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

Tiny houses are trending on TV, but do they really make sense in reality?

There are now multiple reality television shows focusing on the tiny house movement. More and more builders are stepping into the market trying to promote this niche. The ideal is great. The marketing is genius. Live simply and enjoy life more. Have less debt and take better care of the planet. Those are great things. Can tiny houses deliver? Or do they bring even bigger threats?

Tiny Houses Are for People With Big Wallets

If you build your own tiny house from the ground up with free recycled materials, you may really be able to free up your finances and time. However, many of the green or small homes and condos being offered today can cost tens of thousands of dollars. Some even cost a couple hundred thousand dollars.

Given the difficulty in financing a property like this, you’ll need a lot of cash. Most home buyers out there unfortunately are struggling to come up with 3% down for an FHA home loan. Never mind putting down $70,000 or more in an all-cash purchase. New data from the St. Louis Federal Reserve shows 7 in 10 Americans have less than $1,000 in savings. Even among those earning over $150,000, savings rates are pretty dismal.

Your Neighbors Don’t Want Your Tiny Home

Another major issue is actually finding somewhere to put your tiny home. There are micro-lofts and apartments in Miami and NYC. However, most building codes have minimum sizes and requirements, which preempt attempts to build tiny homes.

Neighbors may also be concerned that smaller, cheaper houses will bring down the value of their neighborhood and in turn their own home values and family finances. You can imagine they won’t be too pleased about that or welcoming to the idea. When it comes time to sell, there may be a very tiny pool of potential buyers. That’s bad news. The bigger your buyer pool, the more people to compete and bid up the price of your home. This is why experienced investors typically stick to bread and butter single family homes, which have the broadest appeal.

The Big Picture

Tiny homes may make more sense than McMansions. They may even be needed and may be able to provide the best type of housing in some communities where there are housing shortages and limited land. Yet it is also important for all of us to look at the big picture and long-term plan. What is going to happen in a decade or three? For a start, many young professionals are going to quickly outgrow those tiny homes and condos. They’ll start to feel claustrophobic or will have families. What happens when you have neighborhoods and cities saturated with studios, one bedrooms, and maybe two bedrooms? Especially when it is older inventory — and perhaps inventory that requires cash buyers?

Will the area be able to continue to attract and accommodate families, young professionals, and key workers? Perhaps not. That can lead to all types of problems from poor public services to lack of good schools, businesses leaving, diving property tax revenues, and more.

Are Tiny Houses Truly Green and Sustainable?

On the surface, the tiny home concept can appear to be green and sustainable. It can be. But if there ends up being a glut of these vacant aging units and they need to be torn down and replaced, that’s neither very efficient nor green.

With over 1.4 million vacant homes in America, it is also worth asking whether it is environmentally friendly to build more homes. There are plenty to be remodeled. Fixing up an existing property could be far less damaging to the environment in some cases. It could be more efficient and provide access to more affordable housing. These homes can be financed and ultimately may open the doors to homeownership for more people. As a more affordable option, they may also help provide more freedom to residents.

Tiny houses are cool. Still, they may not always be affordable, green, or sustainable.

What do you think?

I very much would enjoy hearing input.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.