City plan for micro-units may alleviate the city’s housing crisis and create a new pathway for homeownership

Illustration+by+Emma+DiMaggio

Illustration by Emma DiMaggio

Not to be confused with tiny homes, micro-units are apartments that are typically 350 square feet or less, and they may be coming to Long Beach.

Talks of micro-units began in 2017 when the city council approved 29 policy recommendations to address the affordable housing crisis in the city.

Those recommendations were born from a series of public comment sessions and roundtable discussions. One common thread: allowing and encouraging innovative housing types to address population needs, including micro-units.

Now, three years later, the Planning Commission is piecing together a pilot program that would allow for the production of 500 micro-units in Downtown and Midtown.

Tenants who opt for micro-units sacrifice square-footage in return for rents that are 20% to 30% lower than the typical rent of a market-rate studio apartment, according to a report by the Urban Land Institute.

For example, a renter may pay $2,000 for a market-rate apartment in Downtown. By downsizing to a micro-unit in the same area, they could have potential savings of up to $600 a month.

These savings would be determined by the nature of the micro-unit. Barebones units with basic amenities may cost less than luxury units with additional amenities like parking and high-quality finishes.

The financial allure of micro-units

C. J. Gabbe is an urban planner focused on environmental sustainability and housing affordability. While gaining his doctoral degree from the University of California, Los Angeles, he analyzed San Francisco’s micro-unit program.

“Cities have been interested in adding micro-apartments to their pallet of housing options because they represent unsubsidized but relatively affordable types of housing,” Gabbe said. “For someone who’d prefer not to live in a shared housing situation, they’re probably the lowest cost option.”

The City has long acknowledged the value of low-cost housing. As coronavirus decimates job prospects and fears of evictions loom, that value is only increasing.

“Given the ongoing housing crisis, which may be worsened by the negative financial impacts of COVID-19, micro-units could provide another solution to address the need for more affordable housing,” said Austin Metoyer, economic development and policy manager for the Downtown Long Beach Alliance.

Around 52% of all apartments in Long Beach cost more than $2,000 a month for an average space of 801 square feet. While micro-units aren’t necessarily affordable by definition, the program will help fulfill the city’s obligation to create affordable housing.

Periodically, the Southern California Association of Governments creates a Regional Household Needs Assessment (RHNA) that quantifies the need for housing in different cities. The assessment is mandated by state law.

According to the SCAG’s 2020 report, Long Beach is falling short of it’s housing requirement. The City needs 15,000 units to meet the demand for very-low, low and moderate-income housing. This doesn’t include the need for 11,000 above-moderate income units.

“Of course we care about meeting our legal obligations, but I think we’re more motivated by the fact that rents are very high and out of reach for a good number of our residents,” said Deputy Director of Development Services Christopher Koontz. “Being able to meet RHNA is a bonus, but really the driving factor is being able to serve the needs of our residents.”

While micro-units may not be 100% affordable, they will contribute to the city’s affordable housing stock. Since Downtown and Midtown will be subject to the city’s new inclusionary housing policy, at least 11% of rental units will be reserved for very low-income households.

See realated: Residents call for the inclusionary housing policy to be applied to entire city, developers push back

“The Mayor and City Council have been hard at work and they’re pressuring us to continue to think of new ideas and do what we can to increase housing,” Koontz said. “That’s exactly what this program seeks to do.”

An architectural rendering of what a 325 square-foot micro-unit looks like compared to a one or two-bedroom dwelling. (Les Architectures )

Micro-units may pave the way for homeownership

In the wake of what Koontz dubbed a “housing crisis,” the pilot program could serve as an “unusual but effective pathway to homeownership.” For young professionals, micro-apartments offer an opportunity to gain equity in property.

“Homeownership is out of reach for many city residents,” Koontz said. If micro-units are built for ownership, he said they could offer “a great opportunity to do wealth-building for that individual, to provide stability for the community and to achieve our goals of homeownership and building the middle class.”

For many Long Beach residents without substantial savings for a down payment, homeownership isn’t financially feasible.

“With single-family homes priced between $700,000 and $1 million, it’s really just not a viable pathway,” Koontz said. “What people need is an intermediate step, right? They need a condominium unit and they need a condominium unit that is a starter size and price.”

Micro-units could fill this gap. Instead of paying landlords, residents would make monthly payments towards their mortgage. After gaining enough equity, they could sell the unit and upgrade to a larger condominium.

“There’s a lot of discussion right now about how we can build a more equitable city and society. Part of that is reopening homeownership opportunities to people the way that may have been available in decades past, but aren’t today,” Koontz said. “The only way we can do that is by being open to new ideas. It’s a different idea to buy a very small condo, but financially it provides a great opportunity to residents.”

Micro-units, tried and true?

Long Beach isn’t the first city to encourage micro-units as a means of addressing housing demands.

San Francisco, Seattle, Boston and New York City all have such programs. Earlier this year, the Pasadena City Council unanimously approved changes to its city’s zoning code to encourage production of more micro-units.

As some cities ramp up their micro-unit programs for the first time, others are abandoning them. Just last year, after a surge in micro-unit production in Santa Monica, the Santa Monica City Council banned the production of micro-units unless they were 100% affordable.

“Council members were concerned a sudden wave of micro-units in the City would change the composition of downtown— as they don’t accommodate different household sizes,” stated the city’s quarterly newsletter. “They want to ensure new development includes enough larger units for families.”

Long Beach is already poised to avoid this problem. Micro-units will be built through a pilot program that only allows for the creation of 500 units.

“We don’t want to see micro-units in substitution for larger units or family units, which we need also,” Koontz said. “By doing a pilot, rather than flipping the on/off switch, it’s going to give us some real-world information.”

The pilot will allow city staff to analyze whether micro-units are suited for Long Beach. They’ll analyze how they work for tenants, whether they stifle other types of development and the general affordability for renters and developers.

According to Gabbe, some of the biggest deterrents for micro-unit production can be zoning codes, parking and open space requirements.

Despite these restraints, developers are often incentivized by the potential rental price of the units. While rental prices on these units are cheaper overall, they actually cost the renter more per square foot.

According to the Urban Land Institute, “Smaller and micro-units outperform conventional units in the marketplace—they achieve higher occupancy rates and garner significant rental-rate premiums (rent per square foot) compared with conventional units.”

Koontz doesn’t think that this will deter renters. In fact, he sees it more as a win-win. Renters will have access to cheaper housing and developers will get a return on their investment.

“When we rent an apartment, we don’t really think about what our rent per square foot is. We think about what our rent is, so there’s still an opportunity for people to be paying a lower amount of rent in total dollars,” he said. “We think it’ll be attractive.”

The pilot program is still in the planning stages, though he plans on completing it by the end of the year. Once it’s finished, Koontz will present the plan to the Planning Commission and City Council for approval.