Editor’s note: This is the second of two parts. The first part appeared in this space April 8.
At its root, America’s housing crunch is pretty simple. There aren’t enough affordable homes and apartments for the very poor, the working poor and even many middle-class households.
However, solving a housing convergence of decades of stagnant lower- and middle-class wages, high rents and home prices, low affordable inventories, and, now, inflation and higher interest rate is anything but simple.
There are creative answers to the problem, but they can face an obstacle course of barriers.
The trends of living in tiny homes and smaller cottages, as well as RV and van life influencers, are well established on YouTube and other social media and cable television networks. The macro trend has sprouted scores of local and regional builders and outfitters offering smaller footprints and downsized lifestyles.
There are some cottage-type affordable housing developments in projects in Florida, Montana, Wisconsin and other states. But the tiny house real estate segment that has proved popular on social media hasn’t found widespread implementation to address the need for more housing for seniors, young people, immigrants and low-wage workers.
Steve Weissmann, CEO of the Tumblewood Tiny House Co. in Colorado Springs, Colorado, said the market segment has seen demand level off the past several years for tiny homes, and recent interest rate hikes have had even more of an impact.
“Since the interest rates have increased, we’ve seen a real decline in orders,” Weissmann said.
Weissmann said there are two main segments going the downsized real estate route.
“I call them the hippies and the hipsters,” he said, explaining the tiny house segment is frequently dominated by young couples aged 25 to 35 and single women aged 45 to 60.
“Right now, it’s market-driven,” he said of the real estate niche and some of the slower progress to enter affordability zones.
Weissmann said areas of the country that need more and less-expensive housing options the most often have zoning codes and community sentiments that are averse to smaller home developments.
“Typically, the areas who need it the most have the most restrictive zoning, and you can’t place them there,” Weissmann said.
Affordable and workforce housing — whether it’s in apartment complexes, townhouses or tiny home development — frequently still faces opposition from neighbors living in single-family subdivisions that are worried about negative impacts on real estate values, as well as added traffic.
He is seeing some RV and mobile home parks being turned into places for tiny homes, and some localities changing land-use and zoning policies to be more accommodating to smaller footprints.
“You are starting to see municipalities adopting new rules to allow for this,” the Colorado builder said.
In Wyoming, Cheyenne Mayor Patrick Collins said his city has changed some zoning rules to allow for smaller homes, and he’s directly reaching out to builders about smaller lots and square footage.
“I’m talking to developers about how we can start talking about smaller lots with smaller homes,” Collins said.
That faces challenges from a sometimes less-than-innovative homebuilding industry focused on the higher prices and profit margins of homes with larger square footages and footprints. Collins also sees the Fed’s series of interest rate hikes taking steam out of housing growth.
Dan Fitzpatrick, president of the Colorado-based Tiny Home Industry Association, said there have been areas of progress — especially in California, where state laws allow for “accessory dwelling units” in the backyards of properties. Those can be used as in-law suites, for other family members and potentially for home health aides. California has some of the most expensive housing in the country.
“It’s gone gangbusters — and it’s doing very well,” Fitzpatrick said of ADUs in Southern California and parts of a state with extreme affordable housing problems.
Fitzpatrick and Brad Wiseman, chairman and CEO of THIA, are also seeing affordability-based smaller home growth in Georgia, Florida and Texas — all high-growth states with affordable housing deficits that are generally friendly toward real estate developments.
“That’s what will drive the market,” Wiseman said of the affordability argument for smaller living.
He said an individual resident generally needs 200 square feet per person to be comfortable. The THIA group is working more with churches and community nonprofits on affordability answers.
Fitzpatrick said demographic and generational trends may eventually help with demand and supplies of smaller homes, noting 30% of U.S. households are already one person and 70% are two people.
Wiseman said the key is to get buyers and builders out of the “bigger is better” and “McMansion” mindsets, and then get local planners and councils to lose their resistance.
“The biggest challenge we have to do right has to do with zoning regulations,” Wiseman said.
State legislatures across the country are making pushes for more affordable housing.
Florida Gov. Ron DeSantis and fellow Republicans in the state legislature approved a $711 million package in March. It includes $259 million in low-interest loans to developers building workforce housing in a state keyed by tourism (with a focus on new housing near military bases), $252 million to encourage local governments to partner with developers bringing new housing, and $100 million to help police officers, teachers, military veterans and firefighters with down payments.
A number of affordable housing efforts — in Florida and other states — look to foster more infill housing in smaller under-utilized or vacant parcels. Those projects might not be large, but they can help chip away at rampant affordable housing shortages across country. Smaller projects also don’t stir as many worries among existing neighbors over community impacts, including property values.
The Florida package comes as housing activists and progressives push for rent controls and other potential constraints on significant rent increases faced by tenants across the socioeconomic spectrum.
In Oregon, the housing crisis has been pronounced in Portland — which has seen surges in homelessness and transient populations — as well as small towns and rural parts of the state. Problems with homelessness and rising crime rates have prompted Walmart and other stores to close locations in Portland.
Housing groups in the Pacific Northwest are offering some solutions.
Homes For Good manages public housing apartments and homes in Eugene and other Oregon cities. The Lane County, Oregon housing agency has also been working to redevelop the Lazy Days Mobile Home and RV Park in Blue River, Oregon, after it was destroyed by a fire in 2020. Homes for Good purchased part of the rural trailer park, with a goal to bring affordable housing options to the property with modular and manufactured home options.
Transforming RV and mobile home parks into affordable and workforce housing communities could gain traction in warm-weather markets such as Arizona, Texas, Florida, Georgia and South Carolina, which have a long history of snowbird and other transplant populations living in such communities.
Those states have also seen substantial increases in housing costs.
SquareOne Villages in Eugene, Oregon has also developed affordable housing cooperatives with more than 140 small living units across five communities. The nonprofit housing group has also developed 95-square-foot living pods aimed to provide temporary and more humane shelter for homeless persons and transients.
Modular construction, cutting costs
Dale Steenbergen, president and CEO of the Greater Cheyenne Chamber of Commerce (whose group has been involved with local housing efforts), said modular home construction — which entails building homes (and their systems and components) at centralized manufacturing plants instead of on-site, could help produce homes more efficiently and in greater numbers.
That, of course, like other parts of the real estate and housing economy, hits up against interest rate hikes that are increasing mortgage costs and slowing down all kinds of construction.
Steenbergen said creative and innovative affordable housing efforts also need to be coupled with a reexamination of building codes and regulations to help ease construction and development costs to help lower-income ideas to pencil out.
“We’ve really increased the costs,” he said of how regulations, government fees and codes can drive up building costs.