It seems good things really do come in small packages, as evidenced by the latest housing trend towards micro-apartments. The latest to join the micro-living craze introduced in Seattle in 2006 are reportedly Boston, San Francisco, Portland, Providence, North Jersey and New York City.
Seattle-based Calhoun Properties addressed Seattle's affordable housing problem by launching "aPodments", offering pint-sized apartments short on space but long on affordability. None are as large as an average efficiency, typically ranging from 150-300 square feet, and some are estimated to have actual living areas the size of a parking space. Some offer additional amenities like kitchenettes and Wi-Fi, and range in price from $350-$800/month with utilities included. The price is considerably less than their full-sized counterparts in downtown Seattle and they come completely furnished.
One critic of micro-apartments referred to them as "boarding houses on steroids"; an exaggerated but sometimes accurate description in that they often share communal kitchens, bathrooms and open living and/or outdoor spaces. While appearing on the outside like normal apartment buildings, apodments are more closely akin to dorm rooms and boarding houses, and were originally believed to only attract a younger tenant base with no appeal to older, more established tenants. But residents are disproving this theory as many middle-aged professionals as well as seniors have found themselves enjoying the ease, convenience and, of course, low rents associated with micro-apartment living.
Developer Jim Potter, chair of Kauri Investments, says, “Nobody else is producing something at this moderately priced range. You get a brand new building with a new bathroom. You get Internet access and it's fully furnished. In general, our buildings are on major bus lines and/or light rail.” Potter has worked with other developers to build six micro apartment complexes in Seattle, with several more planned. He also is working on projects in Portland, Oregon; San Francisco and in New Jersey. "This product has legs on it," Potter asserts. "It is a national phenomenon and Seattle is ahead of the pack.”
In Providence, Rhode Island, "There's a substantial waiting list," says Evan Granoff, who has redeveloped the historic 1828 Arcade building in Providence to include 48 micro-lofts as small as 225 square feet. He reports the units, which will open this summer, are modeled after efficient boat interiors and include build-ins such as a futon that converts into a table for four. "It doesn't feel cramped at all," he insists.
According to one report, Mayor Bloomberg of New York held a contest for the best micro-housing design for a New York City development project.
Tiny living spaces are not a new phenomenon but seem to have caught on quickly because of lingering unemployment and wage stagnation, in the wake of the economic downturn, and urban lifestyles which require more affordability, simplicity and convenience. Renters are not alone in their inclination towards tiny spaces; many homeowners are opting for smaller homes as well. There is an entire society dedicated to "tiny houses" for owners and investors who foresee a future in this alternative living style.
Unfortunately, size isn’t the only shortcoming for micro-units. Neighbors and city administrators have been vocal in their criticism of the density and quality of tenants who will likely be drawn to these micro living spaces. Thus far, the quality of tenants has not proven a problem for the landlords of these micro-apartment buildings; Jim Potter states “We’re more and more of a singles society. Typical renters are in their early 30s and earn between $2,000 and $3,000 a month. Some tenants have a single-family home outside the city, and rent to avoid a daily commute. He describes his customers as "busy and active’ and in need of a place to sleep and shower.”
As with any shift in housing trends, micro-apartments are the subject of much discussion among city officials, looking into potential code changes which may be useful (whether to city residents or to city tax revenue), and among lenders who are unfamiliar with how to structure loans on these projects. Developers in Seattle say they were able to obtain funding under existing lending guidelines and built the miniscule living spaces utilizing a loophole in Seattle’s existing housing code (which may not remain open if officials decide not to support this micro-housing trend).
At an average of one-third the costs of normal sized apartments and homes, micro-housing is indeed a more affordable option, but affordable is a relative term. For example, micro-apartments in San Francisco and Boston lease for approximately $1,600/month – certainly no drop in the bucket, but significantly cheaper than the average rent of $2,741 in San Francisco.
For investors looking to capitalize on multi-unit dwellings, there may be an opportunity to take advantage of this new wave of affordable housing. While not all investors can afford to develop a new apartment complex, they may be able to invest in companies specializing in micro-apartments, or join other investors for a cooperative investment venture.
What do you think about micro-living? Would you invest in this type of project?