Affordability is driving micro-unit construction
A new report indicates that micro-units are being built in substantial numbers in expensive cities, particularly on the West and East coasts, and that they offer a substantially cheaper option for renters.
Micro-units account for 66 percent of the new housing being built in Seattle, 29 percent in San Francisco, 41 percent in Reno, 43 percent in New York City, and 56 percent in Boston. In Minneapolis, the figure is 20 percent; in Portland (OR) and Los Angeles, it’s 19 percent. Micro-units are defined as smaller than 450 square feet—some are as tiny as 120 square feet. Even in cities where few are being built, they make up a good slice of the existing housing stock.
With a few exceptions, cities leading micro-unit construction have high rents. In these cities, micro-units provide a far more affordable option—maybe the only affordable option—for young people starting their careers.
Micro-units rent for a substantial discount—the difference ranges from 50-90 percent in various cities compared to conventional-sized apartments. For example, in San Francisco, micro-units cost $1,888/month, compared to $3,516 for conventional units (an 86 percent difference). In Seattle, they go for $1,289, compared to conventional units at $2,388, an 85 percent difference. In Minneapolis, micro-unit rent is $1,078, compared to $1,739, a 61 percent discount.
The Minneapolis example shows that even in moderate-priced cities, micro-units are being built to some degree—in that city, they account for 20 percent of new housing. Smaller units are a surprisingly effective tool to boost affordability among certain market segments.
They are also heavily concentrated in or near downtown, which means that transportation expenses would be reduced. The report is by StorageCafe.com. You can read the entire report here.
