In 2000, the average new apartment built in the U.S. measured 1,003 square feet, according to Dallas-based research firm Axiometrics. By 2010, that square footage shrunk to 976. It wasn’t a huge decline, but after three decades of growth, the falloff was noticeable. During the recession, the average new single-family house was 2,135 square feet; by 2013, that number mushroomed to 2,598 square feet. Suddenly, the McMansion was back.
What gives? Market trends are increasingly pushing the housing market into a barbell with smaller apartments (including micro units) on one side and McMansions on the other. To most observers, that’s a surprise. Coming out of the recession, conventional wisdom says that cash-strapped consumers would have to—and want to—cut back on house size.
“All you read is that the consumer wants less and they don’t want a big house,” says Brian Cullen, president of Corbelis Development NoVa. Corbelis is the developer at Willowsford, a 4,000-acre planned community in Loudoun County, Va. “We started [at Willowsford] with small thinking, but the national numbers suggest that the average single-family detached house is bigger than it was in 2005. At the end of the day, when people are buying a house, they don’t want to give up what they already had.”
But the millennials inhabiting high-tech, yet cozy student housing and apartments don’t have outsized space expectations. Over the next decade, their preference for the walkable convenience that often accompanies smaller living spaces will collide head on with their parents’ (and grandparents’) insatiable addiction for square footage.
Will millennials’ maturation force home builders to come up with walkable communities and smaller, more innovative homes that might, finally, kill the McMansion? Or will it lead millennials to make the decision to abandon walkability and convenience for more square footage?
No one really knows the answers to these questions, but trends demonstrate that Gen Yers—many of whom currently are living in student housing and apartments—have different expectations than the generations before them. Even if they eventually end up in single-family homes in the suburbs, their acceptance of efficient spaces might change the game for many builders. But without public policy changes and rethinking what home value really means, their preferences for efficient spaces may do little to cut square footage.
As average square footage fell after the recession, Michael Woodley, president of Woodley Architectural Group in Santa Ana, Calif., worked with Texas-based public builder D.R. Horton to produce Division 43, a 29-unit micro-home infill project in Portland, Ore. At the time, it seemed like the wave of the future. The unit sizes started at 364 square feet and the development eschewed parking for bike storage in the cycling-happy City of Roses. Woodley looked at replicating that project because he thought it would fit a need, but right now those plans are “still on the boards.”
John Thatch, principal and director of design at the Pleasanton, Calif.–based architectural and planning firm Dahlin Group, also has designs for smaller products but, with the exception of apartments, no one is biting. “It’s small portion of our body of work right now,” he says, “but I think it will grow.” As tough credit restrictions have blocked entry-level buyers from entering the market, the only people with the means to buy houses are the ones who want really large homes. As such, builders have responded to those desires.
“Builders are in the business of building products that the consumer wants,” Corbelis’ Cullen says.
Consumer preference also is why apartments and even student housing have been shrinking. The target market for apartment and student housing developers wants location, not size. “Folks want to be in certain areas,” says Bradley Cribbins, chief operating officer and executive vice president of Phoenix-based Alliance Residential, which was the largest apartment builder in the country in 2013. “That’s why our downtown urban structures have been very popular. They have close access to all of the places [millennials] want to be, whether it’s shopping or restaurants or bars.”
This is even a trend on campus. “We find that students like to ride their bike and walk to class, so all of our new properties are within walking distance to campus, are built on campus, or are readily accessible to public transportation,” says James Kenner, vice president and senior director of design for EdR, a student housing REIT based in Memphis, Tenn. “In our properties the actual units themselves may be smaller, but we have amenities to encourage the community aspect.”
In 10 out of the 15 largest metros, unit sizes have fallen over the past decade, according to Axiometrics. In many of these markets, renters are no doubt sacrificing unit space to have livability and amenities outside the home. Essentially, their apartments are where they sleep, while the building amenities and surrounding neighborhood is where they live.
“They’re willing to live in smaller spaces because the community areas of the assets that we’re building now are so sophisticated,” Cribbins says. “They have beautiful common areas where you can collaborate with other folks.”
Despite these testimonials, even the most resolute urbanist wouldn’t proclaim that millennials are going to forever eschew the size and acreage of the suburbs to gather in cramped apartments in the city. For many, life will evolve, priorities will change, and the desire for a yard, more space, or a good school system for children will win out over having multiple trendy bars down the street.
“They don’t really want what mom and dad have until they get married,” says Nick Lehnert, executive director at Santa Monica, Calif.–based architectural firm KTGY. “Then all of a sudden things start to revert. They start getting realistic about what they need for the children and what they need for themselves. [Right now,] Gen Y is used to living in small spaces or with roommates because that’s all they can afford.”
Shrinking the House
Even if millennials do follow their parents’ path to the suburbs, many architects predict (and hope) that the efficient designs they’ve become accustomed to in college and apartments will follow them to their single-family home.
“I’m hoping this is the generation [that pulls in house size] because our generation went gigantic,” Thatch says. “It’s a chance for architects to get back to design smaller, more thoughtful spaces that are flexible.”
Others agree with Thatch and contend that, by duplicating designs in these apartments, architects could help reel in square footage. “Apartments have gotten smaller,” Woodley says. “And as an industry we’ve gotten good at thinking about how people use the space versus just adding space.”
Kitchens and dining rooms are two areas where architects are finding smaller, flexible spots. Maybe there’s an island in the kitchen instead of table, which is commonplace in today’s apartments. At Willowsford, which still has homes in the 2,300-square-foot to 5,400-square-foot range, Cullen says a lot of the models no longer have living rooms. “There’s a combination of a kitchen and family room with a little dining area,” he explains. “There are much more open floor spaces, and there are positive cost implications because you’re building fewer walls.”
Other traditional spaces are on their way out as well. “People are disregarding the traditional formalities that once were considered essential staples,” says Howard Englander, who oversees architecture for Walnut, Calif.–based Shea Homes. “For instance, the living room is obsolete, dated, and archaic. Very few builders are delivering the traditional living room.”
Cullen also sees a fusion of indoor and outdoor space with living areas off the family room, the kitchen, and the master bedroom. On smaller lots, Thatch has another way to conserve space that borrows directly from the apartment industry. “The other thing is looking at the rooftop as your backyard,” he suggests, “although people are afraid of the waterproofing issue.”
For Shea Homes, Woodley has brought loft-style designs to for-sale homes with the master bedroom overlooking the living space. “It’s really for the young couple or young professional single,” he says. “We think about how they use [space] versus just putting raw footage in it, which is different than the mid ’90s when it was just about more house and less money.”
More open floor plans also curtail the need for extra square footage, and not just by eliminating walls. “When you open up spaces and don’t define everything by three walls, you’re creating a bigger visual sensation and buyers want that,” Englander explains. “They want to see expanded vistas throughout the house.”
But then in other places, space is being added in to compensate for what’s being pulled out. “I do find it very interesting that people come in and the first thing they want is build a smaller house,” Woodley says. “They don’t need a formal living room or formal dining room, but they do need a big play room. Part of it is everyone is willing to compromise until they have to compromise.”
In the early 1990s, James Wentling, principal at James Wentling/Architects in Philadelphia, designed a number of communities with new homes in the 1,300- to 1,200-square-foot range. But he says that’s been hard to do recently. “That’s just not happening anymore because the entitlements are so difficult that builders really can’t do much below 2,000 to 2,200 square feet,” Wentling says. “They may be more willing to accept smaller square footage if it can be delivered.”
What’s occurred is that convenience is unattainable for most people. “The thing about walkable communities is who doesn’t want them?” Wentling asks. “But it’s hard to create that dynamic at a reasonable cost.”
Lehnert also sees local zoning regulations as an obstacle to building smaller, more affordable homes. If a jurisdiction specifies two-car garages, for instance, it’s hard to reduce square footage in the overall house. “We’re in kind of a transition zone until somebody steps up because the cities have their own criteria and design guidelines that make it impossible to get any density,” he says. “As long we can’t get density, we can’t get the land value to reflect something that would make the land available to these kids.”
Many of these local policies reflect the prevailing opinion in many jurisdictions. “We were in a city without a development for 30 years and we proposed something below a 4,000- to 5,000-square-foot lot and the public outcry was insane, absolutely incredible,” Lehnert recalls. “A lot of public officials just caved when the outcry started to occur because it’s the easier way out.”
Builder hesitancy also gets in the way of cutting back on square footage. With super-tight margins on entry-level product and diminished lot supplies, many builders would rather focus on the higher end of the market, where they can juice returns. Part of the problem when reducing square footage isn’t just building smaller homes in dense infill communities—it’s also difficult to reduce the size in mammoth single-family homes. Consider the role realtors play.
“At the end of the day, the builders come back to a price per square foot that the market is buying,” Cullen notes. “The realtor community will say, ‘You can’t pay over $2.10 a square foot.’ If I built this really cool house and I’ve crunched its square footage by 20 percent but now the buyer pays $2.30 a square foot, the realtors who represent 85 percent of my buyers are saying, ‘You can go across the street and get this other house for $2.10 and you’re buying more square footage.”
micro lAt that point, it’s a minimal cost for a builder to add more square footage per room, and they’ll gladly do it to remain competitive in the market. “They’ve allocated square footage differently and it fits in the realtors’ mind as acceptable for price per square foot,” Cullen says.
But Woodley is hopeful that millennials are the generation that will destroy these sacred cows of housing. “If it’s more thoughtful, more efficient, a better use of space, and a better design, that’s what entices the younger buyer, not the idea of what excited their parents,” Woodley says. “This buyer is not nostalgic at all about aesthetics. They’re not trying to create something their parents have.”
EdR’s Kenner agrees with Woodley’s assessment, adding that he thinks millennials are “definitely pulling away from the McMansion of their parents.”
Learn more about markets featured in this article: Portland, OR, Los Angeles, CA, Phoenix, AZ.