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Date: March 26, 2018
Category: Real Estate

Is Micro-living Worth the Big Hassle?

In America’s city centers, it seems like the cost of living is constantly climbing. The average rent of a one-bedroom apartment in San Francisco, New York, and Boston is roughly $3,000.1 Add on utilities, food, and social activities, and renters could be looking at monthly living expenses around $3,500.

And buying a house in these cities is just as expensive. On top of a large initial down payment, homeowners are looking at an average monthly mortgage payment of $3,759 in San Francisco, $2,233 in New York, and $2,133 in Boston.2

These shockingly high costs have left people desperate for more affordable housing options. So desperate in fact, that they’ve resorted to looking at co-living spaces, micro-apartments, and tiny houses. Glamorized by shows on HGTV and the DIY Network, some people look at this type of housing as a viable possibility, but are these miniature options really worth the big hassle that comes with them?

Small spaces still come with a big price tag

Imagine that a co-living space is the only affordable renting option in a major city center. A renter has pared down all of his or her belongings to the bare essentials, has a bunk in a room with three roommates, and shares a bathroom, kitchen, and common spaces. How much would you expect this renter to pay? $400 or $500 per month? Surprisingly, “dorm living for adults” comes with a hefty price tag. In San Francisco, these rents are almost $1,000 a month, and in New York, one co-living establishment, renters pay upwards of $2,700 to have a private bedroom.3

Micro-apartments, classified as an apartment with 400 square feet or less, provide a bit more privacy, but offer even less space with just as big of a price tag. For a 300-square-foot apartment, renters can expect to pay an average of $1,700 per month in Boston, $2,050 per month in New York, and a whopping $2,295 in San Francisco.3

When you start crunching the numbers, these micro-living spaces might not be so affordable. Typically, on a price-per-square-foot basis, micro-living spaces are actually more expensive than larger apartments. Co-living spaces and micro-apartments are popping up in the most affluent areas of major cities. People perceive living in these zip codes as a privilege, so housing comes with a higher price no matter the size. Additionally, infrastructure costs in these buildings are the same regardless of the apartment size, driving up the cost-to-space ratio even more.4

Is the sacrifice worth it?

Living in a city center provides convenience, but is the trade-off of tiny living quarters worth it? Choosing to live in a micro-space requires sacrifice.

A lack of space provides limited storage. Renters may need to keep many possessions in a storage unit, adding an additional cost to already high monthly living expenses. And instead of feeling like a home, micro-apartments may end up feeling more like four small walls that are closing in. Additionally, renters can say goodbye to pets, roommates, and entertaining. Less than 400 square feet leaves little room for guests. An active social life is one of the perks of city life, but with no room to entertain, that social life may not be so social after all.

There’s an alternative

Not far outside of major city centers are bustling suburbs that have an urban, downtown feel. These offer easy access to public transportation to the city.

In these urban-like environments, the rent for an average 1,000 square-foot, class-B apartment is $1,350.5,6 So, for approximately $700 less, renters get 700 additional square feet of living space. In addition to the extra square footage, many of these apartment complexes provide access to pools, fitness centers, business centers, dog parks, tennis courts, and other common areas.

Increased desire for space may cause increased demand for affordability

When it comes to picking the right apartment, it’s important for renters to consider their wants and needs. Micro-living may be an option now, but how far into the future can renters see themselves using a sofa as a bed, or a coffee table as a desk, or a stove as a place to store sweaters? Three-hundred square feet just isn’t enough for a lot of renters’ desired lifestyles.

The Lesson Here:

As renters continue to become more knowledgeable about the convenient and affordable options just outside city centers, you may see a continued increase in demand for affordable apartments in the suburbs that increasingly meet their wants and needs without the hassle or big price tag.

1 CNBC. How Much it Costs to Rent a 1-bedroom in 30 Major Cities Around the World. 3/26/17.

2 Business Insider. The Salary You Need to Earn to Buy a Home Right Now in 19 of the Most Expensive Housing Markets in America. 5/24/17.

3 Apartment List. Top Housing Trends You Need to Know About. 6/21/16.

4 U.S. News. Should You Move Into a Micro-apartment. 5/17/17.

5 REIS. Rental Data Segregated by Class (Class A, B, and C) Covering National Sampling of Major Cities from 1965 to 2016. 12/16.

5 National Association of Home Builders. New Multifamily Unit Size Dips. 8/21/15.
 
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