“When we first stepped in, we were a little shocked,” Andrea Giovanni Rossi said of the apartment he had been hired to renovate.

The flat, a 215-square-foot rental in Milan’s Porta Romana neighborhood, was “kind of a challenge to design,” he said, adding that “it was kind of a sign that the market is shifting and that these very tight solutions are becoming the norm.”

Faced with a tiny box, he and Matilde Valagussa, his colleague at the Milanese architecture and design firm Atelierzero, saw only one way to meet basic needs. If there was to be a living area with a single armchair and a dining area that could seat two, they would have to tuck the “bedroom” under the kitchen. The bed is fitted into a drawer that rolls beneath the custom elevated kitchen wall unit.

The flat is on the fourth floor of a typical Milanese building from the early 20th century, with a saffron-colored stucco exterior and an interior courtyard. The single room has a picture window overlooking the street and the neighborhood’s quaint and convenient tramway.

The designers used color to humanize the antiseptically white walls and delineate the apartment’s different functions, pared down as they were. The resin flooring is a dusty shade of pink that complements the kitchen’s orange veneer. (Black rubber used in the kitchen area is a nod to Milan’s early metro stations.) Diagonal lilac stripes give verve to the ceiling. The bathroom is chartreuse and lilac, with a porthole window that transfers daylight from the main room. (On the other side, the round window is framed with a purple circle.)

The renovation budget, Mr. Rossi said, was 40,000 euros or about $47,000.

Much ink has been spilled about the recent transformation of Milan from a gray, frowny-faced financial center to a swinging European hub. Tax breaks designed to attract wealthy European residents to Italy have had the predictable effect of sending the value of Milan’s real estate soaring. The average sale price of homes in the city’s central district as of last month was $1,214 per square foot, an increase of 27.9 percent since 2017, the year a flat tax rate was introduced for high-net-worth newcomers, according to the online property portal Immobiliare.

Also predictable was the legislation enacted last year that, among other things, reclassified the minimum size of a habitable unit for one person from 28 square meters (301 square feet) to 20 square meters (215 square feet). The Decreto Salva Casa, or Home Save Decree, as the law is called, legitimized the many tiny studios that had been sliced off larger apartments and marketed as affordable residences.

The micro apartment in Porta Romana, an upscale neighborhood near the heart of Milan, rents for 950 euros (about $1,117) a month. The unit’s owner, Elena Butti, said it is currently leased by a 30-something who works in the fashion industry and frequently travels. Ms. Butti declined to give additional details out of respect for her tenant’s privacy.

In many ways, Ms. Butti, who is in her 50s, exemplifies the lifestyle choices shaped by 21st-century traumas and predilections. In 2020, with Milan being savaged by the pandemic, she moved with her husband, a graphic designer, to the Italian province of Piacenza. Having taken a leave from her job teaching in a high school, she decided to retire and remain in the country.

The couple now live in a farmhouse on 27 acres and are flirting with agriculture. Two years ago, they bought the Porta Romana flat for 210,000 euros (about $246,764 today, a sum that included Italy’s hefty real estate transaction fees) as an investment, but chose not to list it on a short-term rental platform because of the management and maintenance headaches. Besides, Milan is no Florence or Rome, places overrun with tourists in perpetual need of shelter, Ms. Butti said: “The city has plenty of hospitality options.”

She saw better possibilities from renting to young professionals who were cooling their heels in a shaky economy.

“This is a sort of platform for young people preparing for a better future or to find something bigger, but this may take a long time,” she said of the micro apartment.

Ms. Butti hired Atelierzero after seeing its projects on Instagram. The firm had a distinctively Milanese style that she said was impossible to describe. Making her best attempt, she referred to a way with color and irony — a serious attitude of not taking things too seriously, a kind of detachment that was at the same time stylish and tongue-in-cheek.

The renovation was completed in the fall of 2024. Ms. Butti said she didn’t want to cut corners, but rather to design the home as if it were intended for herself and her husband. This inspiration threatened to become a reality after the couple spent almost six months looking for a renter.

The bed under the kitchen was a turnoff for some would-be tenants, Ms. Butti said. But maybe the largest deal breaker was that the bathroom was too small for a bidet.

“This is very important for Italians,” she said.