Should Tiny Mean Cheap?

by Lark Turner

Should Tiny Mean Cheap?: Figure 1
A rendering of a micro-unit at The Wharf from Perkins Eastman.

Should tiny mean cheap?

That’s the question developers in DC, who are easing into the micro-unit trend, will need to answer.

At a conference last week on the small homes, data was highlighted by George Mason University’s David Versel suggesting the city may need to build at least 10,000-20,000 micro-units to accommodate an influx of young, single professionals who will come to work in the city over the next several years, but not make much money.

When developers describe their target for the housing, this is the demographic they’re highlighting: carless, mobile young adults who want to be in the middle of city centers and are used to biking or taking transit to get around. But the pitch leaves out the fact that most of the cohort can’t afford to pay what developers are proposing for the units, because these newcomers’ rental budgets will top out around $1,750 a month.

The rental rates for the smallest micro-units at The Wharf project in Southwest will go for about $1,570 a month, though that will likely increase by the time the building delivers in 2017. The largest units at The Wharf, with an additional 50 square feet or so of space, will top out at about $1,800 a month.

The small, furnished units proposed for the Patterson Mansion on Dupont Circle, however, will rent at a higher rate. That was made clear at a recent ANC meeting, where a commissioner asked if the units were being built as pieds-à-terre for frequent travelers to the city. “Basically,” the project developer responded.

“I do (see a disconnect)” between the proposed rents and the people who most need the housing, said Versel, a demographics researcher. “But this is the beginning of the wave. What we’re seeing is we always start with the top of the market. So you’re seeing the luxury apartment go in first. When that works, you’ll see a bunch of imitators who’ll try to shave 10 to 20 percent off that rent.”

Versel also pointed out that rents will vary based on where the micro-units are built.

“If you start to see these in H Street NE or Petworth, they will be less expensive by virtue of the land being less expensive,” Versel told UrbanTurf. “I know millennials don’t buy cars, but the analogy is, they want a Toyota, they don’t want a Lexus. And [right now] they’re selling a Lexus here.”

This article originally published at http://dc.urbanturf.com/articles/blog/estimated_microunit_pricing_outpaces_market_reality/8211


  1. Navy Yard Res said at 8:03 pm on Friday March 7, 2014:
    Ugh, why would I pay $1750 for a tiny microunit when I live right down the street and pay $1834 for a 762 1 BR + Den? They need to come WAY DOWN on the rent.
  1. JES said at 8:26 pm on Friday March 7, 2014:
    Yeah, I really don’t understand who’s gonna be paying these rents. The price per square foot is insane compared to other buildings in the area, and while waterfront views are certainly worth some kind of premium, is it really worth THAT much? I guess time will tell, as we’ll see how quickly (or how slowly) these things fill up once they’re built.
  1. Anon said at 9:41 pm on Friday March 7, 2014:
    At this time, many low- and moderate-income young people in the city are already doubling up in 1-bedroom apartments to defray costs. This will not be doable with micro-units, which are just too small. The rental rates of micro-units may very well have a lower-than-expected ceiling to be affordable to the "targeted" entry-level young professional. $1,500 may be passable, but for many, it's still too high. Why pay this rate when $800-1000 buys a nice room in a group house, or for a bit more, half of a 2-bd with a separate bath? The leasing up of The Harper on 14th Street, with its smallish junior 1-bed units, will provide a measure of sorts to evaluate what price points micro-units command. But with one caveat. Two people will be able to squeeze into a Harper unit, and although a bit tight, so to say, it might be the rule rather than the exception.
  1. Justin S said at 10:50 pm on Friday March 7, 2014:
    Well, at least if these become common enough to make a decent sized data set out of, they'll be able to be used as hard evidence showing that the only people that gain from making cuts in housing construction costs are the existing land owners. let's talk about "Luxury" while we are here. finishing costs are rated via builders by grade-level. Those grades are then successfully priced out on a per-foot cost. In a average american new construction home, luxury-grade finishes cost luxury prices because THE HOMES ARE HUGE. Marble counters and imported hardwood floors are expensive when you're coating 2,000-4,000sqft homes in them. The price difference between top and bottom end finishing in a micro-unit is so small that it is barely worth discussing. There's no cost association with the quality of these units. Make no mistake, the only thing you're paying for is greed.
  1. Alexa said at 12:09 am on Saturday March 8, 2014:
    Way too high for the area. I spent a year in SW in a much larger, renovated unit for that price. And I shared the cost, even though my husband and I are no longer ''young" professionals. Even at that cost, for a larger space, with amenities like a gym and a pool, the building was a revolving door. There were always vacant units. I just don't see how the average young professional can afford this price. SW draws a lot of folks with dogs and families, neither of which will be seeking a micro unit. Young folks often want to be close to the action and there was none of that without a bike or metro ride to Navy Yard or Chinatown. I love small living and am excited to see micro units coming to DC. I just hope the developers reevaluate the price.
  1. Barry said at 2:22 am on Saturday March 8, 2014:
    Having recently aged out of the "young professional working class" demo making decent money; I can honestly say, unless the pricing tiers fall under $1400mo - occupancy levels will be extremely low. My first 4yrs in DC (2008-2012) were spent at the Barclay Bldg @ 16th & Q. The rent was $1,150mo with annual increases of ($50-80) per year for 355sq ft. Small yes, but the location was prime. Those same studios today rent for $1300-1400per mo. My point, most young adults aren't dumb; nor desperate, so I highly doubt they'll spend $1600-$1800 for a micro-unit with so many other lower studio options available elsewhere.
  1. Nick the Greek said at 4:16 pm on Saturday March 8, 2014:
    Way too expensive for what you get. I am at the other end of the scale (65) and would not consider a micro unit at that price. An efficiency (studio) makes more sense since it would be a bit more room for less money. It is all about the money, and value.
  1. SW, DC said at 1:45 pm on Monday March 10, 2014:
    $1,570 isn't really even all that bad. And remember these units wont be finished until 2017. And that's just when construction is done. Who knows when they will start leasing. $1,570 may seem a little high in 2014 for a micro unit, but my guess is it will be spot on or low by 2017/2018. Also, let's be real - waterfront views ain't cheap...
  1. Alex said at 4:35 pm on Monday March 10, 2014:
    I disagree - $1,570 really is that bad. The developer's primary market for these units are Millennials (and to some extent foreign expats working in DC). Per the Washington Post - "25-to-34-year-olds in the District ...earn a median salary of $44,680". This is a pre-tax salary. Remind me again why you think $18,840 (disregarding utility bills), roughly 60-70% of a young professionals living wage isn't bad? Finally- we are talking about a little over 300SF of space. the difference between 300 and 350 SF in micro units can be the difference of a few inches in closets or an entryway.
  1. SW, DC said at 6:23 pm on Monday March 10, 2014:
    Since when is owning a condo or renting an apartment a charity event? You are supposed to work hard, save, sacrifice and then if you are lucky enough - you can become a homeowner, or rent an apartment in a prime location with prime amenities. They don't just pass them out in DC... I guess it all boils down to - if you can't afford it, then it probably isn't for you. You don't have to live in SW on the waterfront of course. You can actually move to a non micro unit in PG or NOVA and save a ton - if that's what you're in to. Personally I would want more space, but only paying $1,570 in 2017 for an East Potomac Park/waterfront view is a steal imo. Mark my words. By 2017/2018 these sardine cans will be flying off the shelves
  1. Alex said at 9:11 pm on Monday March 10, 2014:
    I never said they wouldn't sell. There are enough transplants without furniture willing to forgo square footage for location and new construction. The problem is setting a precedent for this high of a SF price aimed at young professionals. This isn't charity, even though some like you might feel it so. This is about creating a city that is livable and welcome for people of all ages- something that allows DC to continue to import young workers from all over the nation. Micro units are great in that they can provide vitality and a significant number of residents in a neighborhood, but this is price gouging. By placing the onus on the employee to "work hard, save, and sacrifice" implies that most don't already to that. Again, I'd say spending roughly 60 - 70% of your living wage is already proving sacrifice, and if you know anyone who pays this kind of rent who isn't working hard then they aren't worried about their living wage anyway.
  1. Alex said at 9:19 pm on Monday March 10, 2014:
    One more note: moving out of the District saves a marginal amount of income for a single family residence at best. The substantial cost savings seen by someone who does not pay car insurance, upkeep, gas and registration far outweighs any rental savings. Additionally, a quick calculation based on peak metro fare times, belt metro parking fees and gas aims at around $100 for commuting a week. Surely losing $400 per month in commuting while wasting ~1.5 hours of every day isn't justified by living in PG plaza or NOVA. No, the real savings in DC is seen in group housing, as stated above by "Anon".

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