The United States has long grappled with a housing affordability crisis, but the recent surge in home prices and mortgage rates has sent this issue to new heights. The median home price of $412,500 recorded in September 2023 hovers near record highs seen in mid-2022, according to Redfin data.
A recent report from Redfin found the average homebuyer needs an income of nearly $115,000 to afford a median priced home as of August 2023. That’s roughly $40,000 more than the average American makes, according to the Redfin report, citing U.S. Census data from 2022, the most recent year for which annual income data is available.
While some homebuyers are choosing to wait on the sidelines in hopes that prices or mortgage rates will come down soon, many buyers are finding creative solutions to combat the housing affordability crisis. One of those solutions is thinking small with tiny homes.
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Why Tiny Homes Are Affordable Alternatives
Tiny homes became popular over the last 10 years as the minimalist movement picked up steam. These homes, which usually describe dwellings under 400 square feet but can encompass homes up to 650 square feet, offer a smaller footprint for a fraction of the price.
There are a wide variety of tiny home styles, from prefab buildings, portable tiny homes and container houses all the way to custom-built luxury tiny homes. Along with this variety comes a range of price tags for building, owning and maintaining a tiny home.
The average tiny home can cost anywhere from $30,000 to $70,000 in 2023, depending on the size and design, according to a report from Home Guide. That’s 83% less than the median home price today and a more affordable entry point than most larger, traditional homes.
How a Tiny Home Will Save Money
Stefanie Mortensen, an HR manager who lived outside of Washington D.C., decided to buy a tiny home in Tampa, Florida, this year to reduce her cost of living and save money. The median home price in Alexandria, Virginia, where Mortensen called home prior to going tiny, was $630,000 in March 2023. “Buying a house was out of my price range in northern Virginia and the cost for my tiny home in The Oaks is much less than what I was paying for rent up north,” says Mortenson.
Mortensen had been watching tiny home development communities closely for years, but the pandemic allowed her to pursue this reality thanks to remote work. She purchased a tiny home in Escape Tampa Bay’s The Oaks community for $159,000, which is around $470,000 less than she would have paid in Alexandria for a similarly sized home.
Moving to an area with a more affordable housing market offered her big savings, but going tiny helped her save even more. Being smaller, there was less cost to furnish the home and there is less space to heat and cool, leading to lower utility bills. Property taxes are often a lot cheaper, too.
“My monthly fees include the house payment and HOA fee, which covers landscaping, septic, water, trash removal and other shared utilities for the park, along with my lot lease. In total, it’s around $150 less than my monthly rent in Alexandria,” Mortensen says. My electric bill was cut in half. I also spent less furnishing the home buying furniture with dual purposes, like a couch with built-in storage.”
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Pros of Tiny Home Living
The most obvious pro to tiny home living is the lower cost of purchasing, building or maintaining the home, compared with larger homes.
— Tiny homes are cheaper to build or buy.
— Utility costs are lower thanks to smaller square footage.
— It costs less to furnish the home.
— Property taxes are lower.
John and Fin Kernohan, who have lived in a 304-square-foot DIY tiny home for the past 12 years, say tiny living saved them hundreds of thousands of dollars in their home purchase. “We purchased an empty 12-foot-by-30-foot shed shell from Derksen Portable Buildings in 2015 for $6,500,” Fin Kernohan says. “We spent another $6,000 on the DIY build-out of our small cabin. We originally leased land in Georgia while we built our home and looked for the perfect land to live in our tiny home legally. It took us nearly a year to complete the build, which we now call the Beloved Cabin.”
They went on to buy 16 acres in Georgia that houses their tiny home cabin, along with several tiny home guest cottages, geodesic domes, a yurt and even a school bus conversion, which they rent as unique getaways.
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Cons of Tiny Home Living
Tiny living can offer huge savings but there are downsides that come along with living small.
— There is less living space.
— Lack of storage means you may need to rent a storage unit.
— Not every community allows tiny homes due to zoning restrictions.
— You need to purchase land at an additional cost.
— If you live in a tiny home community, there are additional monthly and annual fees.
— It may be tricky to get property insurance.
For a single person, the smaller space may not be as big of a deal, but for a multi-person household, 400 square feet can be tight living quarters. You’ll need to downsize notably and possibly invest in a storage unit if you aren’t able to pare down your belongings. You’ll no longer have things like a garage to store extra items, and closet or pantry space will come at a premium.
You also need a place to safely and legally keep your tiny home. “Make sure you can legally build and live in a tiny home where you intend to reside. Check local ordinances and zoning and building codes as not every area will allow this way of living,” Kernohan says.
Many municipalities prohibit tiny homes in certain areas, especially urban residential neighborhoods. Mortensen wouldn’t have been able to move into a tiny home in her area of northern Virginia as there is no zoning for tiny homes.
There are tiny home communities popping up in more regulation-friendly counties, but keeping your tiny home in those communities will require an extra monthly payment for things like landscaping, septic tank, water and trash removal along with other utilities. If you prefer to keep or build your tiny home on your own property, you’ll have the extra cost of land, along with the annual property taxes and insurance that go with it. It could also be tricky to find a homeowners insurance policy to cover your tiny home. Many insurance providers won’t issue a standard homeowners policy, but instead will insure your property as a mobile home or manufactured home.
There is rarely a one-size-fits-all solution to housing, particularly in today’s challenging housing market. Tiny homes are an affordable option but they don’t come without trade-offs.
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Priced Out of the Market? A Tiny Home Could Be the Solution originally appeared on usnews.com
