So what’s the big deal with Micro-apartments?

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ULI, The Macro View on Micro Units: Patrick Kennedy, Panoramic Interests
ULI, The Macro View on Micro Units: Patrick Kennedy, Panoramic Interests

If you were to Google micro-apartments, articles about innovative projects in Seattle, Washington D.C., Boston, San Francisco or former Mayor Michael Bloomberg’s plan to solve the housing crisis in New York top the list. Seattle alone has 780 units already approved for occupancy and about 1,600 more in the pipeline as of March of 2015.

Micro-apartments are a fledgling trend in these large, dense markets where premium prices are paid for space, but do micro-apartments have any place or marketability in smaller markets where real estate is not as scarce and rents are much lower? 

This blog has already explored the potential for Micro Housing or Tiny Homes in regards to affordable housing especially as it relates to the most at-risk housing population in a prior blog post.  These examples have focused on detached tiny houses primarily for the chronically homeless rather than multifamily buildings that are affordable for low to moderate-income households or what is sometimes called workforce housing. Workforce housing is becoming more and more important especially as cities, big and small begin to experience gentrification and displacement forces stemming from the recent re-urbanization happening across America.

But, backing up a little bit, what constitutes a micro-apartment? According to a recent ULI commissioned report, they found that the most common definition to be: “Micro-units are typically about 350 square feet in size, but can range from less than 250 square feet to 500 square feet, depending on the city building code requirements. They have no separate bedroom; sleeping space is combined with living space, but they do have fully functional bathrooms and kitchens. Micro-unit communities place significant emphasis on multiple amenities outside the units themselves, such as shared communal spaces that encourage socializing and foster a sense of community.”  So how small is micro? Most sources say that a micro-apartment is slightly larger than a one-car garage, but much smaller than a two-car garage. In contrast to the ULI definition, some micro-unit proponents and projects include single room occupancies (SROs) with shared bathrooms and kitchens, oriented towards a boarding style of living.  This more communal living can further reduce living expenses but also introduces new challenges in a unique setting.

ULI, The Macro View on Micro Units: CURBED NY “MICRO DWELLINGS"
ULI, The Macro View on Micro Units: CURBED NY “MICRO DWELLINGS”

The primary virtue of micro-apartments are that they offer the renter a lower absolute monthly payment, while providing the developer with 20-50% higher rent per square foot according to the ULI findings. The economics work to provide a more affordable unit while still providing the necessary financial return to entice developers without the need for public subsidy.  Even though micro-units do have higher per square foot construction costs because of more kitchens and bathrooms, the higher cost (5-10%) is offset by the higher rental rate that they receive. Another benefit to residents is that all utilities and other creative space saving furniture are often included in the rent payment.  Renters can save as much as 30% in a micro-unit compared to what they would spend on a traditional 1-bedroom or studio apartment according the ULI results. Some of the obvious challenges of micro-units are that they are geared toward singles and may not be feasible for a family with children, especially when we think about targeting lower income families and children living in poverty.  However, in Boston, developers are building micro-units of for families that offer two bedrooms or more and are relatively more affordable than traditional options with the same number of bedrooms.

Not everyone is sold on the trend towards smaller units. In fact we only need look to our past. In the early 20th century, the overcrowded and unsafe housing conditions from the industrial age were the impetus to implement housing and zoning regulations that are now being tested with micro-units. More recently some experts have questioned whether living in small spaces could be detrimental to your mental health and have negative effects on childhood development. Local building and housing codes are a hurdle that may need to be overcome depending on the jurisdiction due to minimum habitable square footage requirements that are too high to allow for micro-units.

Coming back to the original question: is there a place for micro-apartments in smaller, less expensive markets? The jury appears to still be out on this. Certainly many see the potential that micro-units have for providing affordable options to lower income households. It is an attractive win-win value proposition on both the renter and developer sides. Hawaii Appleseed, the Center for Law and Economic Justice has a website that outlines several different affordable housing models based on micro-unit design. However, it was difficult to find examples of micro-units entering small cities and towns. The closest example may be of micro-apartments coming to Des Moines, Iowa in the form of a converted historic office building. The lack of micro-apartment examples in smaller markets could be for several reasons including that the rents for traditional housing options are too low and would compete directly with micro-units; housing regulations may be more antiquated and restrictive in less urban markets; or smaller cities and towns don’t offer the proximity, mix and magnitude of urban amenities that top the list of preferences that micro-apartment dwellers seek according to the ULI report. If some of these challenges can be overcome, then there is hope for micro-apartments as another option for affordable housing in smaller cities and towns.

Ben Lesher is a graduate student in both the Master of City and Regional Planning and the Kenan-Flagler Business School at UNC-Chapel Hill. He is also a Fellow with the Development Finance Initiative.

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