Even as China's economy slows from efforts to fight a bubble in high-end housing, waiting in the wings with potential to revive growth is a different housing market: the low end.

Some 50 million of China's 230 million urban households live in substandard quarters often lacking their own toilet and kitchen, research firm Dragonomics estimates. The firm figures China will need to build 10 million apartments a year until 2030.

A model apartment on display in Dongguan, a factory town in southeast China, gives an idea what some of these could be like.

At the research center of China's largest property developer, China Vanke, is an apartment that measures 160 square feet, about the size of a parking space. The bed folds to make seating. The shower is a vertical tube by the front door.

At a price of about 835 yuan ($133) a square foot, an apartment that size is relatively affordable at the yuan equivalent of $21,500, which is around six times per-capita disposable income for China's urban residents. By contrast, the larger apartments that have been the traditional focus of China's developers could cost as much as 40 years' income.

Such initiatives offer hope to people like Ou Yibao, a 27-year-old software engineer who lives in a dingy rental in Shenzhen and is currently priced out of ownership. While a focus on building expensive homes from 2005 to 2010 juiced revenue for developers, investors and municipalities, 'the government sacrificed the aspirations of a generation to fuel this boom,' Mr. Ou said. 'People like us are left with little choice but to slave for years to buy a home.'

Figures released last week showed that Beijing's two-year-old campaign to cool the overheated property market has borne some fruit. Urban housing prices declined 1.4% in September from a year earlier, according to a survey of 100 Chinese cities.

That was a far cry from booming increases seen before the government─worried about unsustainable price rises and an affordability crisis─slapped controls on housing speculation in April 2010. The consequences were far-reaching: a weakening of economic growth to the slowest pace since the financial crisis; a profit squeeze for sectors like cement; and pain that rippled out to suppliers such as iron-ore miners in Australia.

Vanke's micro-home shows the luxury-obsessed Chinese real-estate industry starting to address the buildup of demand from frustrated young professionals wanting to get on the first rung of the housing ladder and other urban dwellers who simply aspire to upgrade from shanties and dark basements.

Property agency SouFun Holdings Ltd. calculates that urban China has about 315 square feet of residential real estate per person, while some local governments are targeting as much as 430 square feet by 2015, suggesting extensive demand for construction of small, affordable homes in the years to come.

If the move to build more-affordable homes takes hold, analysts say, it could help China achieve an economic soft landing and drive the next stage of growth.

Among the believers is China's premier-in-waiting, Li Keqiang. He suggests that a combination of government-funded 'social housing' and cheaper homes built for the private market will spark a wave of consumption as owners outfit newly acquired homes with furniture and appliances.

'China is entering a period of rapid urbanization, and that won't just increase investment, it will also promote consumption,' Mr. Li said in a speech at the end of 2011.

When the government moved in 2010 to slow construction of luxury housing─through credit curbs, limits on buying multiple properties and higher down-payment requirements─it also rolled out a plan to build 36 million units of social housing through 2015. By taking the air out of the bubble in the luxury market, Beijing also sought to push developers toward building for first-time buyers and upgraders.

Some skeptics wonder how much economic gain this push will bring, warning it will take years for the market to absorb the oversupply of fancy apartments and villas, many left empty by their investor buyers, and 'ghost cities' of unoccupied blocks. Skeptics also question whether developers and local governments will have sufficient incentive to build large numbers of homes affordable for the masses.

Vanke, however, appears to be heeding the message. A recent book co-written by Chairman Wang Shi quotes him as saying: 'Urban residents in China have no right to live in large houses'─citing low incomes and scarce land among the reasons

Also signing on is Shimao Property Holdings, China's seventh-largest developer by sales. In late 2011, Shimao decided to halve the size of homes in 10 of its projects.

'We used to be known as a high-end property developer, but we changed tack last year when we recognized that the market climate was changing,' said Cher Cai, head of sales at Shimao.

Data from SouFun show that in the first seven months of 2012, the average price per square foot for property sold by Shimao was 13.5% lower than a year earlier, and at Vanke 10.1% lower, as the developers offered properties that were less luxurious and targeted at first-time buyers rather than investors.

Though lower prices mean lower margins, higher volumes limit the impact on profits. Shimao had a 51% year-on-year increase in sales in the first seven months, a time when national sales were falling, Ms. Cai says.

Housing prices across all 100 cities surveyed in September, while up fractionally from August, were below the year-earlier prices for the fourth consecutive month, according to data provider China Real Estate Index System, which worked with SouFun to poll developers and real-estate firms. With Chinese household incomes rising at double-digit rates, the result is to make property more affordable.

Vanke designers worked to make their tiniest apartment appealing, with features like lighting operated by an iPad. A development containing similar micro-homes is under way in the northeastern city of Xi'an, although a new central-government regulation has since decreed a larger minimum size of 237 square feet.

In Shenzhen, the southern city where Vanke is based, the company is completing a complex of apartments of about 375 to 540 square feet for the local government to manage as social housing. The company said it made close to zero profit from that project. 'Management sees it as part of their social responsibility,' said Duan Jixian, who oversaw construction.

Meanwhile, a Texas-based property investment fund, Century Bridge Capital, has raised $170 million to put to work in Chinese real estate, planning to focus on smaller apartments for the owner-occupied market.

'If you build for speculators and make a 70% margin, that's a grand slam home run, but it's not sustainable. We are building to meet genuine demand. The margins are smaller, but you can keep hitting single after single for a long time,' said Tom Delatour, chief executive.

'Wall Street thinks China's government has killed the economy by deflating the luxury property bubble,' Mr. Delatour said. 'In fact, they have saved it.'