Why We Aren’t Building Enough Micro Apartments

On first inspection the micro apartment and co-living accommodation sectors are a common-sense solution to the UK’s housing problems.

Builders of all sizes find it hard to construct enough homes to satisfy demand, land is hard to find; the planning process is torturous; and affordability is fast becoming a joke.

And to cap it all, government and builders have to fight our bi-polar national personality; on the one hand everyone moans about high house prices and first time buying woes, but many of us campaign to prevent developments in our local area.

Faced with these headwinds, doesn’t building or converting more buildings into ‘micro apartment’ developments make sense?

“We’re living in an age when a confluence of factors are coming together that suggest micro living could be part of the solution for some sectors of society,” says Nick Whitten, Dorectpr pf Research at JLL.  “It’s not the silver bullet for everyone but it could work for some.”

The government, to a point, has been following this logic. After the credit crunch many older and less desirable offices stood empty and ‘permitted development’ rules were relaxed to enable properties with B1(a) permission to be converted into C3 dwelling houses.

A boom in office conversions ensued including many being turned into ‘micro apartment’ developments. Nearly 8,000 units were built in the UK last year up from 2,871 in 2014.


Micro apartments at a glance

  • There is growing capacity and demand for ‘small homes’ but planning is somewhat behind this curve.
  • Planners and politicians are wary of giving micro apartments under 37 sq metre the green light.
  • The biggest growth area that’s more popular with planners is for co-living developments for students and young professionals.

But then sensible planning policy ploughed head first into social campaigning. A slew of cheaply executed ‘convert-to-rent’ former office buildings have attracted national newspaper investigations, as has a string of stories about micro slum ‘apartments’ within the private rented sector.

While the smart micro-apartments and co-living developments being built for young professionals and students have little to do with slum housing, the two are inextricably linked in the minds of the public.

Planners, local authorities and government have been put under pressure by housing campaigners such as Shelter to limit the number of new developments within which living space is below the national standard.

Shelter had harsh words to say on the matter recently, saying: “In theory, converting offices sounds like a good way of creating some of the homes we need in a crisis.
“In reality, it’s often used by developers as a way of cashing in on people’s desperation by building unaffordable, rabbit-hutch homes.”

Permitted development

Faced with such views and a lot of heavy lobbying, many local authorities have withdrawn their exemptions for permitted development, and in London few if any now wave through this kind of ‘change of use’.

But the industry is attempting to reverse this. Last month the British Property Federation issued a report on small homes that attempted to nail down some definitions for developers to adopt.

There are a lot of different ways to describe them (see below) but the BPF has come up with three they want to see become the standard. These are ‘compact living’, ‘co-living’ and ‘shared living’, which in plain English are self-contained flats, living spaces with access to shared facilities and HMOs.

The BPF says following consultation with developers, planners, policy makers and tenants, whatever their size micro homes should include a bed, washing machine, toilet, shower, sink, storage, sofa, cooking facilities, fridge and a table.


Learn  the language

Despite the best efforts of the British Property Federation, there are still a lot of different terms used to describe ‘small homes’. These include: micro living, micro homes, micro pads, compact living, nano flats, HMOs, co-living, tiny houses, innovation living and ‘twodios’.


But the report shies away from recommending minimum standards, instead highlighting the range of small homes it found in the market. These vary from 12 to 40 sq m for compact studios and co-living units, most of which are below the national ‘living space standard’ of 37 sq m.

Outside the UK, space standards are even lower. According to JLL these include 24 sq m in the Netherlands, 14 sq m in France while Germany doesn’t have a space standard at all.

The UK’s which is not legally enforceable, starts at 37 sq m for a one-bedroom unit within a one-storey building and rises to 138 sq m for a six-bedroom home within a three-storey dwelling.

This has historical precedent. Older planners will remember the Homes for Today and Tomorrow report headed up by Parker Morris in 1961, which established the idea of a minimum standard.

But Nick Whitten believes this has now outlived its usefulness; huge leaps in data and tech mean space can be used far more efficiently than in the past, and that demographics have changed dramatically since the 1960s.

“We have a system designed around families and protecting children and ensuring they don’t end up in inadequate homes, but that ignores the demographic changes,” he says.

“Of the UK’s 28 million households, 11 million or 40% are families with children. That leaves the rest; singles, couples, sharers and retirees all of whom require less space.”

Space standards

The founder and CEO of Inspired Homes, Martin Skinner, has little time for the debate around minimum space standards, which he says should be scrapped.

“Things like space standards are based on the prejudiced view of regulators who tend to be older and therefore focus on family housing when in reality those moving into urban centres live in single households or share,” he says.

“Space standards should be scrapped and then let’s see what happens; as more people are able to afford their first home there will be competition to produce the most attractive product for the market.

“At the moment developers are incentivised to do anything special because the market is under supplied.”

His argument is that it’s impossible for the market to build more homes in today’s construction-constrained, faltering new-homes market in London, so why not instead increase capacity by building smaller homes that are more affordable?

Martin’s views will prompt outrage among housing campaigners, but within London’s luxury apartment-dominated housing market where sales are slowing and first time buyers are desperate for something affordable to buy, they do make sense.

For example at Inspired Homes’ Innova development in Croydon, people with a household salary of £50,000 can buy one of its compact one-bedroom apartments for £300,000 either with a £30,000 deposit or a £14,000 deposit via Help to Buy for a 30 sq metre apartment. That is seven square metres less than the national standard, although larger 35 sq metre units are available too.

Martin says that although they’re small, he has worked hard with lenders’ to ensure they are mortgageable, and predicts that lenders will accept smaller apartments in the future.

His contention is that, because of the current constraints on the property market, building smaller homes is the only way to go. But he’s worried by the lack of progress increasing the number of smaller apartments being built.

“We need to be constructing approximately £60 billion of housing stock every year just to keep up in the UK,” he says.

“At least half of all households are singe people so logically half of that £60 billion should be homes like mine, but my company’s portfolio is only about £600 million so far after building for three years, and I’m the largest operator in the ‘permitted development’ space.

“And it’s not going to get better – we’re running out of suitable former office blocks to convert.”

Development financing

Martin sounds most vexed when he’s talking about the lack of understanding among civil servants, who he claims invariably don’t understand how development financing works.

His company’s experience is that planners will only allow sites like his to make a 15-20% profit margin, and yet his finance costs for a two-year build mean the only way to make profit is to hope house prices have risen enough once the apartments have launched to make the site profitable.

“Most developments at planning stage are not viable,” he says. “But the government has killed the market for investors recently which means, along with Brexit, most builders in London are facing an uncertain future because prices are not rising. Brexit has already cost me £40 million.”

The government’s promises to allow planners to green-light co-living developments outside of the permitted development rules have also proved hollow.

The only example built so far, despite co-living now being within the GLA’s draft New London  Plan, is The Collective which contains 550 rented ‘person living spaces’ with access to a multitude of shared spaces including a kitchen, dining room, lounges and TV rooms.

Infancy

Nick Whitten says the micro-apartment and co-living revolution is very much in its infancy and that for example so far he’s only identified 300 large co-living developments around the world, never mind the UK.

Also, he says, over half a million people are already living in homes that are under 37 sq m. “We looked at the demographics and half were affluent and the other half at the lower end of the wealthy demographic, so although some have chosen to live in them, others may be trapped and have no choice,” says Whitten.

“But I do think it would be better to have a sensible, grown-up discussion about what is the minimum size of home needed in this day and age. Politicians need to re-examine space standards including people’s basic needs and what constitutes a home.”

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