What is the investment potential associated with Tiny Houses?

The Market has created a “Perfect Storm” of socio-economic forces which are demanding and creating new alternative solutions to traditional housing problems.

Availability: Back in 2008 when the housing market tanked, we were just shy of building enough housing to meet the demand of the ever-growing population. Everything stopped for 4-7 years and very little housing was built. Meanwhile demand kept growing along with the population. Result? The demand has outstripped available housing units, builders re just barely getting back on their feet to start building at pre-recession rates (they will never catch up), the housing shortage has caused prices to rise, and the high-paying new tech jobs have allowed a select small percentage of buyers to continue to purchase the over-priced housing stock. This trend has left a large segment of the middle class priced out of the market.

Accross-the-board lack of Affordability: We are experiencing a housing affordability crisis all across the country. Folks who want to live in all types of environments, center city, urban, suburb and rural are all feeling priced out of the market, and searching for new alternatives to traditional models.

Fewer and fewer living wage jobs: Solid middle class jobs with good living wages are disappearing. Those are the jobs that have traditionally supported the middle class housing market.

Alternative work is replacing traditional work. In most large cities, the commute is out of control, demanding more and more personal time and requiring meaningless energy and focus. This is motivating people to become self-employed

Expanded green, environmental, counter-culture thinking about the need for conventional housing. Fewer people want to tied to a mortgage that will obligate them to work for 30 years to pay it off. Fewer people see their lives as deriving core meaning from the acquisition of things. Meaning in life is being redefined as personal freedom and time flexibility.

Lack of affordable alternatives. All of the conventional models for affordable housing are impacted by the skyrocketing cost of building. All of the traditional models are unable to offer true “affordability” because the each have the traditional layers of profit built into the system. The owner of the land want a profit on the sale, the realtor want a profit for managing the sale, the developer want a profit for his vision and financing of projects, the architects and engineers want a profit for designing the projects,

New models for housing: Tiny Houses offer this market unique potential for overcoming the pitfalls of the traditional model. (1) Individual design and self-build. The investment of personal design ideas and sweat equity changes the relationship between the homeowner and his property. (2) Owner occupancy prevents increasing rents. (3) Location Flexibility (THOW – Tiny Houses on Wheels) allow relocation and patterns of migration without the loss of value associated with moving. (4) Community formation – Tiny Houses allow for individuals to sort and find the optimum style of communities with like-minded neighbors.

Four areas where the TINY House Movement offers investment opportunities.

(A Supporting the construction of the houses themselves: This investment can focus on Tiny House companies that offer standard build plans, custom build and even allow owner-building in a controlled work environment.

Supporting the construction of Places to park: Parking is the critical missing element at this time, and two primary alternatives are being offered:

(B) “Urban Infill” meaning the creation of individual parking pads behind conventional single-family homes (where permitted) as ADUs or “Granny Flats”, and then making these pads available to the property owner for their own rental, their related family (au pairs or kids returning from college?), or strangers who own their own Tiny Houses. Custom developers who specialize in this market could research the local laws, estimat a range of solutions and offer package deals to home owners.

(C) Supporting the creation of new communities: Developers in this field will purchase property, secure permits and build out “Tiny House Villages” to meet local codes and demand. These villages could offer a range of parking alternatives, including developer owner and financed Tiny Houses for rent, Rent to own, and parking of owner occupied tiny houses. A single village could offer a few spaces in each of these three models.

(D) Funding the development of new ideas, inventions and products that are being created by this highly environmentally sensitive movement. EXAMPLE: Mobile Utilities. After researching the source of expenses associated with village creation, I have identified utility access and being the next largest cost to the creation of a community after land acquisition. Access to utilities reduces the number of available parcels and increases the cost of the land. What if we were able to offer an alternative system, based on the expansion of current thinking about temporary utility service (porta-potties). Imagine a system with 10 days storage for fresh water, grey water and black water, offering solar power with battery backup as well as propane, all service weekly by mobil utility trucks just like our current garbage pick-up system. This product would allow the creation of villages in places where conventional utilities are not available.

The road-blocks: Status and Discrimination – Tiny House builders most often choose to build on a trailer frame, thinking they are avoiding the national housing codes (ICC). In fact they are only shifting to the national RV code (ANSI). Building on wheels brings us into a whole different set of challenges. We have a country-wide stigma associated living full-time in trailers and RVs that can be traced back to the Great Depression and post-WW2 eras. This discrimination toward access to unconventional and/or truly affordable housing is as powerful as our cultural stigmas toward racial, gender, and religious beliefs, and it is blocking the acceptance of our lifestyle with national, state and local building codes and planning regulations that can be summarized as a “NIMBY” (not in my back yard) reaction. May of the well-meaning upper-class home and property owners want to see a solution to the housing crisis, so long as it does not happen in their neighborhoods. The time to confront all of these outdated beliefs is upon us, and access to housing should not be any less important to our growth as a nation than access to the other forms of personal freedom.

In short, we have a nation-wide movement with no place to go. We currently estimate that 100 Tiny Houses are being built each week in the US. The pressure to find parking is reaching a critical level, and every week, a local community agrees to change their laws to accommodate Tiny Houses. Any one who can move into this market and begin offering parking, will find an endless source of interested tenants. Please give these ideas some additional thought and let me know if you might like to meet and discuss anything in further detail,

David Ludwig