More People Are Considering 'Tiny Homes'—Here's How Much It Costs To Build One

Shelby Deering
·9 min read

Interior of a tiny house

There are several terms that have entered our lexicon in the past few years. “Downsizing.” “Minimalist.” And “tiny homes,” which perhaps you’ve spotted on social media or through TV shows like Netflix’s Tiny House Nation. 

“Tiny homes are here to stay and are only getting more popular,” says Nate Stover, Founder of Innovative Spaces, a Ventura, California company that specializes in custom mobile spaces. “Not only as an everyday need, but we are also seeing them being used for hospitality purposes such as Airbnb. The housing market is going to continue to shift, and not everyone has the means to live in a traditional home. We will see more people move toward the nomadic tiny home life.” 

But what exactly is this type of small home? If this mini residential approach appeals to you, would it make sense for your lifestyle? And how much does it cost to build a tiny house? We cover expected prices, benefits and more.

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What Exactly Is a Tiny Home?

Laura Lynch, CFP, Founder of The Tiny House Adviser LLC, Financial Planning for Tiny Living Values, says that there are two definitions of tiny homes. First of all, “tiny home” can be considered a catch-all term for many types of alternative housing, which can include: converted vans, converted buses, tiny homes on wheels, tiny homes on foundations and may include other small living structures like sheds, yurts or tents.

Then, according to Lynch, there’s also an official definition from the International Code Council (ICC), which oversees building construction codes. As the 2021 International Residential Code (IRC) Appendix AQ, states, “Tiny houses are dwelling units that are 400 square feet (37 m2) or less in floor area, excluding lofts.” 

Lynch explains that this strict definition allows for the standardization and adoption of residential tiny home building codes and zoning rules across jurisdictions. 

Stover additionally points out that a tiny home takes less time to build, costs less money and requires much less maintenance than a regular home. 

“Tiny homes in the form of RVs or Airstreams also allow occupants to use the home to travel or live in different areas for different periods of time,” he says.

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How Is a Tiny Home Different from a Traditional House?

When compared to traditional homes, Lynch says that a tiny home differs in size and price.

“The National Association of Home Builders reported in 2022 that the average size of new single-family homes is 2,561 square feet,” Lynch says. “When we look at single-family home trends over time, we see that homes have been growing despite the fact that families have been shrinking. A tiny home at 400 square feet or less, at its root, is a reassessment of the cost and benefits of square feet. While the national median sale price of homes finished 2023 at $417,700, tiny homes cost a fraction of that.”

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Different Types of Tiny Homes

“In the broadest definition, tiny homes are smaller living spaces on or off a foundation,” Lynch says. “They may be mobile or fixed.” 

Lynch says that if we narrow that definition to what is described in the International Residential Code, we find three categories of tiny homes. 

“The first are tiny homes that are built on a trailer chassis for one time or frequent transport. These are Park Models and Tiny Homes on Wheels (THOW) respectively,” Lynch explains. “The second are tiny homes that are built on a permanent site often as accessory dwelling units (ADU). The third are tiny homes that are built off site and are placed via a crane onto a permanent foundation. These are often referred to as modular or prefabricated tiny homes.” 

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Is It Cheaper To Build or Buy a Tiny House?

Well, that depends on a number of factors, according to Lynch. 

“When building a home of any size, the costs are those of materials and labor,” Lynch notes. “If we can build a tiny home using some or all of our own labor and reusing/repurposing some materials, the total dollar cost will be less than if we buy a similar home. However, we will have a time cost of researching, planning and constructing.”

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How Much Does It Cost To Build a Tiny House?

“The price of building a tiny home can range anywhere from $30,000 to over $150,000,” Stover says, explaining that when it comes down to it, the cost of building a tiny home depends on what you are looking for. “You are at anywhere from $20,000 to $60,000 for the materials alone, and must also take into consideration the labor costs. The costs that are not often accounted for at first are the unobvious ones—permitting, small furniture, appliances and even a storage unit to keep all of your things that don’t fit in the tiny home.”

For a “very simple” prebuilt unit, Stover says that these can start at around $40,000 to $150,000. He adds that RVs can start at around $30,000 and can cost over $150,000 for a custom vintage Airstream. 

Lynch is, herself, a tiny home owner, and she reports that she spent approximately $40,000 to build it in 2017. She says that it’s important to keep in mind that generally, the per-square-foot price of tiny homes tends to be higher because most of a home’s high-cost items are included in the smaller package, for example, appliances, heating and cooling.

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Benefits of a Tiny House

Lynch cites the lower cost as the top benefit of switching to a tiny home. 

“Tiny homes present opportunities for home ownership and attainable housing for those priced out of the current housing market,” she says. “They are one solution for the housing shortage and affordability crisis.” Lynch goes on to explain that as a financial planner, she has observed that the significantly lower cost of housing is perhaps the biggest lever that one can pull to free up income for other goals. 

“While many Americans spend 35 to 40 percent (or more) of their income on their housing, a move to a tiny home can result in a major reduction in expenses, allowing for savings or other priorities,” she says. “Other benefits may trickle down from this increased financial flexibility—for example, the ability to work less and spend more time with family.” 

Then there are the benefits that come with converted vans and buses. Lynch says that tiny homes on wheels offer geographic flexibility. As Stover explains, “You can use it to travel the country, park it at your desired location for as long as you want or even park it on your own property to act as a guest house.” 

Lynch also notes that many within the tiny home community cite benefits of intentional living, sustainability and simplification. “All the things we accumulate come with their own cost,” she says. “Having less can be its own win.”

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Where Can You Buy a Tiny House?

In general, you can buy a tiny house through a builder or a homeowner who is selling their tiny home. Lynch says that builders offer models, custom builds, modular builds and on-site builds depending on the need. Tiny home owners, like other homeowners, move or make changes to their lifestyle requiring different housing.

“Resale tiny homes can be found on social media and website listings,” she says. “There is not yet a multiple listing service (MLS) for tiny homes specifically.” 

Stover says that premanufactured tiny homes can be purchased from large retailers. RVs and trailers can be purchased used if that’s what you prefer and if you’d like to save money.

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Are Tiny Homes Legal?

Stover says that tiny homes are legal in all states in the U.S. There are some states that have different regulations, but as tiny homes are becoming more and more popular, these regulations have been shifting. According to Stover, the most tiny-home-friendly places tend to be California, Colorado, Oregon and Texas, explaining, “Of course, there are zoning laws to be mindful of.”

And when it comes to those zoning laws and/or where to park a tiny home on wheels, that’s when things can get a bit more complicated. 

“It depends on where the tiny home will be, whether in a nomadic or a permanently placed context,” Lynch shares. “Tiny homes on wheels are welcomed at some, but not all, RV resorts and campgrounds. It’s important to do research in advance of traveling with a tiny home.” 

Tiny homes that are semi or permanently placed must follow the rules of the governing jurisdictions in your area. “Often, this is a city or county with building codes and zoning governed at various levels,” Lynch says. “Some tiny homes are treated as Accessory Dwelling Units. Some jurisdictions allow tiny homes in their separate tiny home planned communities. Some jurisdictions or zoning may have no building codes at all. Within the tiny home industry, there are a few different certifying bodies overseeing the construction of tiny homes. These different certification standards apply in different jurisdictions.”

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If you’re seriously considering living in a tiny home, Lynch says that it’s imperative to contact your local building department to learn the rules of your municipality. Find out the answers to questions like: What is the process for a building permit? What is the minimum square footage allowed? Has your state adopted the tiny home Appendix of the 2018 or 2021 International Residential Code? 

“If you learn that tiny homes are not allowed, you can then work within your community to influence a change in the laws,” Lynch says.

Next up, learn all about “granny pods” and their benefits for your older loved ones.

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