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 Residential Market - Spring 2015 |
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In This Issue Yardi News Client News HNN Associates, LLC Optimizes Rental Pricing Performance with Yardi RENTmaximizer LumaCorp Inc. Reports Revenue, Marketing and Processing Benefits with Yardi Multifamily Solution Products Client in Focus Product & Technology News Mobile Maintenance Top 10 Benefits Does Business Intelligence Achieve Transparency? Payment Processing Collections Simplified Industry Trends Smart Pads Ready for Multifamily? Honey, I Shrunk the House! Events ContactYardi Systems Sales: 800-866-1144 |
Honey, I Shrunk the House!Call them whatever you want, micro apartments, apodments or microflats, but downsized apartments are here to stay. With the ever-rising costs of housing, stagnating incomes and increasing urban sprawl, there is a definite demand for affordable housing in urban centers. A demand that apodment develop Defined as multifamily units smaller than 600 square feet, micro apartments easily go below 300 square feet. In many cases they hover between 150 and 250 square feet. Size, however varies from city to city, complying with local zoning and housing ordinances. In regards to what microflats offer, think miniature studio apartments. Micro apartments are one-room, self-contained living spaces that incorporate a sleeping area, bathroom and kitchenette. Depending on size and development, apodment projects may also offer communal amenities such as a roof garden, patio, community kitchen, community bathroom and lounge. In order to maximize available space, many apodments take an innovative approach to the way available space is used. Features such as hidden storage, pull-down Murphy beds, sliding walls that double as bookcases and even hidden sunken tubs. Micro-housing of course is not a new concept. We don't have to go back to turn-of-the-century tenements to find examples of it. In other parts of the world micro-flats are the norm. In Hong Kong for example, apartments average 161 square feet, according to re:form. By comparison the average U.S. apartment offers 860 square feet and anything below 165 square feet is considered overcrowded by the U.S. Department of Housing and Development. For many Americans of course, living in units smaller than 500 square feet sounds a lot like college. Add to that shared kitchens and bathrooms, memories of marathon study sessions and keggers might pop up. Certainly for older renters, or those who've moved out of the rental pool into ownership 300 square feet can sound inhumanly small. But apodments have a quite clear view of their customer base: young professionals, usually barely out of college, at the beginning of their careers and single, who do little else than sleep and change at their homes. For urbanite Millenials apodments aren't such a cultural shock. And for those on a tight budget, who'd rather not bunk with roommates, a micro flat is a viable option. Testament to this is how quickly micro housing projects fill up. Affordable rents and a location in close proximity to their jobs or mass transit proves sufficient incentive for many to give up a full size kitchen or a living room. Furthermore, micro housing isn't only about affordability or location. For some micro-renters, it's also a question of sustainability. With eco-consciousness on the rise, close proximity to work or mass transit and a tiny apartment with small utility bills further lower one's carbon footprint. As Mark Sowers, general manager of Four Lights Tiny House Company previously told The Balance Sheet, "Any possessions that aren't working FOR a person, are working against her. A house reduced to essentials will offer the best standard of living." For now, however, the main push behind micro-housing is affordability. Rising rents paired with stagnating incomes, especially in high-cost, high-density urban areas such as New York, Boston or Seattle, have contributed to a historic high of unaffordability. Currently over half of America's apartment dwellers are moderately rent-stressed, meaning they pay over thirty percent of their income on housing. Even more worrying, Harvard University's Joint Center for Housing Studies revealed that 28 percent of renters, approximately 11 million households, spend over half of their income on housing, making them severely rent-burdened. Although micro-apartments are more expensive compared to traditional apartments when it comes to price per square footage, an extremely reduced size still yields significantly lower rent rates. For example, Seattle, the U.S. capital of apodments, posted an average rental rate of $1,232 per month, in the first quarter of 2014, according to Marcus & Millichap. Axiometric Inc. data shows that apodment rental rates range between $500 and $900 per month. Even at the highest end of the microflat spectrum, that is still over 25 percent cheaper. At the lowest, it's less than half of the Seattle market rate. With limited resources for government housing subsidies, micro housing is looking more and more like a viable option for creating affordable housing stock. Affordability, however, is not a promise, when it comes to apodments. In 2013 the Boston Globe reported on a new 190-unit micro-housing project, where rents are expected to reach $1,500 per month. Based on the definition of affordable housing as not exceeding 30 percent of a renter's income, future tenants would have to earn around $60,000 per annum – a far cry from what young renters at the beginning of their careers expect earn. In some instances, apodments can actually increase unaffordability. Some owners and property managers interpret apodments' higher per square-foot rates as consumers' willingness to pay more for less. This leads to increased rents for traditional apartments, pricing out even more (potential) renters. While consumers can benefit greatly from micro housing thanks to low rents and location, developers and property managers gain as well. Microflats' higher per square-foot rates mean that owners, developers and managers gain higher profits from affordable rate, ultra high-density properties. An added advantage of micro-housing projects is that their size allows them to be prefabricated. This slashes hard costs and onsite construction times. Micro-housing also has the potential to unlock additional development sites within urban cores. Lots that were deemed too small to hold profitable multifamily projects until now, could hold profitable high-density micro-housing. Micro-apartments of course are not the be all end all answer to the nation's housing shortage and housing affordability crisis. Ultrahigh-density projects do not fit into the fabric of every city or every community. Recently updated zoning laws and new restrictions implemented in areas that saw significant micro-housing growth, such as Seattle, prove that. As does virulent NIMBY opposition in neighborhoods where such projects are proposed. Then again, at every new apartment project NIMBYers come out of the woodwork to protest the character of future tenants, depreciating property values and parking shortages. Even though one might argue that someone choosing to live in a micro apartment to be able to walk to work will forgo a car. |
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