Emmett can speak to this better than I can, but if I recall correctly, it's so that companies can foster their own cultures without being cross bred as directly from YC.

The logic when we were in YC was that office space does not foster the same kind of scrappy culture that working out of your garage or apartment does.

Working out of an office takes away some of the urgency and gives you a more laissez-faire approach to building the company as well as clear work/life separation, which isn't really a good thing very early on in a company's life.

Having all companies in one location also, to an extent, inhibits each company from growing or fostering its own personal culture. At the very least, their culture changes as a result of being in that environment.

My takeaway is that YC would rather each individual company decide with whom and where to work – it's all in the spirit of encouraging entrepreneurs and not forcing them down a predefined path.

I think it's also that silicon valley is a relatively efficient market for finding office space on short term leases, housing, contractors, and employees, vs. a non-silicon-valley place, where an incubator really might need to provide that kind of stuff. Recruiting full-time employees is the one exception, and some of the top VCs (e.g. Andreessen-Horowitz) now have an in-house recruiter to help portfolio companies with that.

(Though, I hope there is some kind of internal-to-YC bulletin board of housing, though, because I really need to find a place to live, ideally in Mountain View.)