Micro-apartments are Coming to a City Near You

Would you make your home in an apartment about the size of a large hotel room? How about having a private bed and bath but sharing a kitchen and other common living space with your neighbors?

Several developers are betting those options will appeal to people who may be looking to downsize or find cheaper rent.

In larger cities, a desperate need for housing and the high costs of land and construction have combined to drive interest in these kinds of smaller units.

Before World War II, smaller homes and shared spaces used to be common living arrangements, and even today, people rent out rooms in their homes to help cover their mortgage, said Richard Green, director of USC’s Lusk Center for Real Estate.

When people consider housing costs, often “they assume people have to live by themselves, and they don’t – lots of people have shared housing,” he said.

Old-school Option

In their heyday, rented rooms (with or without furnishings, meals, laundry and other services) were viable housing options, particularly for anyone young, single, poor or new to a city and looking for work.

But several factors came together to turn public opinion and political policy against a living arrangement critics saw as creating potential community health and safety issues, undermining family life, and even threatening the social order.

Historian Paul Groth wrote in his 1994 book, “Living Downtown: The History of Residential Hotels in the United States,” that around the turn of the 20th century, “Since large proportions of the city’s shiftless laborers, social misfits, thieves, and prostitutes lived in cheap hotels, reformers also assumed that hotel life must be an important part of the cause.”

As privately owned single-family homes became more popular, developers and social reformers promoted them as the ideal, helping shift public preferences.

(Groth’s book noted that in ruling on a 1925 land use case, California Supreme Court justices wrote, “Few persons, if given their choice, would, we think, deliberately prefer to establish their homes and rear their children in an apartment house neighborhood rather than in a single home neighborhood. … It is needless to further analyze and enumerate all of the factors which make a single family home more desirable for the promotion and perpetuation of family life than an apartment, hotel, or flat.”)

By mid-century, boarding houses and residential hotels that hadn’t closed were largely run down and didn’t get replaced. Cities began wielding land-use regulations to make such projects harder to build, said UCLA urban planning professor Paavo Monkkonen, whose grandfather’s parents met at a boarding house (he was a laborer who lived there; she worked there cleaning it).

Municipal planners established height limits and minimum unit sizes, set parking requirements and implemented public review and discretionary approvals.

Between the 1960s and 1980s, Monkkonen said, “piece by piece, city by city, over time anything but single family housing became harder to build.”

Modern Twist

To make smaller units more attractive, developers often play up the amenities: fitness centers, bicycle parking, rooftop decks and in-unit washers and dryers.

The co-living project Burnham is consulting on will offer small apartments with private bedrooms and shared kitchens, living rooms and other common space.

It’s being planned with flexibility, so the units could be an option for families or for people who opt to get matched with roommates.

Burnham said co-living developments “seem to work well in very high-rent, very supply constrained areas,” and that anecdotally, they perform well when the units go on the market.

Micro-apartments can offer a solution for developers too: More units can be squeezed into the available space, and those units can be rented at a higher price per square foot, while the overall rent “remains at a reasonable level,” Zander said.

The market for co-living projects may still grow, he said, but the concept took a hit when COVID-19 gave some people pause about sharing more spaces with strangers.

In Southern California, most of the micro-units (about 250 square feet or smaller) built in the past five years have been in Los Angeles, said Ryan Patap, senior director of market analytics at Costar Group.

According to Costar data, only a few hundred such units have been newly built since 2018, though some renovated older buildings with small units may not show up in the analysis.

How well such different types of housing catch on, and how much they help ease the housing crunch, will depend on more than just the market.

Monkkonen said changing the types of available housing is a several-step process: First regulations must change to allow something different, then developers have to try a few projects to show they can work, and finally lenders have to be convinced to finance the new options.

As the cost of living rises, developers will continue looking at alternatives to attract renters.

“It’s really all about affordability,” he said. “The best way to make the housing affordable without using government interference or programs is to make (the units) smaller.”