Tiny Houses: Will the Movement Last?

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.

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.

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.”

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:

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.
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.
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.
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.

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.

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.

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