Not true, at least if you are looking at the demand side. Micro-apartments got approved for building in a San Francisco suburb and got bought up right away.
Perhaps your city is an outlier, but across the U.S. micro-housing is in demand. Here's a great starting off point to read about it (and do visit the linked research in the article):
https://www.forbes.com/sites/scottbeyer/2017/03/31/what-is-t...