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The great microsuite debate is a hot one because cities like Vancouver and Toronto are screaming for more affordability and density.

At the same time, there are those who are asking if it’s fair to expect people to live in less than 300 square feet and pay top dollar for it. It’s obvious why developers like the microsuite: the smaller the unit and the higher the tower, the greater the returns. In a low vacancy market with high rents, it’s a no-brainer for investors to snatch up microsuites and rent them back to people at a price that makes good on their investment.

With a vacancy rate of 1 per cent in Vancouver, and an average one-bedroom rent of $1,038, investment properties can be a thriving revenue stream.

The Burns Block in the Downtown Eastside is an all-rental microsuite building, where 240 square feet rents for $1,000 a month. In 2011, the units were billed as the smallest microlofts in Canada. The price tag might seem high, but as the saying goes, it’s worth whatever the market is willing to pay for it. And they are willing to pay. Whether renting or buying, consumers have snatched up microsuites as soon as they come on the market.

Renderings of Evolve, a WestStone Group property in Surrey’s City Centre.

It’s been a huge success story for Reliance Properties, which led the way with Burns Block. Now they are bringing microsuites to Surrey’s City Centre, which is a nexus of young people, transit and amenities.

“It’s super well served by transit and it’s an education node, with thousands of students,” says company president Jon Stovell.

In Surrey, an investor can get greater returns on microsuites than in pricey Vancouver. As well, Vancouver doesn’t allow condos smaller than 398 square feet anywhere outside of the Downtown Eastside, which Mr. Stovell sees as an impediment to providing housing options.

“We have looked at all major cities in North America, and most of them were inducing microlofts through incentives and relaxations. And yet Vancouver, which is ranked the most unaffordable city in Canada, is preventing it.”

As marketer Vince Taylor says, it’s all about positive cash flow. Mr. Taylor is marketing microsuites at the new Evolve project, which is a WestStone Group property in Surrey’s City Centre, close to a transit hub and four major universities. The area is basically one huge campus.

“In Vancouver, there is almost no opportunity for positive cash flow, whereas Surrey has opportunity,” Mr. Taylor says. The smallest unit, a 316-square-foot suite, is priced at $93,900. As a result, he says, “There’s an appetite in the investment community to purchase as many units as they can get.”

But there are those who argue against the commodification of housing, which is what happens when investors play a too-active role in the market. We see commodification in the single-family house market, which is driving the demolitions of perfectly good houses to make way for bigger ones with far greater returns. And we see it at the other end of the market – which is offering microsuites to the people who are shut out of the market by those greater returns.

Architect Alan James, who often works on old building conversions, says he’s heard of microsuites referred to as “SROs with granite counter tops.”

That’s another strike against microsuites: they can displace low-income residents of single room occupancy hotels, such as those found in the Downtown Eastside. The Burns Block was an SRO hotel prior to its life as microsuite rentals for 25 to 35 year olds.

“Kudos to [the developers] for providing something affordable, but I think they’re making more of it than what it is,” Mr. James says. “They have to make a profit, that’s their business. But I guess the question is, how much of a profit?

“You won’t find developers doing these projects living in them. They live in Point Grey or Kerrisdale, or on the waterfront in West Vancouver.”

He acknowledges that the microsuite is standard housing in dense cities throughout the world, however. And people have been living small in trailers and boats, which are expertly designed for microliving.

“And architects love to design microhouses because they like to get into the details. But the reality is, people like to move around.”

When you live in a microhouse, you don’t spend a lot of time at home. That’s why they only work in intensely urban environments, where amenities are key.

Real estate marketer Diana McMeekin recalls living in a 350-square-foot apartment in Toronto 40 years ago. She also recalls loving it, and had it decorated nicely enough to warrant a feature in Chatelaine. But she eventually had to move into a house when she partnered up.

“It’s a bit of a shocker to people who are accustomed to land and space to encounter something like this,” Ms. McMeekin says. “But it’s something that’s been going on for a really long time. It’s not new.”

She points out that the advantage of a microsuite is the built-in furniture, which means all an occupant needs is a coffee table and an armchair.

“And if you configure things properly, you have remarkably designed built-in solutions that are multipurpose and transform the space.

“If you look at the demographics, an enormous percentage of people neither need nor want bigger space, nor can they afford it.”

There’s another reason the microsuite works in and around Vancouver, and that’s demographics. B.C. has the lowest birthrate in Canada. The latest census from 2011 shows that 42.1 per cent of the province is not living with a partner. Vancouver is a little higher, at 43.5 per cent. More than 58 per cent of households don’t have kids. Fast-growing Surrey is a city full of young people, which is a huge part of the reason that microsuite developers are flocking there to build.

“I think sometimes the people who think it’s not appropriate as a form of housing are not thinking on a world basis,” Ms. McMeekin says. “Vancouver is inching its way towards being a world-class city, and therefore this is something that goes with the territory.”

Other developers are pushing for diverse forms of housing that aren’t so extreme, and that cater to all life stages.

Bosa Properties’ University District tower, at Surrey City Centre, is offering flexible living space, with 560-square-foot units that include moveable wall panels, murphy beds and extendable built-in dining tables. Adera is pushing for townhouses.

“There should be more of [microsuites], but there should also be more options for families,” says Brad Jones, vice-president of development at Adera and member of Vancouver City Planning Commission.

“The city needs to work to have a broader spectrum of housing, from microsuites to condos and apartments to townhouses to existing single-family houses,” he says. “If somebody is considering the jump from a two-bedroom condo to a house, they are almost forced to leave Vancouver.”