Landlording & Rental Properties

Tiny Houses: Will the Movement Last?

Expertise: Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Real Estate Deal Analysis & Advice, Personal Development, Real Estate News & Commentary, Real Estate Investing Basics
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interior of tiny house

Our house was a very, very, very fine house. With two cats in the yard. Life used to be so hard. —Graham Nash

The whole concept of a tiny house is to live an unfettered, simple, accessible life. The intrinsic idea being, life is less about owning material possessions and more about personal enjoyment. It is a life choice. It is a radicalized re-design of contemporary living.

Wave of the Future or Splash From the Past?

Tiny living spaces are not new. Historically, our ancestors tended to live in spaces minimally constructed and easily maintained. These were typically homes they built with their own hands and the shared energy of their neighbors, family members, and the local community. That way of life has become distant from us, but it’s not without its worth.

Once we began creating compartmentalized rental units (more commonly known as “apartments”), designed to give the occupant space “apart” from their neighbors or other boarders, the designs were still small and simple. These were not gigantic abodes. Often, they were only 80 square feet to 240 square feet and usually one, but sometimes up to three rooms, of space. Those rooms were not typically huge. And the higher you lived the less you paid, because it meant the more stairs you had to climb.

So yes, the world has changed. Yet the concept of people living in small spaces is something old becoming new again. With that said, it is still true that the current tiny house movement is unique, imaginative, popular, thought provoking and importantly, profitable.

Related: Why the Tiny House Movement Fails to Keep the Big Picture in Mind

The Current Fascination With Tiny Spaces

Wherever there is the opportunity to give people a slice of excitement and dream-come-true experiences, they will be willing to pay for the privilege to ride the ride. People’s fascination with the tiny home concept is compelling.

So, while there is naturally a difference between owning a tiny home and renting a tiny home, some tiny home owner’s profit by capitalizing on the craving people have to live the experience, even if just on holiday. This is noteworthy. Many people who bought a tiny home to live in for themselves ended up buying a second and third and have even created entire vacation rental communities to rent them out. They are capitalizing on the spark this unique opportunity to live in a tiny home ignites.

Additionally, throughout the world there is a growing number of tiny house neighborhoods, resorts, and subdivisions. Here in the United States, numerous communities already exist in California, Texas, Florida, Colorado, Nevada, Oregon, Minnesota, Michigan, Arizona, Washington, Maryland, New York, Wisconsin, North Carolina, Georgia, South Carolina, Ohio, and Pennsylvania—with more planned throughout the country.

Woman in warm blanket relaxing and drinking morning coffee on cozy bed in log cabin in winter

What Exactly Is a “Tiny House”?

The definition of a “tiny house” was pretty amorphous for a long time. But then in 2017, Andrew Morrison and Martin Hammer wrote International Residential Code (IRC) Appendix Q: Tiny Houses.

An extensive vetting and review process ensued, followed by a three-stage voting by the administrative body. The following definition was in turn approved by the International Code Council (ICC). The result was the officially recognized and finalized code-based definition of a “Tiny House.”

“Tiny House: A dwelling that is 400 square feet (37 sq. m) or less in floor area excluding lofts.”

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Now you may ask, “Why bother?”

Well, there are a lot of reasons why that process and the resultant uniform definition were important and necessary. Just a few of those reasons are:

  1. If you are legally building a tiny house on your property for personal use or rental use, you will undoubtedly find yourself at the Building and Planning Department of the municipality you are building in. Using the correct terminology will make it easier for officials to be able to assist you. This, naturally, means they will be more willing and likely to issue you building permit(s) and the necessary finalized Certificate of Occupancy.
  2. Having an official and legally recognized definition smooths the process for working with insurance agents and insuring companies. It creates legitimacy for underwriters and ascribes verifiable values for acquiring homeowners, renters, liability, and property protections.
  3. It tells you what a tiny home is NOT. For example, it is not classified as a manufactured home, nor a mobile home, nor a park model.
  4. The legality of the tiny home as an ICC-recognized structure demonstrates legitimacy to code agencies, escrow companies, financial institutions (i.e., banks, mortgage lenders), thereby creating the access to comfortably acquiring funding for penciling out, planning, development, construction, marketing, and renting or selling the intended units. Basically, this classifies the small house concept as marketable, financeable, and deedable. These issues are absolute necessities in real estate.

And best yet, the units can be stationary or moveable. The key is meeting the ICC requirements.

Related: 6 Different Ways to Hack Your Housing (Find One That Works for You!)

What Sparked the Tiny House Trend?

The current tiny home movement grew as quickly as it did, in part, as a backlash to the mortgage crisis of the mid-2000s. The rash of over a half-decade of continuous foreclosures, aggressively rising adjustments in mortgage interest rates, and robo-signings with little accountability flipped a switch in millennials, who saw their lives, the lives of their parents, and even their grandparents torn from their moorings and flipped upside down. These convinced droves of them that traditional real estate was a "sucker's game."

This is the case for people of all ages who lost security, investments, pensions, and retirement incomes in the crushing downturn the market took following both the dotcom debacle and the global real estate implosion.

With trust destroyed and options lessened, the idea of having something that you own for a pittance—a house you can either place on a comfortable piece of land to call your own or throw on a trailer and carry behind you, traveling to wherever you want to go or whatever new adventure called your spirit—quickly became a rally cry for those who’d lost patience and passion for the traditional American dream.

Instead, they wanted to build a different American dream, an American dream more closely aligned with the visions our frontier and pioneer ancestors nurtured and cultivated. In this dream, one could claim themselves free from decades-long financial agreements and ongoing contractual entanglements. They longed to strike out, calling forth a new vision of independence and self-reliance.

It is truly a life of one’s choosing. Some call it liberating. Others call it security. Still more call it freedom.

Small wooden cabin house in the evening. Exterior design.

Will the Tiny House Movement Last?

Is the trend going to continue? Yes.

The development and design industry for these unique living experiences continues to expand. There are more architects, construction companies, financiers, and insurers—all the things that legitimize a real estate enterprise—ascending in this market space.

It has transcended the idea of a small house situated on a plot of land to become a revolutionary remaking of the RV (recreational vehicle) paradigm. Though, while standard industrial RVs got bigger and more gluttonous, tiny trailer homes focused on minimizing space and maximizing homeyness.

Another twist on the expansion of the concept blossomed in the rental market. This trend has already accelerated with the creation of “micro apartments,” as they are termed in the U.S. They are typically between 150 to 350 square feet. Referred to in Japan as a “one room mansion” and in the United Kingdom as a “micro flat,” they have different names all over the globe. The designs are as unique as the developer and the architect’s imaginations.

And they are trending upward in popularity. Often (but not always) less expensive to rent, one of the many values to the tenant consumer is that the monthly costs leave them with more money in their monthly budget for travel and “experiences”—think sightseeing, entertainment, outdoor sports, and any manner of recreation and leisure pursuits.

The typical micro apartment tenant tends to be a minimalist, not a collector of “stuff.” By self-report, they state they want to have the freedom to live and travel rather than a place to collect a “bunch of useless things.”

Whatever their reasoning, just remember that as a developer or an investor, you can put a whole lot more micro apartments on a lot than you can standard-size units. Though, I would suggest creating a mixed collection of units, with some micro units thrown into a building with other size units. The more diverse your unit mix, the more likely you are to be able to meet the living needs of whoever your potential tenant is.

Remember always the wise adage, “Variety is the spice of life.”

In the End

Whether you view tiny houses as an oddity, a trend, an outgrowth of sociological change, an expression of individualism, a creative shift in architectural home design, or a movement to more engaged community living, I’d advise you to give the movement the same level of credibility our industry gave to Hummer Houses, McMansions, Garage Mahals, Starter Castles, and McModerns.

For Tiny Houses, Tree Cabins, Chic Shacks, Micro Homes, Humble Houses, and Farm Cottages are a type of living experience to which consumers demonstrate an intense emotional and psychological attachment. It defines them and their view of life in the same way those extravagant, palatial homes define the psyche and self-reflection of their owners and occupants. There will always be a market for small, simple homes, just as there will always be a market for grandiose palatial houses.

In the end, the spotlight or jargonized name of the trend may change or fall out of fashion, but the sense of attachment to the concept it represents is real and vital to the individual desiring the satisfaction it creates within them.

Would you invest in a tiny home? Why or why not?

Comment below.

B.L. Sheldon is a foremost authority and world leader in communicating the ways climate change and global weather events impact our real estate and business investing profitability. She is an activ...
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    John C. Carlson Appraiser from Victorville, California
    Replied 9 months ago
    What about using Tiny Houses as Accessory Dwelling Units (ADU's) ?? You would have to get them to meet code, but from what I've read, this is possible. Any comments on this??
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Great question, John! From what I’ve researched they definitely fit the bill. And with the change in California law I would anticipate you’ll see a lot of that coming up as you’re appraising properties up there in the High Desert and the surrounding communities. Please keep me posted on what shifts like that you see in your market.
    Terry Lowe
    Replied 9 months ago
    Wonderful article! I am envious of anyone living happily in a tiny home, but I also say that it isn’t fair to have a tiny home and a storage unit! It certainly could be a newer sort of rental unit. Something to think about.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Interesting thought, Terry! :) And right you are storage would definitely be a significant consideration. And everything you need to pay to store would technically increase your monthly expenses. Storage would be renting a place for just your “stuff” to live in! :D
    Jim Walker Real Estate Agent from Roseville, California
    Replied 9 months ago
    Promoters of the tiny house movement almost never mention some of the many drawbacks, especially the added costs that owners of small houses & apartments have had to endure. A short list. Miniature appliances frequently cost more than standard size appliances. If they can even be found. Plan to spend twice as much on fridge and stove, to get half as much utility from them. Also spend big dollars on a mini dishwasher or wash by hand. Clothes washing. Yep. Spend twice as much for miniatures, devote one evening a week to a laundromat, or get used to washing by hand. All your supplies, toilet paper, cost 30% to 100% more when purchased in the smallest possible sizes.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Hi Jim, for decades I have owned multi-family, including many small studio units, so I know of exactly what you speak. You are absolutely correct that shifts and changes, especially in appliances and unique paraphernalia can initially cost more. It has been an interesting trend to observe. You might enjoy some of the videos on YouTube where people who live in tiny houses discuss things they would have done differently or choices that they’d remake in another way on their next renovation, etc. They are fun and the vloggers are very forthcoming. I think you’d enjoy them. Thanks for your thoughts! :)
    Karen Beckett
    Replied 9 months ago
    My parents have lived in a tiny home for over a year now. Their expenses have been cut by 75%. Yes the initial investment of smaller a smaller fridge and downsizing to a washer/dryer combo was significantly higher than larger ones. BUT their utilities alone have been real savings. They used to pay $600 per month for electricity. Now 75 bucks has been the highest. Yes they are completely on grid. No solar, no biodigester. The home is paid for no mortgage on our family land of 105 acres. The taxes on the land are the same. The house tax is much much lower less than 200 a year. Since they are now retired living on a fixed income. This has been a game changer for them financially. The recently took an 8 week vacation cross country with the money they saved.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Your parents adventure sounds fantastic! I have watched this trend with great fun and fascination over the last 15 years! I love that your parents are experiencing such joy in their willingness to try new and exciting things!
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Hi Karen, I absolutely loved your thoughtful response on the Tiny House thread! I would love to connect with you here on BP! Hope your day is lovely!
    Steve Eaton
    Replied 9 months ago
    One of the more "honest" articles i've read, particularly regarding meeting required building codes. Some tiny houses appear to be nothing more than oversized rickety tool sheds thrown up in a day or two to provide temporary shelter for the homeless....no effort, money, responsibility or much protection there. And houses on wheels are trailers, not permanently affixed structures. And many articles never mention a word about the status of the land: is it owned by tiny house owner, or leased, or squatted upon? Most stories fail to provide alk the details.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Hi Steve, thank you, it can be hard trying to strike the balance between getting in all the important details, yet trying not go too much into the weeds. ;) Glad you felt like it struck a good balance! Thanks for your great energy!
    Steve Eaton
    Replied 9 months ago
    I worked in residential and comml appraisal for 28 years...super fun job. Y'all may know that CA gov newsom has essentially declared that most sfd lots the state are eligible for up to two additional and separate living units, and that no additional parking is required. I dont really understand how that will ease rents...jmhofwiw ;)
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Agreed, Steve! And I really question what it will do to the desirability of many neighborhoods when there are suddenly two to three times the amount of cars parked on the street or on the various properties. It really will dramatically change the look, feel and attractiveness of many areas. While may increase prices of individual properties by converting them from SFR's to income producing rental properties, it will also alter the dynamics of every area that embraces it. All in all, it will be extremely interesting to see what happens over the next several years as it plays out.
    Kathrynne Belaska
    Replied 9 months ago
    I am ready RIGHT NOW to invest in a tiny home! On a foundation, not on wheels. I want to live in a tiny house community. That's my biggest problem, finding one in New England.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Hi Kathrynne, good news, when I searched on Google for “tiny house villages USA” and “tiny house neighborhoods USA” and “lists of tiny houses towns” it came up with several Google pages worth of very useful articles and locations of neighborhood. If you need extra assistance please let me know and I’ll send you some of the things I found. Great luck to you!
    Lynn Gracie-Rogers
    Replied 9 months ago
    My only comment about this article is that I believe it is wrong. The IIRC Appendix Q only applies to houses on foundation, NOT Tiny Houses on Wheels. https://codes.iccsafe.org/content/IRC2018/appendix-q-tiny-houses?site_type=public
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Hi Lynn, value your thought here. But to clarify, this article is actually about ALL types of TINY HOUSES, not just the ones that conform to “Q”. In other words, not just tiny houses affixed to the ground. Please know, I have no disagreement with you that the code definition is for formal building code uses, relevant to planning and financing; and those types of tiny homes require a foundation. You are correct. But in truth, those are not ALL the homes that define the tiny house CONCEPT. In all honesty, it would be inappropriate and counter intuitive for me to limit this unique and beloved concept to only structures that are anchored, locked, attached to the ground, primarily because for so very many people who live this lifestyle “anchoring” is the antithesis of why they live as they do. For many “tiny housers” the entire reason they choose a tiny house is for the immense joy of traveling and adventuring, placing the house wherever they wish for days, weeks, months or years. Living a life less encumbered. And obviously, any homes (less than 400 sq feet) whether they are affixed on wheels, or situated on stilts or even floating on a dock are still, well clearly ”tiny”+“homes”; they are homes that are “tiny” :) So, no debate with you that, yes, “Q” refers to a structure with a foundation. But that is not the only type of tiny home. And having lived in houses and apartments of all sizes over the decades I think we all would agree that a home that is 400 sq ft or less is TINY by anyone’s standards. Thanks for your thoughts! :D
    Dan Sharkey
    Replied 9 months ago
    Tiny homes under the code may also be anchored with pre engineered awgers that screw into the earth which meets the building code for large sheds.the ahj inspector may except this with an engineers seal.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Thanks, Dan, great info!
    Jose Antonio Milke
    Replied 9 months ago
    Interesting article, B.L., thanks. Can you give us links on the kind of homes you're talking about? They may not be bigger sheds or some variant of an RV, but seeing a picture or more specs on them can be helpful. Thanks.
    BL Sheldon Investor from Colorado
    Replied 9 months ago
    Excellent question, Jose! I don't have the space to put up all the cool options that are out there with tiny homes. But I would definitely suggest going over to Google and typing in a search for TINY HOMES, then press IMAGES. You get an amazing array of fantastic and detailed pics. Also, I'd suggest that if you are really interested that you consider look up some of the tiny house blogs that are out there. They are prolific, fun and quirky! Thanks for chiming in! :)
    Barbie Steele Real Estate Agent from FRESNO, CA
    Replied 8 months ago
    Here in Fresno, Tiny homes, regardless of if they are on a foundation or not, are considered ADUs. Therefore, if you place a THOW in your backyard, that counts as the ADU. You are still eligible to convert your attached garage or other space in the existing house into a JADU, essentially triplexing your SFR. Hope this helps! Great article BL Sheldon! I just wish we could get someone to finance them....
    BL Sheldon Investor from Colorado
    Replied 8 months ago
    Hi, Barbie! That's excellent info. The shift in the laws in California has really given tiny homes an opportunity to be experimented with in new and innovative ways! Thanks for the heads up on the specifics in the Fresno MSA. And I feel ya', lenders in this niche space would provide a real uptick in that market.