Micro-apartments a macro hit with Millennials

January 25, 2014 | By Neil Howe

This editorial originally appeared in the Providence Journal.

Their size has been compared to prison cells. Yet “micro-apartments” have become popular with city planners, real estate developers, and price-conscious renters alike. As space runs out and rent soars in America’s biggest cities, these pint-sized dwellings are getting a lot of attention. There will be some roadblocks to their development, but with prices that attract Generation Xers and features that attract Millennials, demand for them should be broad.

So what exactly are these “micro-apartments?” Micro-apartments are tiny — but affordable — living spaces, smack-dab in the middle of the United States’ most crowded urban areas. They range from around 150 to 300 square feet. To make up for their minuscule size, they boast space-saving features, like drop-down Murphy beds, walls that double as storage facilities, and tables that emerge from the floor.

The big sell, of course, is their relatively low rent. In Seattle, for example, a newly built 400-square-foot apartment rents for $1,400 a month, but a 250 square-foot micro-apartment rents for just $800 a month. Thanks to public subsidies in San Francisco and New York, some of the units will be rented below market rate.

Micro-apartments are at the cutting edge of the United States’ resurgent housing market. As housing slowly recovers from 2007, consumer preferences have been clear: People prefer small to large and renting to buying. Micro-apartments are also springing up in cities — such as New York, San Francisco, and Boston — where housing markets are hot. Because of healthy job markets and little available space to build new units, housing in many of America’s biggest cities is in short supply.

Micro-apartments offer developers the chance to turn a space that housed 10 people into one that houses 50 — at relatively low cost (many are prefabricated). Developers are confident in the demand for this type of housing. In New York, according to the 2010 Census, the gap between supply (1 million studio and one-bedroom apartments) and demand (1.8 million one- and two-person households) is wide. Jim Potter, a Seattle micro-apartment developer, claims that his properties are almost always filled to capacity.

To be sure, there are hurdles to micro-apartments’ success. Neighborhoods mainly full of single-family homes often oppose micro-apartments because of concerns about overcrowding, lack of parking, and crime. In some cities — such as New York — existing regulations preclude the construction of micro-sized apartments. City officials are handing out permits slowly, and developers are watching closely to see how regulatory efforts unfold.

Most city officials and local politicians nonetheless support the new living trend. San Francisco and New York have already changed or provisionally waived regulations that would prevent micro-apartment developments. Even in Seattle, where neighbors complain the loudest, development is steaming ahead with mayoral approval. As Suffolk University assistant law professor John Infranca stated to USA Today, they’re “not a fad.”

Without a doubt, the Millennial generation is the biggest driver of the micro-apartment trend. More than past generations, Millennials want to live in cities during their 20s and early 30s. And because many Millennials view their apartments as little more than a place to sleep, they are willing to give up extra space in return for low rent, no car, and 24/7 immersion with peers. Features in many micro-apartment buildings — shared kitchens, pools, and gyms — appeal to Millennials’ social nature.

Millennials have no problem with features that would have repelled their parents at the same age. Young people say they don’t need as much space. They’re getting married and having kids later. At school and in the workplace, they’re used to less personal space than older generations. With the advent of the sharing economy, they have fewer possessions to store — and much of this “property” is stored digitally.

Micro-apartments’ affordability also imperfectly appeals to cash-strapped, single Gen Xers. Scrubbed of individuality and low on privacy, micro-apartments may not be an ideal fit for the Xer personality. But their low price-point and flexibility (most rent month-to-month) are big draws for financially struggling Xers.

Surprisingly, micro-apartments are even popular with some Boomers. Developers report that a handful of their tenants are seniors who have decided to scale down now that their kids have left home for college or the working world.

And, some more affluent Boomers are using micro-apartments as a pied-à-terre, either for business or vacation.

It looks like micro-apartments have something to offer for every generation — especially younger, single Millennials and Xers. Significant community pushback and regulatory roadblocks could slow down development, but deep demand and support from public officials should sustain the trend. As Millennials graduate from college, they may not be leaving their dorm rooms so very far behind, after all.

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