Rent new micro-apartments near the CA Capitol in Sacramento

There’s a growing belief that one answer to Sacramento’s soaring rents and to the state’s affordable housing crisis is to think small. Really small.

With that in mind, a team of public and private developers broke ground in downtown this week on what will be the tiniest new apartments in the region with some of the lowest rents in years.

Called micro-apartments, at 267 square feet, the five dozen studio units now underway in the shadows of the state Capitol building are so scrunched they come equipped with couches that morph at night into “Murphy beds” and dining room tables that fold up against the wall.

Rents would be as low as $605 a month, a breakthrough price in a city that has seen some of the highest rent escalations in the country in the last decade, and where some new one-bedroom unit rents are at least $2,000 a month.

The project at 1322 O St. – called Sonrisa, which is Spanish for “smile” – presents several intriguing housing questions for renters and developers as a test case in Sacramento:

Will the project pencil out well enough to encourage other builders to give this a try elsewhere in the central city or along some of the region’s outdated and aging commercial corridors? And will the tiny size of the units be attractive for renters in an era when COVID-19 and teleworking have prompted some people to want larger apartments and homes?

The apartment building financing is unique, set up by the state of California, which owns the land and is essentially turning it over to a public/private development group led by the Capitol Area Development Authority and CFY Development, a longtime Sacramento company that has become a specialist in affordable housing projects.

The project is unusual in another way: To save construction costs, the building will not have a car parking garage. Instead, it will have a bicycle parking room.

Wendy Saunders, head of CADA, said she believes there are more than enough renters who will want to sacrifice space to live close to downtown work places and entertainment. Even if a significant percentage of state workers continue to telework from home, more workers will be back in downtown offices by the time the apartments are available for rent at the end of next year, Saunders said.

“I think they are going to go like hotcakes,” Saunders said. “There is such a lack of supply of housing in Sacramento now, there is going to be plenty of interest in leasing them.”

Income requirements for apartments

The units in Sonrisa will be limited to people whose income is 40% to 60% of the area median income. In Sacramento, that most likely means single people who earn less than $38,100 a year. Those may be restaurant and retail workers, service industry employees or some entry-level state workers.

Monthly rents will be set at three levels depending upon renters’ income, either $605, $756 or $907. CADA is not yet accepting sign ups for potential renters, Saunders said. That will take place next year when the project is six months from completion.

Units will have extra-high ceilings. Transoms above the door will allow air to flow through the apartment and out floor-to-ceiling windows on the opposite side. The units have small kitchens, but the building will have a communal kitchen and entertainment space on the top floor, part of it outdoors.

“For us, it is about creating a qualitative environment,” said architect Terry Green of the Williams + Paddon architecture firm. “Natural daylight, tall glass, higher ceilings make the space feel bigger.”

Sacramento City Councilwoman Katie Valenzuela, a low-income housing advocate who represents the downtown area, said she hopes the project will show that building affordable and small-unit housing will help not only lower-income workers, but also will be part of a new and varied housing stock that could help keep people from falling into homelessness. It could also provide new ways to get people off the streets or out of homeless shelters.

“I’m excited to see how this works and to see how we can scale it elsewhere (in similar but larger projects),” Valenzuela said.

Micro-unit success in midtown

CADA officials said they decided to try the micro-unit concept because they were encouraged by the recent success of the Mohanna Development Company’s 19J apartment project in midtown, which offered some 312-square-foot studio apartments for $1,000 a month, and was built less expensively with minimal parking. That project was financed privately, without government subsidy.

Nikky Mohanna, the project leader who had lived in small flats in London, said her project shows that young workers are wiling to sacrifice square footage for the ability to live near work without a car. Mohanna this week said the new, pandemic-era teleworking trend will not reduce the desire or the need for smaller housing, especially among younger people with slimmer pocketbooks.

“We have seen the market for micro-units and for affordability-by-design strengthen, even through the pandemic,” she said in an email. “Our greatest demand has consistently been for our smallest units.

“In fact, as a result of COVID, we have seen people more inclined to have a smaller apartment to themselves than to be in a shared apartment with roommates, a previous organic solution for affordability that has been a challenge with the pandemic.”

Mohanna said the migration of people from from the higher-priced Bay Area “has placed greater pressure on Sacramento to produce innovative housing types that will address the growing needs and changing demographics.

“As a result, I feel that we have actually gained momentum in our region to focus on more creative housing models, and our city has since implemented planning guidelines that now incentivize smaller units and more diverse, non-traditional housing types.”

Sonrisa architect Green of the Williams + Paddon firm said his company has designed a micro-apartment project in West Sacramento as well that will be under construction soon.

But developers are not jumping in with two feet yet to the smaller-is-better concept.

CADA and CFY currently are partnering on another lower-income apartment complex under construction at 17th and S streets, next to the Ice Blocks neighborhood. But Saunders of CADA said her team was not yet willing to try micro-units there, uncertain about how deep the market is in Sacramento for tiny apartments.

The compelling issue facing developers considering micro-apartments is whether they can charge high enough rents to cover some of the set costs of building projects, given that heating, air conditioning, kitchen, electrical and plumbing costs are similar for projects regardless of the size of the individual units.

At just more than $20 million, the Sonrisa project, which includes ground floor retail, is less expensive than most housing developments, but the cost per unit is typical of other developments that don’t charge low rents.

Ron Vrilakas, an architect and urban infill developer, is looking to build a small-scale micro-apartment project in Oak Park or along Del Paso Boulevard, where values are less expensive, but said the ongoing issue is finding ways to reduce expenses, including planning, development, legal, land and construction costs.

“These can help revitalize older commercial corridors,” he said. “But doing it without a subsidy is very hard. We have to find ways to bring the subsidy per unit down.”