June 23, 2016 The Code Solution

Multifamily: A Rise in Rents and Micro Apartments

The Code Solution is excited to announce our first guest post from our friends at The Llenrock Group! The following post was originally published on Llenrock Blog. 

If you’ve heard anything about housing trends, you know that multi-family developments are on the rise. And the American dream seems like just that – a dream. More residents are renting rather than buying. There’s also been a huge influx of “micro” apartments. What does that mean for you? If you’re in the market to rent (or buy), you’ll want to read on!

According to Abodo’s June report, rent prices for one-bedroom apartments in Phoenix, Arizona increased somewhat dramatically by 13% in June. In addition, Chicago’s average prices increased this month from $1,840 to $1,986, which is about 8%. According to Marcus & Millichap’s Chicago Retail Market Report for Quarter 2, apartment building and construction have been very active. Other cities that show a rise in one-bedroom rent prices include Lincoln, Nebraska and Orlando, Florida. What’s interesting to point out is that many of the cities that have shown an increase are located in the West Coast and Midwest. However, New York as a whole currently has the highest rates for a one-bedroom apartment.

ABODO_National_JUNE

On the other hand, prices in Washington, D.C. fell by 8%, which is interesting since D.C. is one of the most expensive cities in the country. Following D.C. is Riverside, California where prices decreased by $55 on average, which is about 7%. Rates in San Francisco also decreased by 7%, but the rates in general are still more expensive than the rest of the country. San Francisco’s rental rate this month is an average of $3,929 per month.

A rising demand for “micro” apartments

Reports show that in more urban areas, people typically are no longer looking for large and ample apartments anymore; people are starting to opt for smaller or “micro” apartments when searching for a place to live, which reflects the current trend of prioritizing simplicity and minimalism. These apartments are typically cheaper and “micro” apartments appeal to the younger crowd, since many are single and want to live in cities where there are a lot of people, job opportunities, and entertainment. Transwestern Development, a commercial real estate firm, plans to build a micro apartment complex in downtown Austin, Texas to target millennials and satisfy the demand for convenient and affordable living space. A lot of cities used to lack these micro units, but because of the surge in demand for smaller apartments in metropolitan cities, real estate firms and developers are working to fulfill that demand.

Back in 2012, then New York City Mayor Michael Bloomberg held a competition to design micro-units in New York City in hopes to help ease rising rents and provide more affordable housing units. The city just completed its first micro-unit development called Carmel Place which is located in Kips Bay, on the East side of Manhattan. The development, which was designed by local firm nArtchitects, consists of 55 apartments, each averaging 250-350 SF. Bloomberg had to override the minimum area of an NYC apartment (which was originally 400 SF) and density in order to achieve this compact size.

Carmel-Place-1 A look inside Caramel Place

Affordability is a huge driving factor for micro-unit developments, too. According to Fast Co. Design33 of the 55 units are market rate, or $2,500 – $3,000 per month, while eight of the 22 affordable units are reserved for formerly homeless veterans who qualify for Section 8. The other 14 units were entered into a housing lottery in which tenants pay rent relative to their salary. Sounds like a mixed-income urban planner’s dream.

Eric Bunge, a principal at nArchitects comments:

“Young people, old people, middle aged people – they all need small units. And it’s not correlated to any income level. Poor people need it, rich people want it……But the bigger framework is that there are so many different ways to measure affordability. The end user is the most important thing, but on the same level, also cost to the city will be a factor in considering [micro housing].”

It does seem like this newer type of set-up allows for a more open dialogue about how to better address housing affordability and, in a time of rising rents, both developers and tenants sure do need to think outside of the box.

 

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