The project of micro apartment consists of 275-300 sqft of private space offering basic amenities and dedicated to one and two-person households who, in theory, are young professionals starting a new career and can’t afford rentals at current market price assuming a rent to wage ratio inferior or equal to 1/3.
If the initial attempt to develop the concept on 27th Street and 1st Avenue is successful, Bloomberg may have found here a partial solution to accommodate the growing proportion of singles in New York City. Indeed, more than 60% of New York City households (1.8 million) are one- and two-person households for only 1 million studios and one-bedroom apartments1. In addition, low vacancy rates (below 2% in Manhattan)2 and tight credit supply for home buyers have brought rent to increase sharply (6% between Q1 2011 & Q1 2012)3, which lead to additional issues. For example, the proportion of low income household spending more than half of their income in rent has increased from 26% to 29% between 2008 and now, bringing financial instability and risk to these households. With non family household median income at $38,7334, the rent on such units should be somewhere between $1000-1400/month to make it financially viable to tenants – not bad compared to studios that average $1953/month5.
Bloomberg’s idea to target young professionals starting a career is smart. The presence of singles in the city is very important to its economic viability. Singles are more likely than married people to go out and socialize6, and in other terms, spend money on the city’s businesses. Singles and young professionals may be working long hours, don’t need to have space to enjoy or entertain, but want to claim, enjoy their independency and embrace a modern living status, especially after 4 years of college life. This will bring a shift in their purchasing pattern where an additional portion of income may go toward direct consumption, paying loans (decreasing potential delinquencies), and to a lesser extent, savings.
Improvement and creativity in modern living solutions allow for micro-spaces to become healthy and sane for an individual to live in. Such concepts should be developed outside Manhattan to the outer boroughs as it could help revive or stimulate certain neighborhoods’ life for the same reasons enumerated in the previous paragraph.
Bloomberg’s move may be seen as bold but is remarkable in the fact that it brings a new alternative to affordable housing in New York City. Hopefully, this will encourage similar initiatives to happen in areas where similar demographic trends and housing supply are happening.
Footnotes:
1 Census 2010
2 Reis Inc
3 Prudential Douglas Elliman
5 Citi Habitat
6 Study from Eric Klinenberg, processor of Sociology at NYU
Fred M. On Real Estate 