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Emergence of Micro-homes: Solution for the Homeless?

What Is a Micro-home?

Micro-homes, also known as prefabricated homes are houses that are typically under 500 square feet. They originated from Japan and became popular post WWII. Japan produces about 10,000 prefabricated homes each year. On the other hand, only 2% of new single family homes in the U.S. are micro-homes. However, we see this trend emerging because of new technology, affinity of minimalism, and more recently, the lack of affordable housing.

The Smaller the Better: Demand on the Rise

Because the demand for micro-homes has surfaced and technology has evolved, developers have incorporated high end features like luxurious appliances and sleek home designs. Micro-homes in Japan typically cost about $300,000 with these features. Interestingly, some of these homes don’t have any doors—this openness is for energy reasons, but it’s also to encourage social interaction, thus creating a stronger family bond.

Prefabs are great for minimalists and are cheaper than the average home. San Francisco recently has seen growth in demand for this market; back in 2014, ULI found that units smaller than 600 square feet had higher occupancy rates than larger units in the U.S. Additionally, developers are seeing a rise in demand for micro-homes in densely populated cities like Seattle and NYC. This can potentially solve the lack of housing issue! However, not all prefabs are affordable. Units in San Fran typically cost $3,500 a month, which is steep for such a small space.

Small Spaces As a Temporary Solution

In downtown LA, however, these homes can serve as a temporary solution for the homeless. KTGY Architecture and Aedis Real Estate Group are using shipping containers to build a complex of prefab units for the homeless. It will take about six months to build. Appliances will be in each of the 84 units, and Aedis plans to expand this idea to San Diego and Seattle.

The same thing is happening in Richmond, California. The city is working on securing a grant to lease 50 MicroPADS to single homeless adults permanently. Each unit will be furnished with a shower, kitchen, sofa, and closet. Austin, Texas is also working on a neighborhood of micro-homes called Community First! to solve homelessness. It’s a 10-year plan, and currently the city is trying to raise $60 million for the expansion.

Smaller cities like Phoenix Arizona unfortunately will not see a lot of growth in prefabs. Minimalist housing are not prevalent in cities like Phoenix because of current housing options. In addition, there’s not much space in smaller regions. Developers in this area also would likely have to pay more per square foot to build them, despite the overall low cost of micro-homes.

Not Always a Win-Win for Developers & Landlords

Developer Patrick Kennedy of Panoramic Interests has built several micro-homes in the Berkeley area. However, zoning regulations is a big challenge many developers face when building micro-homes. Kennedy couldn’t build more of these units due to regulations, despite the rise in demand. Developers also sometimes have to provide public facilities and infrastructure to build and support micro-housing. In Seattle, inclusionary zoning can force developers to create low-cost units in affluent areas. This causes landlords to jack up the rent. Thus, some tenants skip on rent because they have no choice.

Smaller cities like Phoenix, Arizona do not see much growth in prefabs. Minimalist housing won’t become mainstream enough for cities like Phoenix because of the current housing options, as well as the lack of space. Developers in this area also would likely have to pay more per square foot to build them, despite the overall low cost of micro-homes.

Although micro-housing can temporarily solve the issue of affordable housing, will they become mainstream across the U.S.? Despite demand surfacing in densely populated cities, micro-homes may remain a trend rather than a sustainable solution.


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