It is said the best things come in small packages. While true of many things, this axiom seems lost on the way we design our homes. As discussed in my previous blog post, home sizes are indeed going down, but with median square footage of 2,634 square feet, few would say most American homes are packaged in any way that could be considered small.

Though the real estate development pipeline might still skew large, there is a reason to believe there is a growing demand, for a smaller, better type of home, both in single and multifamily development. Think of it as the “compact luxury” house--a term typically designating SUVs. It’s the type of home I’ve designed with the URBANEER bungalow, and today, I will discuss the forces that I think are creating this demand.

The iPhone effect

There was a time when people reflexively assumed more was better. The assumption makes sense in the analog world. In the analog world, what you see is what you get, there are no “clouds” to access vast unseen resources. More stuff, means more capabilities, resources, and most likely more success enjoyed by the possessor of the stuff.

Then came the iPhone.

An iPhone was a pocket-sized device that contained a phone, email client, planner, flashlight, book, magazine, and music libraries, television, online stores, social network, matchmaker, and so much more. Critically, the iPhone decoupled the words more and better. In fact, in an Apple-designed utopia, a person might only possess a few exquisitely designed items that are able to do everything they could possibly imagine.

This minimalist aesthetic and functional ideal has affected everything from fashion to food, and I believe it’s affecting housing as well. Many aspirational homes seen in magazines are devoid of extraneous elements. The Wall Street Journal published a story entitled, “Luxury Homes That Are Better, Not Bigger,” remarking how many luxury home buyers are increasingly choosing the quality of space over quantity.

‍Image of apartment via Brad Swartz

And there’s growing market validation of this idea. The Washington Post’s Jon Coile recently wrote about a growing trend where “smaller houses [are] gaining in price faster than homes with a greater amount of square footage.” He writes that, “Even though these residences have a lower price tag compared to larger homes, the rate at which their prices increase has started to outpace that of more traditionally sized dwellings.”

Coile notes that some of these gains are attributable to the fact many of these homes are condos, which tend to have higher values on a square foot basis. But that is not the only reason.

What apps does your house have?

Broadly speaking, an iPhone’s capabilities (or any smartphone nowadays) are dictated by its hardware (processing power and memory) and software (connectivity and apps).

Conventional home design focuses primarily on hardware. Developers, architects, and other real estate pros make sure individual homes are equipped with tons of amenities--swimming pools, wine cellars, rec rooms, etc. But this approach is like a smartphone with a 2TB external hard drive. Sure, it gets a lot done, but it makes the device--be it a smartphone or a home--big and, ultimately, limited.

(There is a caveat to the above analogy. Hardware, for a smartphone or a home, has evolved. In much the same way an iPhone has 10x the processing power of a mainframe that once occupied two stories of a office building, intelligent furniture--such as the furniture URBANEER designs and manufactures--can pack far more functionality into the same space as conventional furniture.)

But the way to truly unlock a smartphone’s potential is through connectivity and apps, by which it can tap into the virtually unlimited resources of the internet. In the context of housing, a home’s connectivity and apps are what the home gives access to, whether it's in or outside the building.

Consider that the average square foot in New York City sells for $1,441. In San Francisco, it’s only $966. And though it’s hardly New York or San Francisco, the Heritage Hill neighborhood where my bungalow is located has the highest median sales price in Grand Rapids, Michigan. These prices have little to do with the value of the house itself and everything to do with what can be accessed from the home.

In homes with higher property values, homes tend to be smaller. To compensate for the smaller sizes, developers are focusing improving the quality of the homes (more on that in a minute) and adding shared amenities that give residents an experience on par with a larger home. Coile writes:

What developers weren’t able to provide in square footage, they make up for with pools, concierge services, wine lockers, soundproof music rooms, free Zipcar or bike-sharing rental, or entertainment rooms with oversize televisions and surround-sound speakers...In addition to these on-site perks, many of these buildings are surrounded by restaurants and retail that attract a large number of buyers. Residents are paying not only for the square footage where they live but also for the opportunities just outside their door.

The luxury of less

Bear with me as I carry the iPhone analogy just a bit further. Let’s harken back to the days before smartphones: when we carried big planners in stiff suitcases, when we rifled through rolodexes, when we had to go to our desktop computers to send emails, when we printed out directions, and loaded our 100 disk CD changer. Some of us will romanticize about those days, but for most of us there’s no going back. Life with a smartphone is smaller, more functional, probably more affordable, and infinitely less cumbersome.

Similarly, large homes carry with them more things to manage: more rooms to clean, more spaces to heat and cool, more land to pay taxes on. And though we might enjoy a large home’s capabilities on occasion, when most of us look at the situation soberly, we realize we’re managing spaces we don’t often use.

I think people are realizing the freedom that comes from having fewer things to manage and pay for represents a different, though very tangible, type of luxury. 

Other benefits of the smaller, better approach include:

  • With less space to fill, it’s easier to make upgrades on materials, finishes, and appliances. On my bungalow, we used elements such high quality plumbing fixtures from Kohler and appliances from Bosch. The home enjoys a level of quality not normally found in a 1,500 square foot home.
  • Likewise, the smaller footprint makes it easier to invest in efficiency improvements such as high performance windows, insulation, HVAC and energy management systems, all of which significantly reduce the home’s energy footprint and promote a healthier living environment.

The expense of these upgrades is easier to manage since the total area that’s being fitted out is relatively small. But the improved user experience, durability, performance, and efficiency these upgrades add more than justifies the expense and results in dramatic cost savings over the product’s lifecycle.

Of course, there are challenges with the less, but better approach, particularly in terms of financing. Conventional appraisals typically look at square footage as the primary metric for determining a home’s value. While an extremely high quality 1,500 square foot home might have the same market value as a low quality 4,000 square foot one, banks might be slow to appreciate this parity. But as this new breed of home grows in popularity, I predict lenders will start developing assessment tools that go beyond the fairly crude metric of square footage.

This ‘less, but better’ home is the kind of home URBANEER is out to design, build, and support. And though there might always be a place for large homes, as more Boomers choose to downsize, as more millennials choose to live mobile, less consumer-driven lifestyles, the need for high quality compact housing will continue to grow in the years ahead.

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