The Micro Units Movement

Do tiny homes have a future in Canada?

There’s a new kind of housing unit appearing in Canadian cities. Small houses and tiny condos called “micro units” are growing in popularity amongst urban dwellers, potentially causing builders and cities to change how they plan and design our cities.

A micro unit is a dwelling between 200 and 500 square feet. Of course, homes of this size are not uncommon in places outside of North America. The average house in Hong Kong, for example, is 484 square feet, which illustrates that “micro unit living” isn't unprecedented. 

Why Micro Units?

The growing interest in smaller, more compact homes has many root causes.

In an article about his 420 square foot studio apartment, Graham Hill argues that “smaller living” means less room for “stuff” and more room for things that actually matter, like relationships and experiences. It’s a sentiment that is no doubt shared by many in a time when sustainability and efficiency are important considerations.

On a more practical level, smaller homes are cheaper to buy and cheaper to maintain: they require less furniture, less cleaning and less energy. These are all benefits for young singles and first time homebuyers who have a smaller need for space and a smaller budget than the average home buyer.

With sale prices that are often a fraction of other options on the market, micro units represent a new, lower entry point for homebuyers – one that doesn’t require huge down payments or large mortgages.

This is especially relevant to the Millennial generation, many of whom are only now moving out of their parents' home and starting their careers. In fact, the wave of “Generation Y” hitting the market is likely the primary reason the demand for micro units is growing. 

Not only do Millennials struggle to afford the average real estate prices that currently exist in many of Canada’s urban centres (such as Calgary, Vancouver and Toronto), they are also more likely to prefer dense, urban communities with a mix of amenities and transportation options. Meaning, young Millennials are more willing to trade home size for the benefits of living in the right place or community. Particularly when they are single and just moving out on their own.

"Young people just love them…because it lets them get into the market," says Jon Stovell, president of Reliance. "It's trading space for place. It's having all the stuff outside the four walls that makes up your lifestyle."

For developers, micro units also represent an interesting opportunity. They expand the market of potential buyers and give builders a new, efficient option for densely populated urban areas.

In addition, although micro units are cheaper on an absolute scale for buyers, they tend to be more valuable for developers on a per square foot basis.

“Shaun Hildebrand, vice president of condo research firm Urbanation, says condos under 500 square feet can bring in well over $3 per square foot, while the rest of the market averages around $2.50 or $2.60.”

As a result, micro units represent a unique, viable home option for both buyers and sellers in Canada.

The Challenges

Of course, there are some barriers to micro units gaining a legitimate foothold in the market. The first and primary is zoning policy in many cities. In Vancouver, for instance, the local bylaw dictates that condo units can be no smaller than 398 square feet. Because this kind of housing unit is so new, it may run afoul of existing zoning restrictions, depending on the city.

In addition, major banks in Canada are wary of financing tiny homes. Without an established market or sales history, micro units represent an unknown risk to the big lenders. As a result, micro unit buyers are sometimes forced to borrow from smaller lenders like private interests and credit units, who often charge higher interest rates. 

These issues don’t represent insurmountable hurdles, however. If demand and interest in micro units proves persistent, it will no doubt force local governments and the major banks to “make room” in their policies for the little guy. 

May 25th, 2015
Updated: January 3rd, 2018

Young people are expressing more and more interest in homes under 500 square feet in North America.