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The Double Bottom Line on Tiny Homes: Smaller (carbon) footprint, bigger bang for the buck?

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Tiny houses have hit the big time, especially among younger homebuyers. (“House Hunters” even has a tiny homes series now, and we’ll take HGTV* as a good bellwether that this is a housing trend worth noticing.)

In fact, more than half of Americans would consider living in a home that’s less than 600 square feet, according to a 2017 study from the National Association of Home Builders.

And what’s not to like? Tiny homes are the kitten of the housing world – cute, fun to spot, and easy to imagine cozying up with. But before we get all warm and fuzzy, let’s look at how they stack up on both financial and environmental sustainability.

Tiny homes have a smaller carbon footprint

Tiny houses are one of today’s poster children for sustainable living, in part due to their minimal energy use. They can range from 60 to 400 square feet, which can be the size of a single bedroom (or even a master closet!) in some homes (yes, we do watch a lot of HGTV.)  Most tiny homes have all the amenities of a typical home: places to sleep, eat, cook and shower. They just have them in a much, much smaller footprint.

Unsurprisingly, tiny homes are more resource efficient across the board: building one, living in it, and supplying it with energy for heating, cooling and electricity produces a lot less carbon dioxide (CO2) than its single-family home counterparts. According to a 2015 Renewable Energy World report, the average U.S. home produces 28,000 pounds of C02, versus a tiny home’s 2,000 pound average.

Ready to be part of the climate change solution? Check out this carbon footprint calculator to see how much your own home contributes to climate change, and review these tips for making your home greener.

Tiny homes cost less than single-family home (SFH) – with a caveat

It’s not surprising that a house significantly smaller than the average U.S. SFH also comes with a smaller price tag. Research indicates a wide variation in cost from less than $10,000 for both new and used tiny homes, to more than $100,000 for luxury, custom-designed versions. Contrast that with the median U.S. home price, which was nearly $290,000 as of December 2018.

Of course what those prices don’t take into account is the land the house sits on. “Location, location, location” as the realtor’s mantra goes, is the biggest part of the cost equation for most homebuyers.

Typically, tiny homes are sold either custom built or prefabricated and transported or picked up by the new owner on a trailer. That’s a plus for tiny homes, because the economic advantages of tiny homes are best realized where land is cheap. In addition, the legal regulations around tiny houses are still being shaped around the United States. With that in mind, it’s a good idea to research state laws where you live.

So, what’s the loan and lending picture for a house like this?

Little house little loan… little payoff

If you’re using a commonly accepted rule of thumb, a household shouldn’t spend more than 28% of their gross monthly income on housing, you can see the appeal of tiny homes from a cash management standpoint.

But for many tiny homebuyers, the appeal of living small isn’t just a matter of dollars and cents: these are typically purpose-driven purchases, and not just at the individual level. Several cities, including Austin, Chicago, Nashville, Sacramento, and San Francisco, are making a strategic investment or using the structures to help alleviate their affordable housing crisis.

The double bottom line is green, but only in the environmental way

A lot of the decision-making around tiny homes comes down to decisions between cash management and investment management. From an investment standpoint, your home isn’t typically what’s appreciating in value: it’s your land (hence the term “property value”). With that in mind, if you’re looking to grow equity long-term, the land on which you choose to plant your tiny home is what’s going to provide that value (assuming, you know, that property values increase). If you’re not that interested in buying property, have different investment strategies for your cash, and/or are happier knowing that you’re reducing your emissions – and that you can, to an extent, move whenever you want to without actually having to leave your home – well, a tiny home might be right for you. It really just depends on where you want to invest your money, and what your short and long-term goals are.

Tiny homes in a snapshot Average size

Tiny home: 100-400 feet

Average new U.S. home: ~2,600 feet

Average cost

Average tiny home: ~$10,000 to $100,000

Average U.S. home: $289,800

Average carbon footprint

Tiny home: 2,000 lbs.

Average U.S. home: 28,000 lbs.

Sources: The Tiny Life, National Association of Realtors, Renewable Energy World

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