The city’s proposal itself is based on the efforts of the CHPC, which developed an initiative called “Making Room NYC,” a study that revealed a mismatch between the types of housing units available in the five boroughs and the shape of 21^st century households. Currently, New York City has 1.8 million one- and two-person households, but only one million studios and one-bedrooms. And with the population only expected to increase, the city is teetering on a shortage of affordable units, driving renters to seek other options. Perine says it is illegal in New York City for three or more people to live in a studio.

“For us it is really about the demand that is not being filled in the legitimate housing market, which, is really an expression of an underground housing market which you can see everywhere in the city,” she says. “That includes single people trying to rent rooms that may or may not be legal, people may or may not have legal rights and may put themselves into dangerous situations in terms of fire safety and other things. There’s a universe out there of problematic underground housing market, and we think there is a need for really re-thinking our housing regulations and putting more choice in the housing market.”

Mike Slattery, senior vice president at the Real Estate Board of New York, tells GlobeSt.com similar housing models have been created in other cities with density levels comparable to New York, such as London, Seattle and Tokyo, and have worked to provide “greater flexibility” in the housing field. At the same time, several critics have panned the proposal, citing the plan is a digression from the city’s tenement housing act, which banned the construction of dark, poorly ventilated buildings.

However, times have changed. “The rules made very good sense at the time that we had them,” Perine says. “But this is before the invention of the microwave, mechanical ventilation, advances in heating and sanitation. It doesn’t make sense that housing should be the one place where innovation can’t happen. This is not a step backward; this is a step forward.”

From a construction perspective, Slattery says the real challenge for multifamily builders will be figuring out how to put these micro units into a mix of units that they are already creating. “We are not going to solve the housing problem by making units larger and more expensive to build,” he says. “In response to those critics, we need to be open minded about how to solve the housing problem. We have to make sure that just because units are small, it doesn’t mean that they are not desirable or inhabitable. We need to be open to this approach and try to find this approach more like leavening into bread so we make more bread.”

Currently under the Bloomberg administration’s New Housing Marketplace Plan, a multi-billion initiative to finance 165,000 units of affordable housing for 500,000 New Yorkers by the close of fiscal year 2014, nearly 130,770 units of affordable housing have been created or preserved across the five boroughs. But as more workers flock to New York for jobs in the burgeoning tech and media sectors, the demand for new units is increasing, and vacancy is tightening.

“People are already living in bad conditions because they are turning to an underground housing market, so bring these kinds of units into the marketplace, regulated and safe, and shine the light of day on them, is the way to resolve this problem,” Perine says. “The issue is not going to go away. We have a growing singles population, and that’s a good thing. We have single, low-wage workers that can’t find housing that are renting rooms in illegally subdivided apartments. To me, that’s a step backwards. It’s partly an enforcement strategy, but it’s also a response to real demand.”

Currently, the smallest unit a developer can build in a New York City rental building is 400 square feet. Speaking from an architectural standpoint, Brian T. Ahern, residential studio director at GreenbergFarrow, a national architectural, design and development services firm, tells GlobeSt.com that designing a unit between 275 and 300 square feet could be tricky on an aesthetic level, but could present "exciting challenges" for the industry.

"This proposal is specifically designed to boost the city's diversity and promote economic development, which is a great thing," Ahern says. "It can make the city a more competitive place to do business, and because of that aspect of the proposal, I would say a lot of my colleagues in the world of residential design are going to be excited to rise to this occasion. It is a challenging feat to create such compact units, but it can be an intriguing new dimension to our work."