How Much Does a Tiny House Cost?

Housing market booms are a good thing for sellers and investors, but for buyers, they present a challenge. When home prices climb significantly higher, buyers will often look for ways to save, including by turning to tiny homes. 

Tiny homes, generally considered to be those under 400 square feet, are a recent phenomenon. Their costs and considerations can vary wildly. On average, a typical built-to-suit tiny home costs about 84% less than the median sales price of a traditional new home.

Let’s take a closer look at the costs of these unique little homes, how they vary, and other things to consider. 

How Much Does a Tiny House Cost?

Tiny houses are generally much cheaper than traditional homes. Their costs depend on whether you build a tiny home yourself, hire a builder to do it for you, or buy a used home, among other factors. 

Tiny homes have been generating increasing interest in recent years as housing has become increasingly unaffordable for many people in the U.S. According to the Federal Reserve Bank of Atlanta, median-income households could no longer afford median-priced homes as of March 2021 at the current interest rates.

On the lower end for costs, you can purchase a bare-bones DIY kit home for under $10,000, with the average cost being about $23,000. On the higher end, you can spend $45,000 to $180,000 if you hire a builder for a custom tiny home. 

The costs for a used tiny house are generally somewhere in between, varying widely, depending on the size, features, and age of the home, among other factors. 

Buying a New Tiny Home

Building your own tiny house is not for the faint of heart, and not everyone is able-bodied or has the time. Hiring a builder can solve those problems. A professional builder can usually complete a home sooner than a DIYer, and they have a better chance of getting it right. They can also help navigate the permitting process, which can be confusing for non-professionals. However, you pay significantly more when you hire a builder. You're not just paying for materials, you're paying for their expertise, too.

Building a Tiny Home Yourself

Many tiny homeowners are staunchly in the DIY camp. Building your own tiny house can be a source of pride, plus you can complete it on your own schedule and save money in the process. Building your own tiny home costs, on average, less than half as much as paying someone to build it for you. However, building a tiny house is complex. You'll need to know the ins and outs of permit rules and processes, building techniques, regulations, and more. 

Buying a Used Tiny Home

Unlike traditional homes, tiny homes generally depreciate in value, which means you might be able to reduce costs by buying a used tiny home. There are a few things to keep in mind, though. For example, since occupiers live in a smaller area, used tiny homes can have wear and tear. In addition, tiny homes are often highly customized, which is great for the original owners but may not be ideal for the next buyers. 

Land and Zoning Considerations

You'll need to plan for where to locate your tiny house before you even buy or build it—and that can be complex. 

The zoning laws vary from state to state and city to city, and they can be detailed with their rules. For example, in San Jose, you'll need to obtain a building permit and meet requirements to be considered an accessory dwelling unit (ADU) to park on your friend or family member's land. In Fresno, California, you aren't allowed to park your tiny home on a lot by itself—it must be located behind a traditional home as an ADU.

Tiny House Permits and Taxes

Building or buying a tiny home also means getting the right permits. Not all localities agree on what a tiny home actually is. Depending on where you live and whether your tiny home is on wheels, it could be considered an ADU, an RV, or even a mobile home. 

Costs for permits vary according to what type of permits your city or state requires. If you’re working with a professional builder, they can help you secure the right permits.

Cost of Living in a Tiny Home

Once you have a tiny house, however, there are still ongoing costs to consider that may be unique.  

Utilities

Your utility costs will vary, depending on your location. They will typically include regular utilities such as gas, electric, water and sewer, and internet.

These costs should be less than with a traditional home, but you'll need to budget for them nonetheless. Many tiny homeowners reduce these costs, such as by installing solar panels or rainwater catchment barrels. 

 If you park on a friend's lot or in a tiny home community or RV park, you may not have to pay for many utilities at all, depending on your agreement with the landowner. 

Maintenance and Repairs

Maintenance costs will include typical repairs for leaky roofs, sagging siding, and broken appliances, but you'll also have a few other maintenance considerations. For example, if your tiny home is on wheels, and you move frequently, you may have to budget for more maintenance, just as you would budget for wear and tear on a car. 

Maintenance costs depend in part on the quality of the initial build. If the construction was not done properly, you’re likely to face more repair bills. 

Insurance

Tiny house homeowners might face more insurance challenges than traditional homeowners. Just like with zoning laws, many insurance companies aren't sure how to classify tiny homes yet. The type of insurance you get may depend, for example, on whether the tiny house is built to Recreational Vehicle Industry Association (RVIA) standards, or it's certified by the National Organization for Alternative Housing (NOAH), or it’s built on a foundation.

Many companies do insure tiny homes, but you might have a more limited selection than if you were insuring a traditional home. Property and zoning laws, as well as your tiny home’s dimensions, may play a role in whether you can get homeowners insurance. 

The Bottom Line

Tiny homes offer a much more affordable option for homebuyers in a market where home prices are a growing concern for many. Building a tiny house yourself or buying one used can help reduce costs even further over hiring a professional builder. However, if you make a small mistake, it can be costly down the line. 

Weigh all the pros and cons in tiny home choices to determine which option may be right for you.

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