5 Jan 2023

What's stopping tiny houses from helping solve housing crisis?

4:51 pm on 5 January 2023
Beekbergen, Netherlands, 2019: Wooden tiny house under construction.

Some believe tiny houses could help solve the housing crisis. Photo: 123RF

Tiny house advocates say legislation, lending and land are prohibiting people from buying tiny homes.

Tiny House Hub founder Sharla May said there was "huge demand" for tiny homes, but that complications appeared when people tried to make their dream a reality.


One of the main issues tiny homes owners faced was a lack of standards across councils, said May.

She compared the current system to being like if people required different licences in different cities.

"Imagine having a driver's licence in Auckland, moving to Hamilton ... and having to apply for a new licence in Hamilton. That's exactly what the industry faces at the moment."

The majority of people, she said, were facing inconsistency when talking to council - each time talking to different people and getting different answers.

A few she said were even having trouble getting people from the council "to put anything in writing confirming if their tiny house [is] legal or not".

Chairperson of the New Zealand Tiny House Association (THA) and owner of Tiny House Builders Ltd Rebecca McLean said the THA would like to see a national standard created for tiny homes, so if people relocated from one location to another, council rules would be the same.

She said they just needed the support of someone in government.


Lending also presented a challenge for tiny home buyers, McLean said, with first-home buyers unable to use their KiwiSaver.

Dave Tyrer, chief operating officer at Squirrel Mortgages, said that was because tiny homes were typically treated like vehicles, rather than houses, in terms of lending.

As a result, buyers are also unable to get a standard home loan.

Tyrer said there were "literally a handful of lenders who will lend on tiny homes".

One of the biggest differences, Tyrer said, was tiny home owners often did not own the land. No land meant tiny homes had less security to put against a loan.

Tyrer said an asset such as a house will degrade over time, while "typically land doesn't degrade".

He believed the higher risk profile associated with a tiny house was what detracted banks from lending to them. Instead, he said most tiny house loans were treated like personal loans.

But those loans also come at a higher cost. At Squirrel, he said they typically lent at 9.95 percent per annum - significantly more than than the 6.5 percent banks are charging around for a mortgage in the same time period.

A one-bedroom house in Queenstown, which is only 33 square metres, is on the market for over $1 million.

A one-bedroom house in Queenstown, only 33 square metres, went on the market for over $1 million last year. Photo: RNZ / Peter Newport


Not owning their land also presented tiny house owners with issues beyond lending.

May said it also presented issues around tenancy. Tiny homes on leased land aren't currently covered by the Residential Tenancies Act, she said.

That raised a myriad of issues from how often the rent can be increased to who is liable for what. She said work needed to be done in that area.

McLean said finding land could also be challenging. But she said it had become easier with websites such as May's Landshare, which connected those with land and those looking for it.

May hoped to see the issues around tiny homes addressed.

"It's not for everyone, but there are a lot of people that want to live in tiny homes so … why are we stopping them?"

Tiny homes could assist in solving the housing crisis, said May.

McLean expected interest in tiny houses to continue to increase.

"People want to look at different alternative ways of living."

But until the government puts in legislation to make the process simpler and more accessible, barriers would remain for some tiny house buyers.

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