3 Reasons Why Tiny Homes Are Now So Damn Expensive

published Sep 12, 2018
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(Image credit: Ana Kamin)

Tiny homes have had a big rise in the popularity over the last two decades, with television shows, books, and Instagram pages dedicated specifically to the under-400-square-foot abodes. And the next trend in these kitschy, wanderlust-style homes? Having a huge price tag.

What were once budget-friendly alternatives to rising rents and mortgage costs, tiny homes have recently seen an uptick in costs, with the median cost for a space with a three-fourths bathroom, working kitchen, and dining/living area estimated to be $59,884, according to The Spruce. But more companies have been branding themselves as building “luxury tiny homes” and charge $124,000 or more for a home with amenities like a washer/dryer unit, stainless steel appliances, and even whirlpool tubs in the 400-square-foot units. But why are they so expensive? I talked to tiny home experts to get the answer. Here’s what I found:

1. Location

According to a February 2017 report from CNBC, location, location, location is one answer. Last year, a tiny home was listed in Bethesda, Maryland—a suburb of Washington, D.C.—for a whopping $459,000 (the median house price in the area is $995,000, according to Realtor.com.) If a tiny homeowner wanted to lay their roots in a populous area like New York City or the Bay Area, the homeowner could potentially be stuck with a similar price tag to their “regularly” housed neighbors (not to mention a lot of expensive red tape with the zoning board!)

But for rural, suburban—or even mobile tiny home owners—the experience is still more expensive than many think. On top of those initial prices, there can be a fair number of hidden expenses associated with tiny home-ownership, including land to place your tiny home, specialized appliances, and potential losses when it comes time to sell.

2. Lack of market transparency

Randy Jones, former $12-million developer, thinks tiny home inflation is partly caused by lack of education for buyers. In a recent interview with “The Real Deal,” Jones described his foray into the tiny homes market after the financial crisis. He used his two decades of experience as a contractor to join in, but was surprised to see many tiny homes selling for upwards of $60,000. That shock led to his current business, Incredible Tiny Homes, where Jones lists homes for starting at just $25,000.

“Our company is the only company in the United States that is actually selling our homes at such a low price,” Jones said. “That whole premise, and starting this company, was because the inflated prices on tiny homes is outrageous.”

Jones is very adamant about transparency in his business model, showcasing the building process via videos on Facebook and YouTube and monthly workshops for customers to learn the process. Although he’s running a business, he aims to keep the prices low, be efficient and run a smooth-sailing company.

“It’s not that I’m trying to prove anything, I’m just trying to help everyone understand and get educated about building,” he said. “My competitors are really doing an amazing job, but they’re cashing in on a new thing.” Jones feels that since the economy has recovered since the 2008 crash, many tiny home builders have entered the market due to greed and are overcharging for things without reason. “We need to work together and take care of the customers instead of gouging them,” he said.

3. An oversaturated market

Another factor for large prices? An oversaturated market. Derek “Deek” Diedricksen, HGTV host and author—whose second book “Micro Living” is set for release in October—first learned of tiny homes in 1987 at just 10 years old, when he was gifted Lester Walker’s book “Tiny, Tiny Houses.” Since entering the market himself, Diedricksen has seen the Internet’s obsession with tiny homes lead many to dream of a tiny home themselves. Since there was such a demand, there was a new market for builders to tap. Diedricksen estimates there are upwards of 5,000 builders in the U.S. alone, and this over-saturation led to a rise in the price point for tiny homes. This is only accentuated by the fact that many tiny homebuyers are also looking to hold on to their favorite amenities.

“People will build what the market can bear, so you can have all kinds of pricing, from $20,000 to $120,000” he said. “If you want all of these amenities, and don’t want to forego all of these things that you would have in a normal-sized house, you’re going to have to pay to fit them, somehow, jigsaw-like into a tiny home.”

However there is one way around these exorbitant prices: Building your own tiny home. Ryan Mitchell, one of many self-taught builders on the market, posts about his tiny home lifestyle on The Tiny Life. After being laid off in the beginning of the Great Recession, Mitchell decided he needed to find a way to not have half of his income going straight from his paycheck to his housing costs. He saw a photo of a man who had built one of the first tiny houses, and determined from there that he would do the same, taking about a year-and-a-half to complete the project.

“I’m a pretty big proponent of people building their own homes,” he said. “It may be the hardest thing they do, they may make mistakes they have to fix, it may take them a lot of time, but anyone can do it.”

Diedricksen agrees on the value of circumventing tiny home builders—rather than going along with the high price points for these tiny homes, he recommends an alternative: “It’s smarter to research cabins instead of tiny homes—there are age old plans out there that are absolutely beautiful, affordable, and attainable,” he said.

But if building your own home seems out of your league (and you find yourself priced out of a tiny home and a regular home), here’s some good news: A 2020 recession might act as an economic correction to the housing market—cooling demand and potentially making all sorts of homes more affordable.