Tiny apartment concept gains interest from city officials, developers

Are Austinites ready to start living in 21st century boarding houses?

That is how at least one Austin developer describes micro units, small residential spaces that are less than 400 square feet. These tiny apartments do not exist en masse in Austin—at least not yet, said Terry Mitchell, longtime developer and president of Austin-based Momark Development LLC.

"I think micro units are perfect for someone moving to the city trying to get on their feet and start accomplishing goals," Mitchell said. "They are very appropriate for the right location and the right demographic."

In early October, Austin City Council will likely review regulations that potentially enable the development of more micro units. A Planning Commission subcommittee on Sept. 16 recommended council reject the proposed code changes, citing the city's ongoing land development code rewrite process as its reason for not supporting the amendment.

There is no city rule prohibiting micro units, said Greg Dutton, Planning and Development Review Department project manager who drafted the proposed regulations. However, density and parking regulations make such micro-unit projects unviable financially, he said.

"You can't fit enough units inside a building to rationalize the cost of the project," Dutton said.

Mitchell said such a project might already be viable downtown where there is no parking requirement. Also, according to Downtown Austin Alliance statistics, only 10,000 people live downtown despite there being more than 120,000 jobs.

But Austin has no successful all-micro unit example from which to draw inspiration, he said, making it difficult to attract funding for such a project.

"We all have to answer to the same guys," Mitchell said. "It's not [developers'] decision alone, and a lot of capital sources tend to look backwards instead of forward."

But such projects have already been allowed in Austin the past 40 years, said Stuart Hersh, an Austin–based consultant who helped the Mary Lee Foundation develop more than 60 micro unit-sized affordable apartments in the past three years.

"We're pretending we're trying to do something in Austin that's only been done in other cities, when in fact we've been doing this for a long time," Hersh said. "Let's take our lessons learned and broaden them."

In addition to downtown, Hersh points to West Campus as another Austin location where micro units could be developed right now thanks to less-strict parking requirements. Micro-unit projects can be built throughout the urban core, he said, if additional fee waivers are granted in exchange for affordable units—as outlined in an alternative code proposal Hersh provided the city.

Downgrade in progress

While there are no confirmed major micro unit projects being built or proposed in Austin, apartments are trending downward in square footage per unit.

Crescent at Austin, a rental complex on Riverside Drive near South Congress Avenue, features 30 micro units. The 392-square-foot apartments average $1,272 in monthly rent, according to Crescent.

Additionally, all 135 units have already been leased at Capital Studios, the first affordable apartment project built in downtown Austin since 1967. The 430-square-foot units, which fall just outside micro-unit classification, are deeply discounted at about $500 per month for single adults living well below the median income level, said Walter Moreau, executive director with Foundation Communities, the nonprofit group developing the affordable project.

More than 700 potential tenants expressed interest in living at Capital Studios, Moreau said, suggesting there is already strong demand for affordable, downtown living units regardless of size.

"As Austin becomes more expensive, especially as you are closer to downtown, and as the downtown core becomes more dense, then I think you'll start to see that market dynamics will make sense to build micro housing," Moreau said.

Matt Dungan, associate with Dick Clark Architecture, the firm that designed Capital Studios, said such projects become cheaper when built uniformly.

"Each unit is cheaper to build, so you as the renter take on less of a burden because you're paying back less construction costs," he said.

Given the tight budget used to build Capital Studios, Dungan suggests that, if Foundation Communities can develop small living units, then so too should private developers.

Federal tax credit regulations typically prevent affordable housing projects from constructing units any smaller than 430 square feet, said Al York, principal with architecture firm McKinney York, which designed affordable housing complex Anderson Village on East 12th Street.

Multifamily units are now being built with density in mind, York said, incorporating more common spaces previously found inside the residential area.

"Young people don't have to be tied to the telephone in their dorm the way we used to be," he said.

York also does not expect market-rate micro units to address Austin's rising cost of living.

"There's going to have to be other ways to combat affordability," York said.

But where to park?

The city's micro-unit proposal requires just over one parking space per two units—the same regulations seen in vertical mixed-use districts along Burnet Road and South Lamar Boulevard, for example.

While there is concern among some neighborhood groups that enough parking is not mandated for such high-density residential projects, city research suggests one-third to two-third of all micro-unit tenants in Seattle, San Francisco and Portland, Oregon, live without a vehicle.

Whether Austin can overcome its own auto-dependence remains to be seen, said Max Reinbach, vice president of Stream Realty's new multifamily division, which launched in May.

"Our public transportation is not on par with these other cities," Reinbach said. "That's why a lot of people in Austin won't be giving up their cars."

Reinbach and other Austin multifamily brokers report a trend of smaller studio and one-bedroom units being built instead of more traditional two-bedroom, two-bathroom concepts.

"That's been changing really ever since this buildup began in 2010–11," said broker Jeff Rogers, Transwestern Central Texas managing director of multifamily.

However, Planning Commission members on the city's Code and Ordinances Subcommittee urged council members to not "put the cart before the horse" by approving any "blanket zoning changes" before revisions to the city's land development code are made—a process expected to take at least two more years. Doing so may dramatically change the fabric of the existing neighborhood plans, subcommittee member Jeff Jack said.

Code rewrites may make more housing types such as micro units possible to help fill in the "so-called missing middle," said Ward Tisdale, president of the Real Estate Council of Austin, referring to the city's need for more market-rate affordable housing.

Ultimately, he said such projects need more momentum to become reality.

"Our developers are like any other business person, they respond to market demand," Tisdale said.

Mitchell, a past RECA president, said micro units should be geared toward single Austin adults who have no children and little personal belongings.

"For them, it is an option," Mitchell said. "It's not going to be for everybody, but for some it's a perfect fit."