The demand for small footprint housing marks a significant shift away from monster homes that have dotted the suburban landscape for the past two or more decades, and this new demand is about to change everything from community planning to finance, insurance and real estate.
We’re told that the U.S. housing market is 67% back to “normal” according to Trulia’s Housing Barometer and the post-crisis recovery is on-track, according to the latest home price figures from Case-Shiller. But what will post-recovery look like? Has a five-year depression created a new segment of consumers within this renewed economy?
Lauren Lyster wrote in the Daily Ticker that economic gauges may be missing a “tiny” but growing slice of today’s housing market. Lyster interviewed Ella Jenkins of Frazier Park, California, a 23-year-old “homeowner.” She built her own house, and it has everything she needs. There’s just one catch: it’s only 130 square feet and it’s built on wheels (i.e. a trailer). The home cost her $16,000 to build, and she constructed it with her father in the driveway of her family’s home. It was a year long D-I-Y project, but a tiny home with no mortgage or rent means she has the economic freedom to pursue music and art. She won’t get forced into a career path she doesn’t want.
There is an element of change that may be poised to transform at least part of the housing market and at present we know little about it. What we do know is that the institutions that act as gatekeepers for the housing market would rather not be having to deal with dramatic shifts in consumer behaviour which is largely why tiny homes are having a hard time getting a toehold in some places.
Lets face it, if you’re a banker living in a monster house and someone came to you wanting to borrow $20,000 to build a 200 square foot home, how might you react? The first thing you might do is look at your 200 square foot office den and wonder how anybody could live in a space as small as that?
This is the problem, the housing gatekeepers are having a difficult time imagining this new emerging market. It should be noted that this has happened to the mainstream before, regarding a number of new ideas.
“It’s not possible, man will never fly”.
“We will always need horses to move goods”
“Alexander Bell is insane”.
“Nothing will replace gasoline engines”.
And my favourite…. “the Earth is flat.”
So today, there’s a growing number of people insisting that they can live comfortably within 175-400 square feet of living space. And if this is the case and this market is large enough – it’s a gamechanger, and we should all be paying attention.
For the past number of decades we’ve been trending "big" without logic - in developed countries family size has been generally shrinking, in some countries family homes have grown in size, notably in the United States where the average size of new single family homes grew from 1,780 square feet (165 m2) in 1978 to 2,479 square feet (230.3 m2) in 2007. Reasons for this include increased material wealth and prestige – but regardless everyone, always complains that the price of housing is going up while overlooking this simple fact – houses are getting bigger, so they will cost more.
However it was Hurricane Katrina that provided a back-to-basics shift in the housing landscape. In 2005, after Hurricane Katrina, Marianne Cusato developed the Katrina Cottages that started at 308 square feet (28.6 m2) as an alternative to FEMA trailers.
Though these were created to provide a pleasant solution to a disaster zone, Cusato received wider interest in her design from developers of resorts, and even big box home supply centres. With the financial crisis of 2007–2010 the small house movement attracted more attention as it offered housing that was more affordable in acquisition and maintenance, and was considered ecologically friendly as well.
Realistically tiny homes as a segment, still represents a very small part of total real estate transactions. In the U.S. only 1% of home buyers acquire houses of 1,000 square feet or less and the typical cost of a tiny or small home is $20–60,000 according to 2012 figures.
Today, many of these small houses are used as additions on a property for aging relatives or returning children; as a home office, or as a guest house. The emergance of lane-way cottages or carriage houses are gaining a foothold in most cities which contain lots that are too small to subdivide. Local governments then struggle with whether to allow a smaller minimum lot size so that a subdivision can occur, versus allowing a second smaller home to be constructed on a single property. People interested in building a small home can encounter institutional “discrimination” when building codes require a minimum house size well above the size of a small home. Also, neighbors may be hostile because they are afraid of a threat to their property values. However, this concern may be baseless as there is evidence that these small homes actually increase property values through increases in density. There has also been opposition based on this fact, due to concerns about increased taxes – but really what we might be witnessing are the early signs of two consumer cultures, in a collision course, one that suggests that, “bigger is better”, the other that, “small is beautiful”.
Right now we have problems fitting people into not only housing, but also home ownership and communities should be taking notice. The last time when there was a national effort to move people into home ownership was after World War Two when thousands of veterans took advantage of government mortgage incentives intended to help them buy a home - and those were not monster homes; many of them were about 800 square feet on the main floor plus two bedrooms upstairs. These houses can be seen in many cities and are often labeled “wartime houses”. Coincidently, they are now being eyed as perfect places for a second tiny home due to large lot sizes and to their close proximity to downtown areas.
Local governments need to know that there’s a possibility for small footprint densification plus the trend is being helped by what some describe as a “tiny mortgage.” Some tiny houses are built on trailers to RV code and the manufacturers are RV-approved, and banks are then willing to loan on that basis. So instead of $60,000 needed upfront for your "luxurious" tiny home, you may elect a for frugal house that requires only 10% down and a payment of $400 a month for a 15-year loan.
Time will probably demonstrate that the tiny house trend will have a wide homeowner landscape, there will be those fueled by their appetite to buck high mortgages and McMansions; and then there will be those seeking a simpler, more affordable life perhaps in an eco-village environment; and there will be some who will create unique intricacies that defines luxury within a small footprint.
The future of housing is getting interesting.
