We transformed a cramped utility closet in our new kitchen into a highly functional storage space — and along the way gained a surprising amount of usable room. What used to be dominated by a bulky electric water heater and HVAC equipment is now organized, attractive, and far more useful. Below we walk through the changes we made and why each step mattered.
If you saw our drawer-by-drawer kitchen organization video, you might have noticed a peek inside this closet. Here’s a full walkthrough of how we turned a “mostly water heater” closet into a neat storage nook that now supports our kitchen and household needs.
The Utility Closet Before
When we first moved in, the closet was basically a spot for the HVAC system and a large electric water heater. Although it extended under the stairs, the water heater blocked access to most of that space, making the area behind it unusable. In those early days we stacked bins and seasonal items in the small accessible gap, but it was hardly efficient.
Beyond the lost floor space, having a bulky tank inside the closet meant we couldn’t take advantage of the entire under-stair cavity. In a smaller home, wasted storage feels particularly painful — so reclaiming that square footage became our priority.
We stored a mix of holiday bins and miscellaneous items in that cramped space, but it was obvious this setup wasn’t working for the long term. With the kitchen renovation underway, we figured this was the perfect time to fix it properly.
Our solution began with removing the obstacle: the old water heater.
Step 1: Update (& Relocate) the Water Heater
We replaced the bulky electric water heater with a tankless model. Tankless units are more compact and energy-efficient, and in our area they’re often mounted outside the house. Moving to an external tankless unit freed up the entire under-stairs cavity and reduced the visual clutter inside the closet.
With the water heater relocated to the exterior siding, we went from a cramped, half-accessible storage area to a generously usable under-stair space — a very welcome gain when downsizing.
At first we added temporary wire shelving and stored larger items under the stairs, but it felt chaotic. As the rest of the kitchen came together we developed a clearer plan for functional, attractive storage.
Before adding new units, however, we needed to clear a few remaining obstructions.
Step 2: Reroute the Pipes & Wires
Wires, tubes, and pipes were still protruding into the space. For about $280 we hired pros to reroute them properly. Our HVAC contractor repositioned the thick tubing and venting to the far right of the closet so it no longer arced into the storage area. Later, our plumber rerouted the water lines for the tankless heater so they no longer blocked the back wall — they now run discreetly behind the door molding.
With systems safely in place and clearances respected, we were ready to install attractive storage that actually fit the space.
Step 3: Customize a Cube Storage Shelf
We replaced the shallow wire shelves with a sturdier cube organizer. To elevate its look, we added 5″ brass furniture legs and topped the unit with a butcher block counter cut to size and sealed with cutting board oil. The result looks intentional and pairs well with the kitchen finishes.
Four of the eight cube openings are visible when the door is open, so we use matching taupe fabric bins to keep those areas tidy. The bins store dog food and treats, vacuum attachments, tools, and seasonal supplies. The remaining open cubes house items like extra toilet paper, beverages, emergency gear, and our Berkey water filter for backup water purification.
We also freed counter space elsewhere by running a water line to the refrigerator during the kitchen renovation, which made the Berkey less essential for everyday use — though we keep it stored here for emergencies.
There’s still room on the floor for larger items like a dehumidifier, which is handy in our climate and helps protect equipment and stored items.
The difference from the original cramped view is dramatic: the space now feels intentional and useful.
Step 4: Add a Floating Shelf
We had leftover butcher block and added a simple floating shelf above the cube organizer for more vertical storage. Metal shelf brackets were spray-painted to match the brass legs so the details read as a cohesive design. The shelf holds mugs, a pitcher for watering plants, and a handheld vacuum — functional items that are easy to reach.
A few decorative pieces make the closet feel less purely utilitarian and more like a purposeful pantry or mini bar area — small touches that elevate everyday storage.
Step 5: Cover the Ugly
To hide the HVAC unit while keeping it serviceable, we built a simple cover panel from thin plywood, trimmed the edges, and painted it the wall color (SW Pure White). The panel hangs from eye hooks attached to a closet rod, so it’s easy to remove when the unit needs maintenance. Because the HVAC intake sits at the bottom, the cover doesn’t impede airflow or filter changes.
The cover softens the utility feel of the closet while preserving full functionality.
Step 6: Take Advantage of Hidden Walls
We used the inside wall opposite the cube shelf to hang a dustpan, cleaning wands, and other slim items. We also mounted a 24″ under-cabinet light vertically along the door molding for extra illumination. The light plugs into the outlet we had installed when the water heater was moved and offers two brightness settings, making it easy to see inside the closet whenever we need it.
So that’s how we turned a mostly inaccessible utility closet into a tidy, multi-purpose storage space that fits our kitchen flow. The closet is shallow but fully usable: both of us can step inside and reach the back, and the space now stores everything from emergency supplies to everyday household items.
A couple of final notes: the closet comfortably fits an adult standing inside (the ceiling does dip under the stairs, so you do duck to access the very back), and we kept a compact upright vacuum for quick jobs. We rely on a robot vacuum for daily cleaning and use handhelds or the upright for stairs and spot-cleaning.
If you want to read more about the overall kitchen renovation, we documented the full process and costs in this post, and you can see our full kitchen organization in this post.
*This post contains affiliate links, so we may earn a small commission when you make a purchase through links on our site at no additional cost to you.