Can Tiny Homes & Co-living Help Make Housing More Affordable?

December 6, 2018

One enduring repercussion of the 2008-09 financial crisis and collapse of the housing market is the hesitancy among consumers to take on mortgages that they’re not sure they can afford over the long term.

That’s why more Millennials and other middle-income consumers are looking to alternative housing solutions that sometimes sacrifice space and privacy for the sake of lower costs.

In dense urban cities like New York and Los Angeles, developers are building more co-living apartments with small private rooms and bathrooms but no kitchens. Think of them as dormitories for grown-ups, with lots of amenities but not a lot of space. Some units are just 300 square feet, which is smaller than the bathrooms of some modern houses.

Developers are also starting to build more tiny homes that can be as small as 500 square feet.

“In New York City and Europe and Asia, everyone lives in a closet-sized apartment but they do their real living out there in the community — in the parks and restaurants and shared spaces,” said Will Johnston, executive director of the MicroLife Institute, a nonprofit that advocates for changes to local zoning rules that would allow more tiny homes. “We’re just trying to normalize smaller spaces. Small can be good.”

One proposed project in the Atlanta area, the Eco Cottages at East Point, will have 40 tiny homes ranging from 500 to 1,000 square feet. They will cost $150,000 to $250,000, which is lower than most existing homes in the area.

The project was granted a variance and approved by the City of East Point. Additional engineering and planning work is underway so groundbreaking can happen before the end of 2018, said Kim Bucciero of project developer Tiny South.

More than 1,000 people have expressed interest and are on a waiting list to buy the 40 tiny houses, Bucciero said.

“We would love to see more mixed housing neighborhoods, with mixed sizes, mixed income ranges and mixed ages,” Bucciero said.

Affordability Crisis

More than 19 million low-income families spend more than half of their income on housing nationwide, which inflates the risk of eviction or foreclosure and results in housing insecurity, according to the National Low Income Housing Coalition.

The median list price for a house in Atlanta is $355,000, according to Zillow. Across Georgia, there are only 38 affordable rental homes for every 100 extremely low-income households, according to NLIHC data.

Proponents say one increasingly feasible way to provide more affordable housing for Millennials, retiring Baby Boomers, people with low-income and others who simply want a more modest lifestyle is to build more tiny homes.

Reliable statistics for how many tiny homes exist in the United States are hard to come by because the definition isn’t consistent across municipalities, but one estimate by USA Today put the figure at 10,000 units two years ago.

There are dozens of tiny homes listed for short-term rental on Airbnb, including a treehouse home in Atlanta that Airbnb says is its most-wished-for listing in the entire world. You can even buy a tiny home made from a modified 40-foot metal shipping container on Amazon for about $40,000 including shipping.

Sunday Brunch & Yoga

Co-living apartments are also becoming more popular because of their lower price tags, with companies such as WeLive (an offshoot of WeWork), Ollie,Common, The Collective and dozens of others pitching themselves as the future of affordable living.

More than 25 million Americans share an apartment with one or more roommates, a figure that has risen by 20 percent in the past decade, according to co-living startup Common.

At Ollie’s Carmel Place in Manhattan’s Kips Bay neighborhood, a 302-square-foot micro studio rents for $2,775 per month – less than half the cost of other nearby apartment buildings. It has a high-end sofa that converts into a bed, a bathroom, built-in storage with drawers and includes hotel-style housekeeping every two weeks, free internet and premium TV channels.

What it doesn’t have is a full kitchen, dining area or living room. Those are all shared spaces elsewhere in the building, along with a rooftop terrace, lounge, gym and laundry room. Other amenities include catered community dinners, Sunday brunches, yoga and cocktail mixers.

Ollie says its developments are attracting people of all ages, income levels, cultures, professional fields and life situations.

“Roughly 80 percent of tenants in Ollie buildings are in their 20s and 30s, but just under 20 percent are over the age of 50 — and about a third of those are in their 60s,” Christopher Bledsoe, CEO and co-founder of Ollie, said in an interview with the Senior Living Innovation Forum. “We’ve learned that ‘millennial’ is more of a mindset than an age group.”

Co-living startups are attracting large investments from venture capital, private equity and others who are bullish on the future of shared living spaces. British-based developer The Collective has raised $400 million to double the number of properties and expand into the U.S., while Common attracted $40 million, and Ollie raised $15 million.

Zoning Challenges

While there is broad acceptance of co-living in urban apartment buildings, there are often zoning challenges for tiny homes, which are typically about 500-750 square feet.

Tiny homes fall into two main categories: permanent structures on concrete foundations with connections to water/sewer and electricity that are often called “accessory dwelling units” (ADUs), or tiny houses on wheels (THOWs) that are typically classified as recreational vehicles.

These modestly scaled dwellings face enormous challenges with municipal zoning and ordinances, plus opposition from neighbors concerned that they will hurt property values or create more traffic and crime.

Whether they’re even allowed on specific parcels of land often depends on the type of zoning for that particular lot.

The MicroLife Institute, which hosts the Decatur Tiny House Festival near Atlanta, advocates for removing some of these barriers to meet demand for more affordable, eco-friendly and sustainable housing.

“We think there’s a huge opportunity to get beyond the red tape and think of what’s possible,” Johnston said. “We’re trying to create the mindset for housing innovation, and let people choose what’s right for them.”

The City of Atlanta is seeking public comments on proposed changes to zoning laws that would allow ADUs on residential lots zoned R1-R4. A presentation about the changes can be found here.

Potential for Homeless Housing?

Some cities have experimented with tiny homes as a way to create permanent housing for homeless people. There are an estimated 553,000 people experiencing homelessness on any given night, according to the National Alliance to End Homelessness.

Advocates say it’s a complex issue and that tiny homes for homeless and low-income occupants should have complete amenities (full kitchens, water/sewer, electricity, etc.), be installed in locations that are dignified and near transit, grocery stores, health care, child care and other social services.

One of the first tiny home communities for homeless adults was in Eugene, Oregon, where low-income housing developer Community Frameworks built 30 tiny cottages with 144 square feet each.

The total project budget was $3.06 million, or $102,000 per unit. By comparison, newly constructed subsidized one-bedroom apartments cost about $239,000 to build, according to a white paper by Community Frameworks about the project.

“Tiny house villages are a logical extension of the tent cities that have sprung up across the country, where resourcefulness and ingenuity have come together to create safe communities,” Community Frameworks wrote.

In Summary

Tiny homes and co-living apartments are becoming more popular as Millennials, retiring Baby Boomers and lower- and middle-income families look for more affordable housing solutions.

Many municipalities across America including Atlanta are considering changes to zoning laws or other exceptions that would allow more tiny homes to be built, while developers in major cities such as New York and Boston are creating more co-living apartments to attract renters who prize affordability over size.