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Notes -
I don't think the tiny house thing is ever going to take off. I don't want to say it's dead, but several years ago, when they were becoming a fad, some group tried to build one in Pittsburgh as a proof of concept that they could be used as inexpensive housing for the homeless. The house they built cost double what they expected. The conclusion they came to in the postmortem was that the fixed costs of doing anything at all aren't increased that much by expanding the square footage, so making things smaller didn't save much money. One of the big unexpected expenses they talked about that caused the price to balloon was excavation costs. Essentially, building on a city lot in a distressed area is a bit of a crapshoot in that you don't know what you're going to find. Foundations of prior structures, rubbish, old utility tie-ins, etc. They also spent a lot of money on legal fees, despite the fact that city government was pushing the project; the zoning board didn't really know how to treat it.
A bigger part of the problem, though, was economic. It only makes sense to build that kind of house if you can get the land for cheap. But in areas where land is cheap, there isn't demand for anything that modest, and the cost of construction swamps what the house can be sold for. Shortly before the tiny house debacle, the local community development corporation built a regular house on a vacant lot in the same neighborhood for $237,000 but were only able to sell it for $143,000. I'm sympathetic to arguments for subsidizing construction to alleviate a housing shortage, but it makes more sense to do renovations or build normal houses.
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