Could Micro-Apartments Help Ease Austin’s Housing Crunch?

By Emily Compton
For Reporting Texas

Micro-apartments, roughly the size of a two-car garage, have been making waves as a new housing option in some East and West Coast cities, but will the trend make its way to Austin? As more young people move to Austin, some city leaders say the tiny apartments could become an affordable option for a city where the cost of housing keeps rising.

“Demographics are shifting in Austin,” said Chris Riley, an Austin City Council member. “The city is becoming more appealing to millennials” – people in their 20s and early 30s – “as well as retirees such as baby boomers who are looking to downsize.” Many young people are more comfortable living in small spaces and without cars, Riley said.

Riley and his council colleague, Bill Spelman, want the city to amend its development rules to encourage the construction of micro-apartments, 500 square feet or less, as one way to address the need for more affordable housing in a city that grows by an average of 110 people a day.

The average apartment rent was $1,057 at the end of last year, up 8 percent from 2012, according to Capitol Market Research, an Austin real estate research firm. And with a 97 percent occupancy rate, relief is not in sight for renters.

Riley says micro-apartments are one “significant solution” to the city’s housing crunch.

But some real estate experts question whether micro-apartments are a short-term trend and whether a super-compact lifestyle more common in places such as New York will really take hold in Texas.

In April, the council approved a resolution from Riley and Spelman directing the Planning Department to review a proposed ordinance that could come back to the council for discussion and a vote later this summer.

The ordinance would address two major impediments to micro-apartments in Austin: rules that now limit how many apartments a developer can build on a site, depending on its size, and that require a parking spot for every unit, whether or not the tenant wants one. Easing those requirements would reduce the cost for builders and lead to lower rents, Riley said.

In Riley’s vision, micro-apartments would be built in high-density areas and within walking distance of public transit. Transportation options are growing in Austin, including the new B-Cycle bike-sharing service, as well as Zipcar and other short-term car rental services.

Austin already has a supply of very small apartments, but most are not near downtown, one area where Riley thinks micro-apartments would work. Riley cited the new Whitley apartment tower on Brazos Street downtown, which has 514-square-foot studios, as an example of small units already working in the city.

Not everyone is convinced that micro-apartments are right for Austin.

Outside of a few cities such as New York and Boston, the trend is relatively new, said Charlie Hewlett, a Maryland real estate executive and member of the product council of the Urban Land Institute, which is researching micro-apartments. The Washington-based institute is a nonprofit organization that does research on land use and sustainable development issues.

“The question on everyone’s minds is: Is this a flash in the pan or is it here to stay?” Hewlett said. “I think there will always be a market for [micro housing], but I am nervous to call this the new normal.”

Hewlett said micro-units are the “bastion of the young,” a launch pad for people who have moved to a new city with a new career.

“Young people haven’t accumulated a lot of stuff yet,” Hewlett said. “They are car-light or don’t have cars. They are part of the sharing economy. They are willing to have less space in order to live in a cool neighborhood and have access to the amenities of the city.”

Hewlett said that the product council’s research shows about 40 or 50 micro-apartment projects in motion across the country, with a total of 3,000-plus units. He said such projects make sense in high-cost coastal markets such as Seattle, San Francisco and Boston.

“The sweet spot seems to be getting a 25 to 30 percent discount [in rent] to live in a place with less square footage,” Hewlett said.

Chuck Winkley is a broker with Metro Realty in Austin, which handles sales and leasing for properties, including in the University of Texas area.

“I think it might just be a fad,” Winkley said of micro-units. “People just want to be green.”

Winkley questions whether Texans, who are used to living in large spaces, will accept living in these “tight spots.” But he agreed that younger people are increasingly going without cars.

Apartment developers in the West Campus area, across from the UT campus, already charge separately for parking spots, Winkley said. It was a hard sell at first, he said.

“But now, more kids are leaving their cars at home, or just not getting their driver’s license,” he said.

The share of 14- to 34-year-olds without a license increased from 21 percent to 26 percent from 2000 to 2010, according to a report from the Federal Highway Administration. Many young Americans are making a conscious effort to drive less and seek to live in places with alternative transportation options, the report said.

City Council members have been meeting with neighborhood groups now to get feedback on the potential ordinance. In the past, neighborhood groups have complained about other types of rental housing, including so-called stealth dorms — duplexes or houses rented to six or more unrelated people that are often used as dormitories and have been built in single-family neighborhoods.

But Larry Gilg, a 30-year resident of the Hyde Park neighborhood north of the University of Texas campus east of Guadalupe Street, said he thinks micro-apartments might help revive his neighborhood of Victorian and early 20th century homes.

“The last two censuses have shown that the population in Hyde Park has remained stagnant,” Gilg said. “That’s not good. We want to be able to keep our fire station, our post office and our walk-up groceries.”

Allowing small apartments and garage apartments would bring in more residents while maintaining the historical integrity of the neighborhood, he said, adding a caution: “These infill tools have been misused in other cities. We don’t want super duplexes popping up behind homes.”