Micro-apartments are finally getting their due.

Since the Great Recession, more people are choosing to rent.

Sometimes, it’s out of necessity and insufficient income to afford a house in 2020…But today’s society is also becoming more mobile and less attached to things.

The “tiny home” movement, KonMari method, and concern for our carbon footprint reflect a desire for a minimalist lifestyle and less consumerism.

In response, micro-apartments have cropped up in cities across the country.

So, what is a micro-apartment, and what is behind this trend toward micro-apartments?

What is a Micro-apartment?

Micro-apartments have long existed in the crowded cities of Europe, and Asia.

There is no standard definition for a micro-apartment. The vast majority of these tiny apartments are located in large cities.

They started to catch on in the past ten years in the U.S. Developers are building micro-apartments in response to the lack of available housing.

Tiny City Apartments

Micro units are smaller-than-average studios built for a single resident. They are designed with multi-functional furniture to enhance livability.

Units in older cities like New York and Boston are converted from old buildings or factories or built on small in-fill lots.

The Sunbelt cities of Houston, Dallas, and Denver are building luxurious complexes near medical and technology centers.

There is no consistent sizing on micro-apartments.

Typically, they run from 225 to 375 square feet. In New York, zoning requires at least 150 square feet for an apartment, but in Seattle, they may be as small as 90 square feet.

Why Are Micro-apartments So Popular?

Urban dwellers are desperately looking for housing that’s affordable and livable. The lack of affordable housing in metro areas is having the most impact on middle-income brackets of the population.

Developers in big cities face a plethora of obstacles to building affordable units. In a 2019 survey of homebuilders, 70% found affordability to be a “serious concern across the nation.”  The cost of labor and building materials are the most significant factors in affordability. But, permits and zoning issues were a concern to 75% of multi-family builders.

Cities Are Becoming Overcrowded

While families may flock to the suburbs, cities continue to increase in popularity for younger generations. Millennials, in particular, are seeking opportunities In desirable metro areas.

Cities Are Becoming Less Affordable

Since the housing crisis, real estate values have bounded back. But the construction of new units is not keeping pace, leading to a pervasive housing shortage. Consequently, all housing is becoming less affordable, especially in large cities.

According to the National Low Income Housing Coalition, a household “must have an annual income of at least $45,960 to afford a two-bedroom rental home at HUD’s average fair-market rent of $1,149 per month.”  That means someone working 40 hours a week at minimum wage was unable to afford a 2-bedroom apartment anywhere in the country.

In Manhattan, the average rental price was $4,385 in February 2020, a 3.9% increase in one year. New leases were down more than 10%, indicating an especially tight rental market.

Changing Demographics in Society and Cities

More people are living alone today.  Single-person households accounted for 13% of the population in 1960, but compose 28% percent in 2018. 

Today’s younger adults are remaining single longer. The number of married adults declined by 8% since 1990.

Post-recession incomes are lower, too. Salaries have not kept pace with rising housing prices. And boomers are retiring with a smaller nest egg than they expected. Some are unable or unwilling to keep their large house in the suburbs.

Where Are Micro-apartments Popular?

As you’d expect, micro-apartments tend to have the most interest and appeal in large urban areas.

New York, Los Angeles, Boston, San Francisco, Seattle, Minneapolis, Denver, Atlanta, Austin, Washington D.C., and Chicago have all jumped on the bandwagon.

As a solution for affordable housing, then-Mayor Michael Bloomberg pitched a New York City pilot housing project in 2012.

The newly constructed Carmel Place was built on an in-fill lot in the heart of the city. The 55-unit building employed modular building technology to lower construction costs. A minimalist design ensures a clean and modern look.

Latitude Med Center is a luxury high-rise complex developed in a prime location of Houston. It is proximate to the Texas Medical Center and Rice University.

In other cities, older buildings have been converted to micro-apartments. For instance, Boston’s Factory 63 is a renovated shoe factory.

These loft spaces retain original brick walls and timber-beam ceilings. 

Portland’s The Arthur first served as a hotel in the heart of downtown and is just steps away from coffee shops and entertainment.

With Whom Are Micro-apartments Popular?

Micro-apartments are built for single people. Their scale makes it pretty tricky to fit a king-sized bed, and there isn’t enough storage for families.

The Urban Land Institute indicates that by far, young adults in their 20s occupy micro-units.

The Appeal to Millenials

The appeal to Millenials makes sense. Starting new careers, Millenials have less disposable income. Today, young adults are entering the workforce with lower salaries and more student loan debt. While they desire to live in vibrant tech cities like Seattle, Austin, and San Francisco, their wages, albeit high, aren’t a match for outsized rents.

A micro-apartment is suitable for a new college graduate. After living in a tiny shared dorm, a modern, albeit small, apartment of one’s own has allure.

Young adults have not amassed a household of furniture and collectibles. So, these small but practical apartments make sense.

New Jobs in the City

These apartments are built in locations convenient to work centers. Residents don’t have to rely on cars. Instead, they can use public transportation or walk or bike to work.

Portland’s The Arthur has a Walk Score of 100 and a Transit Score of 95, helped in part by a streetcar outside the front door.

Work/Life Balance

Millennials value their work, and technology has allowed them to stay connected at a moment’s notice.

But they also prioritize their off-hours and desire a lifestyle that facilitates the enjoyment of life.

Most residents appreciate living independently, yet are drawn to the community aspects of micro-apartment living.

Proximity to neighborhood restaurants, coffee shops, and other nightlife is a must.

A Mobile Generation

The Millennial generation also tends to be more mobile. With the internet and tech industry, providing opportunities to work remotely, professionals have more flexibility in where they choose to live.

Renters in micro-apartments renew their leases less often than conventional renters, according to the Urban Land Institute.

They may stay for a year then move on to a new location or career.

And as with other apartment dwellers, they marry, move to a larger apartment, buy a house, or relocate to a new city.

The Attraction for Travelers

Some travelers utilize micro-apartments as short-term rentals. Millennials who value experiences over possessions have fueled the rise of Airbnb travel. They prefer being in the hub of a dynamic neighborhood that a short-term micro-apartment rental can provide.    

What’s it Like to Live in a Micro-apartment?

Micro-apartments certainly aren’t for everybody. Usually, these units comprise only a small portion of units in a complex. But there are long waitlists to lease one.

How Big is a Micro-apartment?

Micro-apartments are smaller than studio apartments, which run from 350 to 500 square feet. While each city has its regulations for minimum unit size, micro-units are usually between 200 to less than 325 square feet.

Micro-apartments are specially designed to be functional and space-efficient. With an area the size of a 1-car garage, every inch of space needs to be well planned.

Ultra-efficient Design

The small footprint of micro-apartments allows for only the essentials. This minimalist layout creates the illusion of space and a light feeling. Built-in storage is maximized. Often, micro-units come pre-furnished.

You may find loft or Murphy-beds, dining tables that convert to desk space or kitchen counters, and galley kitchens with mini-refrigerators and two-burner stoves.

The developer can creatively furnish units to accommodate the space. New renters often do not have adequate furnishings. Or they prefer not to furnish their units because of their mobile lifestyle.

Common Areas to Entice

While residents get to enjoy their unit in solitude, they have access to an array of shared amenities.

Most complexes come equipped with recreational areas where residents can relax and socialize. Some have roof decks with garden areas or grills and expansive views.

Like the typical complex, they may have gyms or swimming pools. But current trends lean towards yoga studios and coffee bars.

Most have no or few covered parking spaces. Instead, they have bike parking or shared rental bikes.

A few micro-apartments are designed for co-living. In a throwback to college dorm living, only the bedroom is private. Community kitchens and bathrooms are shared among the residents.

Are Micro-apartments a Viable Long-term Investment?

A Niche Multi-family Investment

To be sure, micro-apartments are a niche market. There has been some push-back in cities that don’t want such small units.

Neighbors oppose new construction, assuming congestion will increase in the neighborhood. Others consider these units to be too small and substandard housing.

Developing micros may require zoning changes or modifications. But these developments have shown they can compete in the market.

Higher Return on Investment

Micro-apartments fill a niche to meet the growing demand for rentals across the country. However, they are rarely developed as affordable or low-income housing.

These units have rents 20-30% lower than conventional units but yield higher rental prices per square foot. Micro-apartments in key locations near technology centers have higher rents as a total and on a square foot basis.

Further,  the Urban Land Institute study found that micro-units have higher occupancy rates and lease faster than conventional apartments.

This Trend is Becoming Mainstream

After more than a decade of development, micro-units appear to be growing in popularity across the country.

To be sure, they make the most sense when situated near business hubs, public transit, and consumer amenities. Interest continues to pique developers, investors, and renters.

Where Can You Find Micro-apartment Construction Leads?

Innovative architects, developers, investors, contractors, and furniture designers and more are moving this trend forward.

But how can you discover new and proposed micro-apartments?

With BuildCentral’s MultiFamilyData tool, you can find new apartment construction leads near you.

Our technology comes with cutting-edge features to find senior housing, micro-apartments, co-living, condos and other multi-family construction projects you want to bid on or invest in.

Register for a Free 7-day trial today and find up-to-date analytics for any market.