roommates to go in on a full unit, or a yearlong lease. Rooms are rented individually, and people often stay just a few months. But the somewhat fluid, hands-off approach has led to problems in some instances.

In 2022, the Daily Beast reported that some tenants of Common Living properties had complained to the company about security issues, poor maintenance, and occupants living on site who were potentially dangerous. One tenant posted in an apartment group chat that he was going to set fire to the building—but the residents quoted in the article reported that Common’s response team failed to communicate or handle situations in an appropriate or timely manner.

And yet despite the shutdown of Common and other competitors, Co-Living Cashflow’s Arroyave and Outpost Club’s Starostin said they believe the business model is here to stay. While it has progressed in fits and starts, the flexibility and easy access to housing at the core of the co-living idea is something that there is more than enough demand for among young renters.

“Young people cannot afford rent, and the fundamentals of housing—in New York, in Boston, in L.A.—the numbers are not going to change dramatically anytime soon,” Arroyave said. “But for co-living to stay strong, the question is, what is the part of the business model that is not working?”

“The move is already there,” Starostin said. “I don’t think it will go anywhere. It’s just a question of who will grow in this market, but the market itself is there.”