In July, New York City Mayor Michael Bloomberg announced a competition to design, build, and manage a small apartment building of 50 or so units on a city-owned site at 335 East 27th Street in the Kips Bay neighborhood of Manhattan. This, in and of itself, was nothing out of the ordinary.

What was groundbreaking was the requirement that at least 75 percent of the apartments be between 250 and 300 square feet (23 to 28 sq m) in size, which have come to be called “micro-units.” In a city where the average apartment measures 1,300 square feet (120 sq m), the idea of a building entirely composed of apartments one-fifth that size has stirred intense interest in the press, the local real estate industry, and, apparently, around the world.

According to Robert K. Steel, deputy mayor for economic development, the New York Department of Housing Preservation and Development received 33 proposals to build these units by the September 14 deadline, nearly three times the normal response the city receives to similar requests. Proposals came from teams that included partners from London and Amsterdam, as well as teams from New York City, New Jersey, and Massachusetts.

But interest in the municipal government’s request for proposals (RFP) spread far beyond the city; according to Steel, the RFP has been downloaded more than 1,600 times over the past two months from cities across the United States and around the world, including Athens, Bangalore, Berlin, Copenhagen, Hong Kong, Innsbruck, Jerusalem, Lima, Melbourne, Milan, Montreal, Paris, Quebec, Rotterdam, Shanghai, Sydney, Taipei, and Zurich.

One reason for the surprising interest shown by the New York real estate industry is that, if this effort is successful, there is the possibility that the city will reduce the current minimum apartment size from 400 square feet (37 sq m), which has been the requirement since 1987. This would allow many developments to include more units, potentially improving financial feasibility and lowering rents in a city where the cost of new construction makes it impossible to build housing at rents affordable to people with modest incomes, especially the young and the old, without considerable subsidies.

This last point is important because the city is offering no subsidies, although the evaluation criteria include both the price to be paid to the city for the land and the proposed rent levels. In other words, the apartments are to be offered as market-rate units with no income restrictions or city subsidy (other than a possible reduction in the land price), but the affordability of the rents will be considered in evaluating proposals.

The average rent for a studio apartment in New York City runs $2,000 a month, and is $2,700 a month for one-bedroom apartments, according to municipal officials. Those rents are well out of reach for many New Yorkers. So, from the city’s perspective, this initiative has the potential to demonstrate a way to provide decent housing at lower rents without the need for a subsidy from the city.

There is good reason to believe that micro-units would be popular, as 46 percent of all New York City households consist of only one person, according to the 2010 census. This is almost double the national figure of 27 percent, although this percentage has been climbing over the past decade. New York City has a severe shortage of smaller units, as there are 1.8 million one- and two-person households but only 1 million studios and one-bedroom apartments. 

A fundamental question that this initiative is designed to answer is the extent to which simply building smaller apartments in fact reduces the cost of the apartments and makes an otherwise unfeasible building economically workable, and whether this reduces rents absent a city requirement. Given that there is the potential of strong demand for these units, at what price point will it materialize? How much below today’s average rents would these micro-units have to be priced in order to rent them?

Just making an apartment smaller reduces some—but by no means all—of the costs associated with building that apartment. Even when size decreases, the costs of installing a kitchen, a full bathroom, and heating, ventilation, and air-conditioning equipment change little, and those costs become a larger percentage of the total cost. The same is true for space lost to corridors, chases, and other common elements.

Another key question is habitability. Is this building going to be simply a throwback to the old days of the Lower East Side tenements that housed generations of immigrants at the turn of 20th century, or a return of the now-disgraced single-room occupancy (SRO) housing style? Municipal officials argue that the pitfalls of yesteryear’s tenements and SROs will be avoided because these units will be occupied by only one or two people—not the large immigrant families who occupied tenements—and will offer modern design, good construction, and strong management.

The fact is that this initiative responds to a longstanding aspect of the New York City housing market in which young people just coming to the city have crowded together in order to make their accommodations affordable. Paying the same for a well-designed, modern micro-unit as for one bedroom in a crowded, older apartment would seem like an attractive alternative.

Another intriguing aspect of the proposals submitted will be the kinds of programming and common facilities that developers propose. For instance, would a building be targeted to those who work in the arts, with shared studio space made available to them? If the target population is young tech entrepreneurs, would there be shared facilities with access to high-speed broadband where residents can collaborate on their work?

Micro-units also have the potential to be great homes for people in their late 70s and 80s, especially if the buildings have the right programming. There is growing resistance to the institutional aspects of traditional seniors’ housing, and a building of micro-units with a community kitchen for occasional community meals, and common facilities for appropriate services and socializing, could provide a needed sense of community and support while allowing residents to live independently.

Regardless of its size and programming, the ultimate amenity for any building in New York City —or any lively, walkable urban neighborhood—is the city itself, with its parks, shopping venues, coffee shops, arts, museums, libraries, and wide diversity of people and opportunities. Younger people, in particular, live more out of their homes than in them, using their apartments as places to retire to and rest up for their next foray into the world. The same is often true of the growing number of people in their 70s and 80s who are increasingly living alone by choice.

For all these reasons, this initiative may succeed. If so, it may open the way for a spread of the concept throughout the city’s five boroughs. And a success in New York may lead to similar initiatives in other cities, given the interest shown in the RFP.

If so, does this mean that the United States—the country where for decades the average size of homes grew larger every year, and where the typical home is now many times larger than homes anywhere else in the world—may now become the poster child for a new, smaller style of home, one more like those found everywhere else? Or is this simply a sensible response to a longstanding problem unique to New York and a few other high-cost cities? On the other hand, is it a facet of a larger rethinking about the nature of “home” being brought on by the Great Recession?

Whatever the answers are to these questions, this is an intriguing and innovative initiative that is well worth watching in the months ahead.