Trying to figure out whether tiny houses are actually affordable

I ran across a story of a self-sustaining time home made in Australia and retailing for roughly $61,000:

In total, this Urban Tiny home on wheels is 8.2 feet wide, 14.1 feet tall, and 24.3 feet long, including its drawbar. The drawbar, which is 4.6 feet long, allows the 7,363-pound tiny home to be towed by several vehicle types, including pickup trucks and SUVs…

The home’s self sufficiency title comes from its power systems, which includes solar panels, a battery system, and a 240-volt inverter…

The inside of the home looks no different than a typical loft apartment…

The bathroom and kitchen source its water from the drinking and grey water tanks. But for those who want a more consistent stream of water and power, there are water and generator power connection points in the tiny home.

The home looks appealing and the built-in electricity and water units provide more flexibility and sustainability. But, here is why I wonder if such houses could truly be affordable housing:

1. The price on one unit is cheaper than most single-family homes in the United States. This does not necessarily mean it is affordable. It is almost double the cost of the average new car in the United States. Would lenders be willing to extend longer mortgages for these small housing units?

2. The owner of the tiny house still needs land. This would require buying a lot, renting a lot, or finding a free lot. The first two options could add significant costs while the third requires a personal connection.

3. It is unclear what the operating costs are for tiny houses: what does maintenance cost? How much are utilities? How long do these units last? What is their resale value after five or ten years?

4. Moving the unit is an attractive option (particularly given #2). But, this requires renting or owning a large enough vehicle to tow the unit.

5. This is not a large unit at roughly 200-250 square feet (including the loft space). In terms of price per square foot, this is not necessarily cheap (particularly if the costs for #2 are added in). If people have a lot of stuff, would they need to rent a storage unit or have a storage building/garage on their property? There is not a lot of private space in these units; would this require living near a community that provides pleasant public and private spaces (think coffeeshops, libraries, parks, etc.) and would this drive up the price of parking the unit?

Putting this all together, I’m not sure this is within the reach of many people (perhaps it is more in the ballpark for a retreat or second home for people with more resources).

The advantages McMansions may offer for working from home

With coronavirus pushing more people to work from home, I have seen more advice about setting up a home workspace. I found one example that suggests workers in all kinds of homes face similar challenges:

First things first: As we’re learning, there’s no “normal” with the coronavirus. But that also applies to where you live. “Home workers” now include apartment dwellers, Millennials who share a house, Midwesterners with basements, suburbanites in McMansions, and more. You’ll have to figure out what works for you, within your own unique environment. Still, some rules apply to just about everyone.

Is this true? Do McMansion-dwellers have any advantages in working out of their large homes? A few ideas:

  1. All that space means McMansion occupants have plenty of options to choose from regarding where to work. They could even rotate (though these articles tend to emphasize making one space a clearly delineated work space).
  2. All that space also means they can keep their distance from all other occupants.
  3. Although the McMansion might have a lot of open common space, there are likely parts of the house that can be pretty quiet and separate from other activities.
  4. Related to #1-3, who likes open office plans?
  5. If a worker needs to bring lots of materials home, the McMansion likely has a lot of storage space. A temporary home office might barely be noticed.
  6. Because of the size of the home, the walk from the office space to the kitchen or bathroom could be a sufficient break or help the worker acquire their needed steps.
  7. The McMansion home worker pressed for cash could rent out a room or create a coworking space (while attending to local zoning codes, of course).
  8. There could be enough space to recreate the spaces in a large office building, ranging from a workout room to a large eating area to spacious bathroom to room to spread out one’s work.

Americans like their private spaces but being confined to one’s home for a few weeks may just reinforce the desire of some to have plenty of space.

Paper suggesting Americans adopt sufficiency limits for the size of homes

A new study looks at what amount of space might be sufficient for American single-family homes:

Social scientists have extensively documented the strategies used over the past century to purposefully upsize the preferences of consumers in high-income countries (Collins 2000; Nickles 2002; Cohen 2003; Horowitz 2004; Clarke 2007; Jacobs 2015). These practices became increasingly prevalent during the years following World War II and have been revamped and augmented to encompass an ever-expanding array of products. The most notable example of this phenomenon – abetted by builders, architects, realtors, mortgage bankers, public-policy makers, and numerous others is housing which in particular has in the United States, Canada, and Australia approximately tripled in size in just a half-century. This process of residential upsizing is understandable as individuals and organizations were for the most part responding to prevalent social and economic incentives and investing a portion of the gains accruing from increasing productivity and rising incomes into more spacious accommodation. While the trend contributed to unambiguous improvements in standards of living, evidence is now emerging that the process of residential upsizing is not contributing to gains in “house satisfaction” (Bellet 2019).

However, the contemporary era, characterized by climate change, economic inequality, and deep social divisions, requires new priorities. Rather than looking to enlargement as a panacea for all manner of problems, the targets outlined in the Paris Agreement and the United Nations 2030 Agenda for Sustainable Development require high-income countries to pursue a sustainable consumption transition. The downscaling of home size, because of the substantial volumes of resources required to meet residential needs, will be a critical part of this undertaking. While the methodology to formulate a minimum social floor and a maximum biophysical ceiling is necessarily provisional, it provides a place from which to begin to consider this important issue.

And from a summary of the article:

In the U.S., average floor space per person would need to be reduced from 754 square feet to 215 square feet, which perhaps surprisingly, is roughly comparable to the amount of space available during the baby boom of the 1950s.

While Cohen acknowledges the myriad political, commercial and cultural challenges of imparting such a sufficiency ceiling on current housing practices, he highlights five examples that he asserts point to shifting sensibilities: the tiny-house movement in the United States; the niche market for substantially smaller houses and apartments in the Nordic countries; the construction of accessory dwelling units in west coast cities of North America; the growing popularity of micro-apartments in New York City and San Francisco; and the emergence of co-living/co-working facilities in Europe.

Four quick thoughts:

  1. There are a lot of factors pushing Americans toward bigger houses in recent decades. Pushing against these factors would require a lot of time and energy. For example, reducing consumption might help people think about smaller spaces.
  2. Given the local nature of building and real estate, I have a hard time imagining this happening top-down. On the other hand, I could imagine some locales adopting such guidelines and then it spreading to similar locations or even the whole country. At the least, it could be popular in expensive real estate markets – think Bay Area or Seattle – though it would be interesting to see how wealthier homeowners deal with such guidelines. Perhaps if it was instituted for a housing units going forward, there would still be a supply of big homes for those that want them.
  3. Related to #2, I would guess more Americans would be motivated to pursue smaller homes because of cost and lifestyle preferences, not because of environmentalism and realizing that single-family homes make significant contributions to carbon emissions and require a lot of resources.
  4. How much of this is dependent on building a better public realm? People might be more willing to give up private space if they saw attractive alternatives like coffee shops, libraries, and other public settings where they could live their lives. Americans do not have developed public living spaces or many do not have regular patterns of spending important hours away from their private homes.

A restaurant smaller than a McMansion dining room

McMansions are known for having a lot of space; certain restaurants try to keep the dining room very small. Thus, the comparison between an Omaha cafe and a McMansion dining room might not seem out of place:

You feel at home in Sojourn the minute you walk in the door and down a hall that’s separated from the eating area. When you reach the cafe, it’s much like you’re entering your own dining room. The serving area, with 12 tables for four, is smaller than some dining rooms in suburban McMansions.

OmahaRestaurantDiningRoom

However, this appears to be a decent-sized space with room for twelve tables, 48 customers (plus the small countertop in the back), and still some room for people to get by. And if this estimate of 12 square feet per diner is anywhere close, this space has roughly 570 square feet.

This would make for a very large McMansion dining room. Even with the interest Americans might have in always having some extra space, how many times does a McMansion owner need to seat 48 people? A 20 foot by 20 foot square McMansion dining room comprising of 400 square feet would be smaller than this space. A 40 foot by 15 foot rectangular dining room would be slightly larger than this. The size of this cafe is probably more akin to a great room or family room in a McMansion rather than a dining room.

So why the comparison here to a McMansion? Two guesses. First, the emphasis is on the relatively small space of the cafe. While the video does not suggest the space is too tight, the dining room would certainly be lively with a half full or more dining room. This is not a suburban chain restaurant with tables upon tables; this is a limited space. Second, the description attempts to highlight the coziness and warmth of the space. McMansions have plenty of space as well as limited charm due to their cookie-cutter nature and cavernous rooms.

Modernization, smaller homes, and social class

I wanted to come back to a post from earlier this year where an economist argues that modern conveniences mean people can save money by living in smaller houses:

DR. SHILLER: Big houses are a waste. People are still in a mode of thinking about houses that is kind of 19th century. As we modernize, we don’t need all this space. For example, we don’t need elaborate kitchens, because we have all kinds of delivery services for food. And maybe you don’t need a workshop in your basement, either. You used to have a filing cabinet for your tax information, but now it’s all electronic, so you don’t need that, either. And bookshelves, for people who read a lot. We have electronic books now, so we don’t need bookshelves anymore…

DR. SHILLER: Having a big house is a symbol of success, and people want to look successful. People have to know about your achievements. How do you know, really? Who knows what people are doing in their day job? But you do see their house…

DR. SHILLER: When it comes to housing, there are books about this in the last 20 years—including “The New Small House”—that talk about designing houses to look impressive as well as function with a smaller scale.

Just like we’re developing Uber and Lyft and Airbnb using existing resources more efficiently, we can also build houses that are better at serving people’s needs without being big.

All of this could indeed be true. Many of the items people purchased just a few years ago may not be necessary. However: some of the services mentioned above seem to be tied to social class and age. Which people in society are getting all of their food delivered? How many people are doing all their taxes and bill paying online? Who needs space to store books, clothes, toys, electronics, gym equipment, etc.? Imagine a few scenarios of who might trade stuff for a smaller home:

  1. A downsizing well-off couple who wants to move to the big city now that they are empty-nesters.
  2. A recent college graduate who cannot afford a large residence but wants to spend money on cultural options and food.
  3. A professional who works long hours and does not want to care for a large residence.
  4. People who live the majority of their life through the Internet and their smartphone.

On the flip side, imagine people who might still want a larger home:

  1. A suburban couple with a child on the way who want more space for their kids.
  2. A young worker who has saved a little money, wants to put down roots in a community, and invest in something that will probably rise in value over the decades.
  3. People who like to have friends and family visit or who want to gain some extra income through hosting people.
  4. Numerous Americans who think a larger home is a better deal given that they can use the space, they like to buy stuff, and/or think that their home will appreciate in value.

In sum, I could imagine those who choose to buy smaller homes might be doing it for class/education/taste based reasons rather than just because they want a more efficient home. Those with more education might value a big home less. I would guess it will take time for many American residents to come around to the way of thinking that a smaller home is more efficient. In the meantime, there are still many forces still pushing people to buy larger homes.

Mismatch between the slightly smaller homes millennials want and bigger homes builders want to construct?

Some data from recent years suggests builders and younger homebuyers may not see eye-to-eye on what kinds of homes they want:

A new survey from the National Association of Home Builders suggests that millennials — the demographic that should be the big driver of home buying over the next decade — is growing increasingly pragmatic about size. In 2018, one-third of millennials said they would trade smaller size for greater affordability; in 2007 just one in five millennials found that tradeoff palatable.

Indeed, in its most recent annual report, Harvard’s Joint Center for Housing Studies notes the builder vs. buyer mismatch. “With millions of millennials moving into their prime home-buying years, demand for smaller, more affordable homes seems poised for a surge,” the report stated.

Yet builders aren’t interested in ponying up the supply.

The JCHS says that in 2017 small homes represented just 22% of new homes, compared to an average of 32% between 1999 and 2011. And to be clear, the JCHS is not talking about tiny homes for millennials. It defines small as 1,800 square feet or less. That is still bigger than new homes’ median size a generation ago.

Just how much smaller are the homes that millennials desire? The median new home size decreased last year to around 2,300 square feet. What exactly is the range of home size millennials most desire (and how does this size interact with other important factors such as locations or features of the home)?

On the other side, builders are likely interested in constructing larger homes because they can make more money off each unit. Additionally, there is still some demand for larger homes though this could change in the coming years with more millennials in the housing market alongside older residents who are no longer buying homes or who are looking to sell their own large homes.

All of this is of interest to the housing industry (and other related observers): will millennials kill McMansions? Where are the newly constructed starter houses? On the whole, Americans still have large homes on a global scale and an intertwined set of social and cultural factors that keep that going. There is both money to be made here and new dwellings younger homebuyers would like to explore (if they can afford them).

Looking at “The McMansion Effect:” home satisfaction and size of the homeowners’ home

A new study under review looks at how satisfied owners are with owning some of the largest homes in their area:

This finding, Bellet reasons, has to do with how people compare their houses with others in their neighborhood—particularly the biggest ones. In his paper, which is currently under peer review, he looks closely at the construction of homes that are larger than at least 90 percent of the other houses in the neighborhood. By his calculation, if homes in the 90th percentile were 10 percent bigger, the neighbors would be less pleased with their own homes unless those homes grew 10 percent as well. Moreover, the homeowners most sensitive to such shifts are the ones whose houses are in the second-biggest tier, not the ones whose houses are median-sized.

To be clear, having more space does generally lead to people saying they’re more pleased with their home. The problem is that the satisfaction often doesn’t last if even bigger homes pop up nearby. “If I bought a house to feel like I’m ‘the king of my neighborhood,’ but a new king arises, it makes me feel very bad about my house,” Bellet wrote to me in an email.

The largest houses seem to be the ones that all the other homeowners base their expectations on. In neighborhoods where the biggest houses are more modest, Bellet told me, expanding the size of one’s house can be 10 times as satisfying as undertaking such an expansion in a neighborhood where the biggest homes are palatial.

Bellet sketches out an unfulfilling cycle of one-upmanship, in which the owners of the biggest homes are most satisfied if their home remains among the biggest, and those who rank right below them grow less satisfied as their dwelling looks ever more measly by comparison. He estimates that from 1980 to 2009, the size of the largest 10 percent of houses increased 1.4 times as fast as did the size of the median house. This means that the reference point many people have for what constitutes a big home has shifted further out of reach, just as many other lifestyle reference points have shifted in an age of pronounced wealth inequality.

Read the working paper here.
Three quick thoughts:
  1. The term McMansion in the paper seems to refer simply to the largest homes. At least a few of the homes are not likely McMansions since the term is much more complex than just referring to homes with a large amount of square feet. Is the big home architecturally sound? Is it a teardown replacing a smaller home? Is it less of an issue of the single home and more an issue of sprawl and excessive consumption? Calling all big homes McMansions does not add much to helping understand what exactly is going on with large homes. Not all large homes are made alike or may be as satisfying. It may, however, add sizzle to the title: “The McMansion Effect” sounds good.
  2. I would like to see more research that addresses the issue of homeowners comparing their homes to others around them. This paper suggests satisfaction is linked to nearby comparisons. How far does this geography extend – walking distance? Half a mile? 2 miles? Within the same municipality? Compared to what is seen on TV?
  3. This sounds similar to a recent argument about the “Dream Hoarders,” the group just below the wealthiest people who have status anxiety about keeping up. Here, those just below the biggest homes in the neighborhood can feel worse. Is it the largest houses that are the problem or the people in the next to largest houses who then long to have the biggest house. If only we could control the pesky human tendency to compare ourselves to people who have just a little more than us…

Shrinking new homes, fewer McMansions in Australia

A few years back, Australia passed the United States for largest new homes in the world. Now, new homes in Australia are trending smaller, Australian new are firmly the second largest in the world, and fewer McMansions are under construction:

Australian homes have shrunk to 22-year lows as the “McMansion” fades in popularity and more apartments are built, Australian Bureau of Statistics data reveals.

The average floor size of a new home is now 186.3 square metres, down 1.6 per cent over the past 12 months and the smallest since 1996, according to CommSec’s Home Size Trends Report released on Monday.

More on the longer trends:

The average size of freestanding houses peaked in 2011-12 and has stabilised over the past five years. The average house is 8 per cent bigger than 20 years ago and nearly 30 per cent bigger than 30 years ago in 1987-88.

The standard fit-out is also superior, with higher quality kitchens, bathrooms, floor coverings and inclusions such as air-conditioners.

It is good to have a reminder that new homes can both increase and decrease in size over time. On one hand, smaller new homes would be praised by some as a good move. On the other hand, the long-term shift is still toward larger homes with more expensive features.

It is tempting to consider whether a similar shift could take place in the United States. Could the ever-growing new home in the United States start shrinking as smaller kinds of new housing increase in number? This could happen either two ways: fewer large homes are constructed or more smaller units are constructed (in comparison to each other). I am skeptical this would happen for multiple reasons. Americans still seem to believe in the virtues of having more space and are still willing, to some degree, to tackle the issues that can come with larger houses (i.e., longer commutes, higher taxes, higher maintenance and upkeep costs). Smaller units may be popular in some circles but reasonably-priced apartments, tiny houses, and accessory dwelling units have yet to take off in large numbers. This, of course, could change as households and communities change over the decades, but I do not envision a major reduction in the size new American homes in the near future.

Claim: Americans are giving up McMansions for tiny houses

A story about a tiny house promotion in New York City starts with this claim:

Over the past few years, the tiny home movement has picked up steam, with more and more folks deciding to abandon McMansions to live in small houses, typically less than 500 square feet.

I am skeptical about multiple parts of this claim:

  1. Tiny houses may garner some attention. But is there a tiny house revolution going on? I do not know if there is a single researcher or group tracking this but the number of sales is limited.
  2. The term McMansion is clearly negative. There may be fewer McMansions constructed today in the aftermath of the 2000s burst housing bubble but the percentage of new homes over 3,000 square feet has increased in the last ten years. McMansions are back and/or here to stay (and/or never really left). In contrast, in recent years homes under 1,400 square feet have been 7% or 8% of all new homes.
  3. The stronger part of this claim is that McMansion owners are giving up their homes to live in tiny houses. There may be some cases of this but this is quite a dramatic change. I suspect more tiny house owners are wealthier people who choose a tiny house as a vacation home or second home. Or, tiny houses offer helpful options for those looking for affordable housing or the homeless, not those that already have a large home.

In sum, the evidence suggests McMansions are alive and well and tiny homes are limited.

Suburban family downsizes to 1,000 square feet…and then upsizes 412 days later

Downsizing and tiny houses are supposedly all the rage but they may actually be difficult to pull off as one suburban family attests:

I’d like to say that we had thought about what it would be like to live a tiny life before we downsized from our 4,000-square-foot home, but we fell in love with our little cottage in McKinney, Texas, and had grown tired of living large. Somewhere between the quest for more living space, we lost ourselves in exchange for higher utility bills and weekends spent dusting…

By the standards of tiny living — formally anything under 500 square feet — our move was not a tiny one. But when you consider that we are a family of five (plus a dog), you can see why we called our life “tiny.”…

Every day we learned more about each other and grew less tethered by the norms of privacy. But still, we all secretly longed for a sliver of it, for a private moment where tears could run without an audience, for the chance of living an embarrassing moment on your own, and for conversations that are secret, almost hidden, from the buzz of daily life. It was the togetherness that championed our tiny life, but it was the lack of privacy that also had us questioning it….

All of this joy for 400 extra square feet plus the 12 it takes to house the vacuum. Everyone has a room, everyone has personal space, and no one has to look at the vacuum unless they are using it. We could have added more space, but we purposely kept it small to maintain the togetherness of tiny living and the added bonus of smaller utility bills.

The overriding thought in the decision to add a bit more square footage seems to be privacy: 1,000 square feet was simply not enough. That comes out to about 200 square feet per person but the family desired more. It would be interesting to compare this figure – certainly far below what many Americans have in their dwellings – to global figures as well as to how Americans define and prize privacy. The American Dream with its single-family home is in significant part about having space away from others.

Two other factors in this particular story also strike me as unique. First, the family lives in a warmer climate where being outside is easier. If residents need a little more space, especially kids, going outside is an option. (Granted, being outside in Texas summer may not be pleasant but it is certainly preferable to freezing cold.) Second, the family lives in a suburb that regularly is ranked among the best places to live in the United States. The family does not say much about this in the article but the amenities of such a suburb could ameliorate having a smaller house.