Comment: micro homes can cause big problems, so why do they get built?
PUBLISHED: 18:00 22 August 2017
Properties under 37 sq mt are hard to mortgage, don’t hold value, and are hardly aspirational. So who is building them, and for whom?
I love things in miniature. Anything scaled down to a pocket size scale brings out my covetous side. As a child this manifested in a love of doll house furniture, miniature figurines of animals and model trains. Children’s toys in the 90s actively cultivated a love for all things mini, with the neatly gendered Polly Pockets (pink plastic dolls that lived in teeny snap cases) and Micro Machines (blue plastic war machines that waged epic pitched battles).
This affinity for all things Lilliputian has stayed with me into adulthood. I enjoy anything that can pack down tiny, especially those down jackets from Uniqlo that come with their own stuff sack. And I can happily live in small spaces, a talent that has served me well since moving to London.
There are limits however to how small one can go before feeling the detriment to ones health, both mental and physical. Anyone who has done battle with the London rental market will have seen their fair share of Harry Potter cupboards masquerading as habitable homes.
Intense pressure on property prices and available land has seen increasingly smaller homes being built to cater for London’s insatiable demand for living quarters. At the bespoke end you have architects such as Roger Zogolovich, with his manifesto for thoughtful infill architecture.
At the still-ethical-but-commercial end you have Pocket Living, a private developer specialising in discount starter homes for those earning under £90k pa. They have a no investors rule to keep the buy to let landlords and land bankers out, and last week Mayor Sadiq Khan gave them his seal of approval to the tune of a £25 million cash injection.
But as the small square footage movement gains momentum the rise of the micro homes is well under way. By definition, a micro home is anything under 37 sq mt, which is minimum size for a studio under the Government’s national Technical Housing Standards (THS).
But in 2013 a loophole was introduced. Permitted Development Rights allow developers to convert existing buildings, such as office spaces, into micro properties. It was open season on super small homes.
This week a new report from Which? revealed that between 2013 and 2016 290 micro homes were built in north London alone. In 2016 8,000 micro homes were built in the UK the highest number on record.
The micro homes market is clearly lucrative – the question is for whom. As the report makes clear, these pint sized studios are only suitable for young professionals living alone. A lot are marketed as ‘investor opportunities’ promising ‘guaranteed yields’ to potential landlords. But micro homes are a particularly poor investment.
When the news broke that offices in Barnet House in Brent, which gets a name check in the report, were set to be converted into flats as small 16 sq mt I called my friendly local financial advisor. He told me in no uncertain terms that getting a mortgage on the flats would be a nightmare. Most reputable lenders are loathe to loan on these small properties, and those that would have an upper limit for the number of properties they’d lend to in one building.
The Which? report backs this up. Of the six banks they approached only a couple would consider lending on a sub 37 sq mt house, with Nationwide and RBS flat out refusing. RBS noted this was because micro homes are vulnerable to ‘restricted demand’ and ‘volatice pricing on resale’. In other words, no one would want to live in one unless they absolutely had to, and if house prices drop studio flats are the first to see their stock devalued.
The mortgage question isn’t a problem if you’re an investor buying in cash, but the volatile pricing should cause concern. You might think the upward trajectory of house prices covers all property, no matter how tiny the patch of land it covers, but micro homes buck the trend. Which? data showed homes under 37 sq mt only increased in value by 11.8 per cent between 2013-15 and 2016, compared to the 14.5 per cent seen by larger properties.
So how do developers justify building these glorified shoeboxes? One exec of a micro property company told Which? that younger generations are more willing to adapt to these tiny homes because they prefer to store their music, films and photos on the cloud. Presumably this is the silver lining to the cloud that hangs over the hopes and dreams of young Londoners.
The Which? report concludes by asking whether micro homes can ever be aspirational, to which I’d posit the answer is a resounding: no. Bridging finance provider MSF polled 2,000 UK adults and found that 81 per cent were unenthused by the prospect of living in a new-build house.
More tellingly of all, 23 per cent admitted they would consider buying one as an investment as a buy-to-let property, but wouldn’t live there themselves. Ay, there’s the rub.
Micro homes are built by and bought by those who have no intention of living in them themselves. Relaxing government interference might have seen more housing built for Londoners, but only the desperate have to call them homes.