In a time of climate change and strained housing affordability, sometimes it pays to think small.

At just 50 square metres, the apartments and townhouses inside the Two Sisters development in North Melbourne are far smaller than the 236 sq m average Australian home – the biggest in the world.

It’s a decision that has allowed sisters Eve and Michelle Pickering – building developers, owners and occupants of two of the homes – to minimise costs and environmental footprint.

Director of the architectural practice behind the design, Breathe’s Jeremy McLeod, says smaller homes lead to less embodied carbon in the materials used, less energy and emissions to run them, and improved affordability.

“It’s a beautiful, simple way to solve a carbon and a cost crisis simultaneously,” he told AAP.

Jeremy McLeod (file image)
Breathe founder Jeremy McLeod says the Two Sisters development is inspirational. (James Ross/AAP PHOTOS)

While small, every square inch is maximised, with most dwellings stretching over two floors and complete with their own private courtyards.

Tenants of the build-to-rent building will also go without car parks, an intentional call that keeps emissions and costs down even more.

Mechanical heating and cooling is rarely needed in the passively-designed, high-performance dwellings, with rooftop solar powering the common areas.

Climate-friendly homes are also increasingly accounting for the carbon released in the making of buildings and the concrete and steel.

Low carbon cement replacements and carbon neutral bricks were used and unnecessary material minimised by leaving ceilings exposed and floors polished rather than coated.

“It’s about exposing the honesty of the building rather than covering it with materials,” Mr McLeod said.

He applauded Michelle and Eve for their generosity.

“These two sisters approached the whole thing through a lens of, ‘I’m building my own home, but what can I give back to the city?’,” he said.

Eve and Michelle Pickering
Eve and Michelle Pickering aimed to minimise costs and their environmental footprint with the homes. (Michael Currie/AAP PHOTOS)

The project came about when the pair started looking for an inner-city site to build homes for themselves.

Urban, walkable North Melbourne quickly became a top contender.

“It’s such a diverse neighbourhood in terms of its physicality, it’s sort of got residential and commercial and retail all jammed up together,” Eve told AAP.

“And there’s fabulous transit here.”

It was Eve’s background in urban development and architecture that made her realise it made sense to squeeze more than two dwellings onto the unconventional site they landed on.

The Two Sisters development will be one of 240 homes open to the public on May 17 for Sustainable House Day, a Renew-hosted event set up in recognition housing accounts for more than 10 per cent of total emissions.