A case for building small
CAmerica are facing a devastating housing affordability crisis. One obvious potential solution is micro-units. Adding density without affecting the skyline, they offer housing at a lower price point than is usually available in expensive areas.
Broadly defined as living spaces under 350 square feet, micro-units are an old idea being revived with new twists. Previously known as efficiency apartments, they are today’s successors to the boardinghouses of old — where residents often lived in retrofitted mansions or hotels and shared one bathroom per floor with a common kitchen.
Narratives of midcentury America often reference this sort of boardinghouse or hotel living — from the bohemian adventures of Jim Morrison and the Beat poets, to Grace Kelly, Lauren Bacall and Sylvia Plath, who stayed at the Barbizon, a long-term hotel for women.
And yet, decades ago, in cities across America, such spaces were effectively regulated out of urban life.
In the 1960s and ’70s — a time of misguided planning policies that made cities less livable — many cities enacted laws that directly or indirectly targeted boardinghouses. A common ordinance was to declare any dwelling with five or more unrelated women living together a brothel. New building codes were developed that required larger minimum unit sizes and prohibited the development or conversion of buildings into exclusively small units.
These regulations led to larger apartments — and, inevitably, fewer apartments at higher rents.
This pattern was echoed in the suburbs, where larger minimum house and lot sizes forced the entry point of home ownership (and rental) higher. People were required to purchase or rent more home and land than they needed — and as a result had higher monthly costs to heat, cool and maintain the larger spaces. In hindsight, these policies seemed intended to create economic segregation — raising the financial bar for living in an area by removing the most affordable options.
In the past several years, however, thousands of microunits have been built in cities such as Boston, Denver, Los Angeles, Seattle and New York City. Based on the number of applicants for the units, as well as the low vacancy rates, there seems to be a considerable demand for this new product.
A lack of affordable urban housing obviously plays a role. But, beyond that, today’s economic uncertainty and job instability are also leading many who can afford larger residences to reconsider the wisdom of throwing away hardearned money on high rents. Additionally, other than their size, today’s micro-units bear little resemblance to the boardinghouses of old. One Santa Fe in the downtown L.A. Arts District offers a saltwater pool, yoga/Pilates studios, and an outdoor theater. That said, micro-units don’t have to offer luxury amenities — they’d be cheaper as a more bare-bones product, and could be adapted to served senior citizens.
Putting consumer psychology aside, there is a more pressing reason that micro-apartments are so popular: They are gold mines for developers and landlords. When regulations against minimum unit sizes are relaxed, developers can put more units into a building envelope. And because small spaces tend to rent for more per square foot than larger ones, the building generates significantly more revenue, even if the monthly rents per unit are relatively affordable.
At One Santa Fe, for example, a 343-square-foot unit rents for $1,915 per month, or $67 per square foot, annually. Meanwhile, a top-floor two bedroom in pricey Santa Monica can be $4,500 per month for 1,100 square feet — or $54 per square foot annually.
Yet many cities — even those with an affordability crisis — are resisting this trend. Santa Monica recently passed a law that limits micro-units to 15% of any building — claiming it would encourage developers to build more multi-bedroom units for families. Denver recently put a moratorium on micro-unit apartment complexes built on tiny lots with no offstreet parking. And Seattle is effectively regulating micro-units out of existence through onerous, mandatory design reviews. That city also excluded microhousing from tax exemptions.
Micro-units do have shortcomings. Apartments under 400 square feet are better suited to individuals rather than those with partners or families. But enabling single people to live alone, rather than with a roommate, frees up existing multibedroom units for families.
Besides, the next iteration of micro-units could be built with families in mind. Imagine compact two- and three-bedrooms that are thoughtfully designed to maximize privacy and utility for a couple or family. Perhaps a 600-square-foot two-bedroom or an 800-square-foot threebedroom — versus your typical 600-square-foot studio today. This could strike a balance that offers affordable rental and purchase options while offering developers a higher return.
Solving the housing crisis in the most desirable cities in the United States demands accommodating a range of housing options. The backlash against micro-units isn’t helping anyone.
Constantine Valhouli is the co-founder of NeighborhoodX, a real estate research and analytics firm.