Tiny Homes: The Big Picture       

A  huge amount of new information, new products, and new technology has been dumped into the world of manufactured housing in the last decade, all under the umbrella term known as “tiny homes.” Recently, however, the hype around these mythic structures has been starting to crumble, and the reality of what a tiny home is has started to take painful hold in the market. And to make matters even more complicated, there's still a substantial amount of misinformation surrounding these structures.

Still, the world of tiny homes continues to expand with new builders, new , and new potential. To spread awareness, education, and a realistic picture of the tiny home market, this publication will examine what a tiny home is, where they came from, and what the potential is from an investment and development standpoint.

Authors note: It should be made clear that I have neither a positive nor negative opinion of tiny homes. Having dealt in depth and in detail with these structures, I see good and bad. I can say that, under the right circumstances, with the right operators, and with proper oversight and regulation, tiny homes can make a meaningful and lasting impact on affordable housing.             

A Classic Tiny Home (Stunning Sage Green THOW by Bear's Tiny Homes for Sale (tinyhousetalk.com)   

Tiny homes have great potential, but they got off to a difficult start.

Unlike a more well-defined structure, such as a mobile home or park model home, tiny homes don’t have a definitive point or time of origin. And since the term is so ill-defined, any structure built on some sort of movable chassis or frame has the right to lay claim as the first “tiny home.” The growth in popularity of what is generally considered a tiny home today, though, coincides with the of the affordable housing crisis in the Pacific Northwest (and California, but for the purposes of this publication the focus will remain in the Pacific Northwest).

Specifically, tiny homes began to gain popularity in the immediate aftermath of the Great Recession (year?) Years of loose lending regulations, coupled with an explosion of new financial instruments which allowed banks and other loan originators to sell the loans they had created, created a perfect storm of over-valued homes and engineered an inevitable collapse.

In addition to the economic and financial fall out, the recession crippled the residential housing market. While new construction of housing units plummeted to less than 25% of historical averages, the large inventory of existing housing (created from the large amount of foreclosures and bank-owned sales) was quickly absorbed due to depressed pricing and low interest rates. This historically unique combination of opposing forces created a fury of rental increases as existing properties were bought and sold on the promise of rapidly increasing rents due to a limited supply.[1]

In response to all of this newly unaffordable housing, many early adopters of tiny homes sought to reduce their housing costs by moving into a broad range of moveable, livable (or semi-livable), but always unpermitted, housing. Local municipalities, faced with tremendous pressure to increase affordable housing, found themselves making a series of enforcement concessions in order to accommodate this new product. Some cities even went so far as to embrace this new housing type; in Portland, Oregon, for example, a city ordinance that still exists today allowed for the placement of a tiny home structure as an accessory unit to any single-family home.[2]

 

As more products came to market, government bodies began to codify some of the earlier allowances, making a somewhat code-compliant means to build and occupy the formerly unpermitted structures.[3] The 2018 International Residential Code, for example, made a special allowance for tiny homes, thus cementing the permanence of these units[4]. All told, this rapid entrée of tiny homes into the Pacific Northwest was somewhat quickly accepted as a legal dwelling unit in a short amount of time.

 

What is a tiny home?

There still isn’t a definitive answer to this question. However, several recent entries to state and federal building codes provide at least a rough framework by which tiny homes must generally operate:

  • A tiny home must meet conventional residential housing standards to be used as a dwelling; i.e., a tiny home must be legally “livable” per the prevailing authority.
  • A tiny home does not have to be moveable, though it can be[5].
  • While tiny homes must meet most aspects of residential code, certain variances exist for items such as sleeping lofts, total square footage, and individual room dimensions.

While general, these provisions at least provide a basis for agreement for builders, inspectors, and governments to allow these structures[6]. They also allow for a more legal habitation to be possible using tiny home designations. Despite this, however, there has yet to be any sort of large-scale tiny home development[7] in the Pacific Northwest. Regrettably, the residential construction industry is notoriously slow to adopt new technologies, so it will require direct action from dedicated developers and entrepreneurs to push this forward to a point where the greater industry starts to take notice.

To add a layer of complexity, the very existence of tiny homes is somewhat of a threat to conventional builders. Typically, conventional large home builders are seeking to “get in, get out” of any project in which they are engaged by building to minimum code standards and cutting corners whenever possible – that's the shortest road to maximized profit with limited recourse against them from eventual homebuyers. What’s more, because “square footage” is the primary metric by which a home’s value is obtained, building larger homes is of paramount importance to a home builder. It goes without saying that tiny homes do not adhere to either of these conventions, thus making it unlikely any home builder will try to engage in this new product.

Another deterrent is that unlike a traditional subdivision, the low price point mandates that a tiny home builder/developer stay actively involved in the property as the underlying landowner and property manager. This ongoing relationship with the homeowners means that any short cuts taken in construction have a very likely probability of being discovered, which should be motivating to a tiny home developer to adhere to a much higher construction standard and ensure that the product is of the utmost quality, not only a the completion of construction but for the useful life of the property.

 

[1] Great Recession - Wikipedia

[2] https://www.portland.gov/ppd/zoning-land-use/zoning-code-overview/occupied-rvs-and-tiny-houses-wheels

[3] When Did the Tiny House Movement Start, and Why Is It Still Going Strong? – Monumental (monumentalwd.com)

[4] APPENDIX Q TINY HOUSES - 2018 INTERNATIONAL RESIDENTIAL CODE (IRC) (iccsafe.org)

[5] see my article on Park Model homes for an in-depth analysis of the moveable variety

[6] 2018 International Residential Code (IRC) (iccsafe.org)

[7] The largest, as of this writing, is the 50 unit Bellis Fair Tiny Home development conducted by Bridgeview Asset Management in Bellingham WA