Many in Seattle are taking a stand against rise of micro-apartments

Seattle Times ^ | 28AUG2014 | Daniel Beekman

[Albion Wilde]

I think you have your supply and demand dynamics confused. More supply of low-cost housing should LOWER the cost of low-cost housing. No?

I am not versed in classical economics, but I spent 40 years in marketing, which is a practical/mechanical/influential view of markets. My conjecture about these microspaces driving the price of conventional spaces up is based in part on my view of retail packaging. The smaller the package of, say, toothpaste, the higher the price per ounce. Also, the same package in a convenience store will cost more than in a drugstore. The lowest price is for the largest quantity at a bigbox store or a warehouse club, where the shopping "experience" is relatively least pleasant.

Granted, rentals are not portable like retail packages. However, I am looking at the willingness of segments of the market demographic to buy the same product at a 20% to 30% higher price in exchange for other desirables, such as smaller initial outlay, or convenience of time or location.

When micropackaging of residences hits the market, I'm speculating that it will have an inflationary effect on prices where other desirable qualities are present. If a rental agent finds that people will pay X dollars/sq ft for 200 sq ft, and that price is 20% or 30% more than the sq ft price of larger residences, I think the effect of that willingness will be tested out by rental agents, who will push prices of larger units up in neighborhoods with other desirable qualities.

However, you are probably right that it may lower prices in marginal or less desirable neighborhoods. So, instead of a smooth continuum of prices, there may be sharper divisions, with some zones being forced downward, while others are nudged upward.