Do tiny homes offer big solutions?

I’ve become increasingly enamored of the idea of tiny homes. They’ve gained in popularity as real estate prices rise and millennials are strengthening the trend as they eschew the accumulation of stuff in favour of collecting experiences.

The idea of living in, say, 300 square feet, doesn’t appeal to everyone, but tiny homes do offer some interesting possibilities for those who don’t mind giving up 52-inch TVs and walk-in closets in favour of a place to call their own.

Most recently, the idea hit the news as Cass Community Social Services launched its Tiny Homes Project in Detroit. The non-profit organization purchased 25 vacant lots from the city for just $15,000 US and will spend $40,000 to $50,000 to build a home on each, with the help of a volunteer workforce.

Hundreds of low-income earners have applied to rent-to-own the seven homes already built; they range from 250 to 400 square feet. The city has suffered ever since the auto industry’s plunge in 2008, and in 2013 Detroit became the largest US city ever to file for bankruptcy.

Would this work in other cities with affordability issues? It seems like a no-brainer, but as always, there are barriers to an innovative idea that would seem to perfectly solve a number of problems.

In Ontario, mobile tiny homes are considered RVs so they must be parked only where RVs are legally allowed; those with permanent foundations are subject to minimum sizes depending on municipal zoning.

In November, the Free Thought Project accused the US government of “criminalizing” sustainable living by either banning tiny homes all together or forcing them to be connected to the utility grid, which is at odds with some would-be buyers’ desire to avoid utility bills as well as high mortgages and high property taxes.

Alternative energy sources, like solar panels and rainwater catchment systems, are perfect fits for the diminutive dwellings. Yet, in most cities, stand-alone tiny homes aren’t allowed, except as coach houses or guest houses alongside larger properties.

Many legislators argue that allowing tiny homes would lead to a ramshackle streetscape or, as in Los Angeles, an actual threat to public safety, as presumably only the indigent and dangerous would deign to live in them. NIMBYism has reared its ugly head, as the haves try to keep the have-nots away.

One town in Texas, rather charmingly called Spur, bills itself as tiny home friendly and reportedly embraces the concept as a way to reduce costs and unfetter yourself from traditional living, but it too requires that tiny homes are properly permitted, on an approved foundation, and connected to city utilities.

Unfortunately, such requirements eradicate many of the cost benefits of building a tiny home in the first place, so it becomes more of a lifestyle choice than a cost consideration.

I’ll be keeping an eye on the Detroit project, hoping for its unqualified success and hoping that tiny home communities will become part of the solution to our own affordable housing problems.

Speaking of affordability issues...

According to Qz.com, the real story of the US so-called subprime mortgage crisis of the last decade shouldn’t lay blame at the feet of overextended borrowers, but rather greedy house-flippers.

According to a recent research paper by the National Bureau of Economic Research, it was wealthy and middle-class speculators who inflated the bubble, and then popped it hard when they defaulted en masse.

The biggest growth of mortgage debt during the boom that preceded the crisis came from those in the middle and top tiers of credit scores, according to researchers who analyzed a huge Equifax dataset of anonymous credit scores; those borrowers also accounted for a disproportionate share of defaults.

The low-credit borrowers — the “subprime” set — who have taken the brunt of the blame generally consistently maintained their borrowing throughout the crisis. And, although such borrowers often account for relatively higher rates of default, they didn’t after the housing collapse. Those in the bottom quarter of credit scores accounted for 70% of defaults in the boom years, but only 30% post-crisis.

Believing that housing prices could just keep going up forever, many wealthier buyers leveraged their existing equity to try to turn their good credit, which allowed them to secure bigger mortgages than their poorer counterparts, into cash.

Investors accounted for nearly half of the total mortgage balance in the top quarter of credit scores. The “rise in mortgage delinquencies is virtually exclusively accounted for by real estate investors,” according to the researchers.

Evidence is increasingly mounting that the poor, reckless borrowers who have become such ready scapegoats are getting a raw deal. It certainly casts a different light on things. And maybe there’s a lesson or two to be learned.