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The Arc House: The Case for Compact, Alternative Housing

New concepts such as the 400-sq.-ft. Arc House demonstrate a viable option for moving renters into starter homes.Millennials-Trulia.jpg

Today, more than ever, we need housing solutions that respond to changing demographics and economic realities, while at the same time reducing the environmental footprint of the housing industry. With The Arc House, Shelter Dynamics and Green Builder® Media are demonstrating the possibilities of future housing and steering the market on a more sustainable course.

But to understand where we are heading, we need to take a look at where we are.

From McMansions to Millennials

A typical community in the 1950s and 1960s consisted of small houses on small lots. In the early 1970s, the average home measured just over 1,500 square feet. Since then, house size has increased steadily and dramatically, as exemplified by the “McMansions” of the 1980s and 1990s. Despite opposing trends such as the tiny house movement and surge in urban micro-apartments, today’s homes are bigger than ever: the average size of a new single-family home exceeds 2,500 square feet.

“Ten years ago, we built close to 2,000,000 single-family detached homes, which averaged 2,400 square feet each. Today, we are building apartments and talking about smaller homes. Shelter Dynamics' 432-square-foot Arc House reflects this new direction.”—Jim Gregory, Founder, Shelter Dynamics

Yet the McMansion era spawned an interesting trend: the number of single-occupant households began to climb. In 1950, single-person households constituted just 9 percent of all households; today, that share has reached 29 percent. Some projections predict this trend continuing, so that by 2030 the number of single-person households will climb well above 40 million. This trend is largely driven by the young and the old. As baby boomers age, they are losing spouses through death or divorce. Millennials, on the other hand, are delaying marriage and children.

Baby boomers and millennials, two hugely influential demographic groups, don’t want to live in the suburbs, and they don’t want large houses—especially if they live alone. Instead, many are showing a preference for small, efficient homes that are part of vibrant, walkable communities.

The tiny house movement is evidence of this. Proponents say it’s more than a trend; it’s a social movement, attracting people who want to make more deliberate choices about the way they live. Enthusiasts cite the many advantages of tiny house living: a smaller environmental footprint; financial freedom; a simpler—and perhaps more adventurous--life.

Average Square Footage of New Single-Family Homes

1975—1,645 sq. ft.

1985— 2080 sq. ft.

2015—2,687 sq. ft.

Bigger and Bigger. Except for a brief slowdown during the recession,the average new home size keeps growing.

Source: U.S. Census

Where are All the Starter Homes?

But the tiny house movement also reflects a darker reality. Shrinking incomes are squeezing many people out of the housing market. Most people can no longer afford large, expensive homes—nor can they afford the hefty water and power bills such homes generate.

Polls show that millennials want to own their own homes. But the share of so-called “entry-level homes”—smaller, more modest and affordable homes aimed at first-time buyers—has been shrinking, especially since the Recession. According to Trulia Chief Economist Ralph McLoughlin, the number of starter homes on the market has decreased by about 44 percent since 2012. The National Association of Homebuyers has also taken note of the trend, stating that entry-level properties represent less than 20 percent of new construction in recent years, down from an average of 30 percent.

At the same time, the average price of the typical starter is spiking in many markets. The price of the typical starter home averages $714,000 in San Francisco; $212,000 in Denver and $235,000 in Boston. Rising home prices mean that a greater percentage of income is required to purchase a home. Meanwhile, the share of middle-class incomes is shrinking in most major metropolitan areas in the country, according to a May 2016 analysis conducted by Pew Research Center. And while some people are moving “up the ladder,” many others are falling behind, leading to greater income inequality.

First-time buyers with lower incomes are left with two choices: move to a more affordable market, or keep renting, which further puts pressure on the rental market and drives up prices.

Percentage of Single-Person Households in the U.S.

19%    24%    25%    27%    28%

1975   1985   1995   2005   2014

A “VISION” of Future Housing

Concurrent with the changing demographics and economic realities, growing evidence of the impacts of climate change is putting pressure on the industry to increase energy efficiency of buildings, which contribute 40 percent of the country’s greenhouse gas emissions.

Some in the industry are clinging to the status quo; others are showing leadership in addressing all of these converging trends. Shelter Dynamics and its partners are demonstrating the future direction of the housing market by offering The Arc House—unique, efficient and functional housing with a smaller footprint. But this vision includes more than the home itself.

“The Arc House meets the intersection of green building, the tiny home movement and the world of hand-crafted high design.”—Moorea Hoffman, Principal Designer, Kitcheneerin

When people live alone, says Shelter Dynamics Founder Jim Gregory, they tend to seek more fulfillment outside the home itself. He predicts a trend—already underway in many urban centers—where individuals and families live in smaller dwellings and enjoy common areas and resources that bring people together.

“People need more than just a house,” says Gregory. “We need neighborhoods; we need stability and security.”

Gregory’s vision is based in experience. He has already repurposed an extended-stay hotel in Ridgecrest, California, and turned it into an intentional community, the 46 units of which average less than 600 square feet. 

“The community serves as a prototype for new ideas in meeting the dual needs of shelter and human interaction,” says Gregory. It was here where he also began building the prototypes that led to The Arc House, which Gregory calls “a demonstration of a new direction in housing towards smaller more functional places to live.

Gregory intends to offer the base-model solar-ready Arc House for around $125,000. This price does not include the solar PV array and battery storage, transportation or site preparation.

“The Arc House is a super-custom home,” says Gregory. “But if we can build a lot of them, and if we build them in a factory and achieve economies of scale, we can get the cost down.” Gregory and his partners are now focused on building a tent factory, which will combine increased functionality with more efficient building methods.