The size of a typical studio apartment is 500 to 600 square feet. The studios that Riaz Capital is building around the Bay Area measure on average 300 square feet — which is on the small side, even for a standard hotel room.
But the Oakland-based developer sees micro-studios as a way to provide “affordability by design” in a state where the cost of housing is a major financial burden for many residents.
Units come with only the essentials. Many don’t have ovens — just two electric burners. The first few units the company built came with mini fridges rather than full-size ones. (Upon residents’ frustration with the lack of freezer space, they upgraded to bigger ones at their next project.) The small unit size means they can squeeze more apartments into a single building, achieving greater economies of scale when it comes to their maintenance and operating budget.
So do the units rent for half as much as a 600-square-foot apartment?
Well, no.
But the rent is cheaper than many of the newly built apartments across the Bay Area. At ArtHaus Jack London, a former motel Riaz converted into 130 apartments, a 277-square-foot studio goes for $1,750 a month. That price is the same whether you’re renting a market-rate apartment or one of the income-restricted ‘below-market-rate’ units for those making less than 110% of the area median income (about $120,000 for a single-income earner in Alameda County). Other newly built studios around Oakland of more typical size run closer to $2,200 a month.
Riaz Capital is bringing the micro-unit concept elsewhere. They have built 2,200 residences throughout the Bay Area, and have 3,700 units in development across California, including in San Diego and Santa Cruz.
Riaz Taplin, CEO, and Lisa Vilhauer, vice president of design and entitlement, sat down to explain why they’re betting their smaller units can be a solution for some Californians looking for low-cost housing options.
Q: How did you get into multifamily real estate?
Taplin: In the 1970s, my dad was working in condo conversions. Some people bond with their dad around sports — me and my dad bonded over real estate. We started buying apartment buildings in the late ’90s. Then, after I went to college, I felt like, “I didn’t get a degree to deal with toilets and tenants.” So I wanted to do something different.
I spent the first part of my career building luxury housing, but I was interested in the idea of a design-based solution to affordability. I’ve spent the last five years focused on housing single-income professionals at scale.
Vilhauer: I have a degree in landscape architecture but ended up working in civil engineering and planning. After eight years, I decided I wanted to be on the developer side instead of the consultant side. So I went to Taylor Morrison, which is a public national home builder, and a few years later went to a smaller family-owned development company in the East Bay, and then came to Riaz.
Q: Land is so expensive in the Bay Area that we see most ground-up developers focusing on the top end of the market, where rents are the highest. On the other side of the spectrum you have nonprofit developers that rely largely on subsidies (typically, tax credits) to build affordable housing. Why focus on building apartments that are in the middle of the market?
Vilhauer: Few people are building for the people who make somewhere in between — between $60,000 and $120,000. We decided to focus on them. We saw such a need.
During 2020, when we started leasing our first project, that’s when we saw that we’d really hit the nail on the head. We were finding a lot of renters who couldn’t work remotely – who needed to be here in Oakland. People like teachers, bus drivers, nurses, who didn’t want to be sharing spaces at that time, but they still needed to find somewhere within their budget. We’re even seeing some retirees, who enjoy the convenience of living downtown.
Q: During the COVID-19 pandemic, many people wanted to live alone rather than with roommates. What are the trends in how people are living today, and how did that inform your design for these units?
Vilhauer: People are often living in roommate situations because it’s affordable. While some people enjoy the community aspect, a lot of people prefer to live on their own. That really informed our design.
We’re trying to build naturally occurring affordable housing, versus income-restricted. Some of our units are rent-restricted — like the moderate-income units that we built so that we could be allowed to build more units in each property with the state density bonus program.
We also have a lot of renters staying here for shorter periods — like traveling nurses. We offer leases that are less than a year long for them. We also offer furnished units that are move-in ready.
Q: During COVID, a lot of people decided to leave the urban environment. These ArtHaus apartments are very “urban” projects. How has that impacted your business?
Taplin: The trend before the pandemic was small house, big life. You exchange having a big home in the suburbs for a smaller place in the city, because your backyard is the urban environment.
The pandemic created a shift against proximity. That coincided with the end of a major tech cycle here. Now, with the rise of so many artificial intelligence companies in the Bay Area, I think we’re starting to see another tech cycle. That’s bringing people back, and they’re looking for housing.
Vilhauer: Here at ArtHaus Jack London, after nine months of lease-up, we’re about 93% occupied.
Q: Rents in most parts of California and the Bay Area have started to recover from the pandemic slump — except for in the East Bay. Are you getting the rents you expected?
Taplin: No. This five-year period is an anomaly in California history — it may or may not correct itself. I believe that we’ll see a reversion to the mean.
Q: Can you talk a bit more about the state density bonus program and how you’ve used that in your projects?
Vilhauer: The density bonus is a state policy program intended to get more housing built, both market-rate and affordable, through a trade off: the developer provides a certain amount of affordable housing, and in return they either are allowed to build more densely, or get out of development standards that might add costs to a building.
Santa Cruz, for example, has a standard that developers can’t use vinyl windows. And it’s hugely costly to install aluminum windows. So through the density bonus, we’re providing more affordable homes, and we’re able to install vinyl instead of aluminum.
Lisa Vilhauer:
Age: 42
Position: Vice President, Design & Entitlement
Education: California Polytechnic State University – San Luis Obispo, Landscape Architecture
Residence: Danville/Carnelian Bay
Riaz Taplin:
Age: 44
Position: CEO
Education: London School of Economics and Political Science — B.A., Economic History
Residence: San Francisco
Five facts about Taplin and Vilhauer:
1. Taplin and Vilhauer have wanted to bring color to their buildings. So far, the ArtHaus Living portfolio has hired over 20 local artists for both exterior murals and interior art.
2. Taplin started his career in luxury housing. His goal is bringing the same eye for quality and detail to the residences that the company builds now.
3. Taplin was raised with the mentality of “Do Well, Do Good.” His mother was the communications director for Planned Parenthood, his stepfather the head of the Sierra Club and his father a real estate attorney.
4. Vilhauer has entitled over 5,000 units in her career, 1,350 with Riaz Capital alone.
4. Taplin and Vilhauer were stuck in an elevator together in Copenhagen, with two other developers and an architect, while they were there learning about urban design with SPUR, a city planning think tank based in San Francisco.