Builders see growing market for tiny houses

It’s just under 300 square feet, but touring this tiny house for sale in Vermillion takes some time.

The main floor at 240 square feet includes a living space, kitchen with fridge and stove, and a bathroom with a toilet and shower.

A table or desk can be converted into a window bench. One sink serves both the kitchen and bathroom. A sleeper sofa fits, but a Murphy bed would be an option, too.

A loft above adds room for storage or sleeping.

“We crammed a lot of stuff into 240 square feet,” said Nick Larson, vice president of Builders Choice USA, which manufactured the house. “We tried to make it a convertible space.”

His company, which is based in Alaska, is among the first to embrace the tiny house trend in South Dakota. Other builders also are slowly wading into it, and others in the industry are taking away concepts from tiny house designs that might be incorporated into designing more traditional houses with greater efficiency.

While the market for tiny houses is growing, it’s still a miniscule portion of buyers. The National Association of Realtors reported 1 percent of houses sold last year were 1,000 square feet or less.

But driven in part by rising construction and land costs in some areas – and reality television shows documenting the final products – miniature houses are attracting more attention. Buyers typically point to mortgage and utility savings and added flexibility to travel.

Builders Choice has four houses with the same layout for sale.

“Almost everybody loves them. The standard reaction is ‘this is really cool. I can’t believe there’s this much space inside here.’ They feel like a lot more than 240 square feet,” Larson said. “And there are all the amenities a normal house would have, just smaller.”

Tiny pilot project

Builders Choice expanded to South Dakota almost five years ago to support business from the Bakken region in North Dakota. The company manufactures apartments, hotels, offices and other commercial buildings.

As oil prices fell and Bakken business slowed some this spring, the company found itself between larger projects and decided to experiment “with what we could do in a smaller scale and challenge ourselves designwise and craftsmanshipwise,” Larson said.

“That’s how the project was born. We used it as a training tool for our factory employees to see outside our normal box and challenge them creatively and in their woodworking and challenge our designers and came out with that.”

The houses are meant to sit on a foundation and serve as a primary residence or cabin. They are listed at $58,500, which Larson called the high side of the market.

If demand warrants more production, efficiencies gained in manufacturing would allow prices to come down without sacrificing material quality and detail, Larson said.

The most serious interest so far has been from developers, he said, including some who see the potential for developing tiny-house communities.

“Developers see a lot of options for either a vacation destination or low-income housing, stuff like that. So it has opened the doors to a few creative developers, and that’s the most serious interest,” he said. “I don’t think the market is in the Midwest for it, so we will probably pack these up and ship them west, maybe to Washington, just to market in a different climate.”

The houses are built to withstand Alaska weather, however, he said. Builders Choice also is developing a website that will allow tiny-house buyers to customize projects. But it mostly is focused on its “bread and butter, which is manufacturing more repeatable things.”

Design concepts learned from the tiny house, however, have bigger applications.

“Tiny for some people could be 1,000 square feet. Tiny for others is 2,000. And we take all these things we’ve learned in building miniature houses and put them toward that, and we can make our space more usable,” Larson said. “And when we do that, we save a lot of money.”

New prototype

Custom Touch Homes in Madison has been building a line of houses under 400 square feet for about eight months. They are put on a steel frame, pulled to a site, and the frame is left with the unit. Designs include one- and two-bedroom units with a kitchen, living area and covered porch.

“Right now, we’re taking them down South, to Louisiana, Georgia, Texas,” general manager Jason McDonald said. “Our ownership group felt the need for in the southern areas with some of the other industries down there, their growth and what they needed for places for workers to stay.”

Because they are considered a modular structure, the houses can be moved anywhere in the U.S., and all states accept them, he added.

Many of the tiny houses the company sends south are leased by workers in the energy industry, McDonald said.

But a new prototype just built in the past few weeks at the Madison facility addresses a different market.

It’s still one bedroom and 400 square feet, but it includes an extra loft that adds another 200 square feet and could act as a second sleeping area. There also is room for a hideaway bed and space to add a patio.

“Realistically, you could have three beds in here if you wanted,” McDonald said.

The loft floor plan also is a modular unit but is meant for people who want to buy. It includes a full-size refrigerator, stove and microwave, a bathroom with a shower and its own sink, two closets, a pantry and a built-in dresser and entertainment center. The house is priced at $63,000.

Because the market is relatively untested locally, Custom Touch wanted to build a prototype, put images online and show the house at its Madison visitors’ center before making more.

“I think the demand is going to be pretty high for them,” McDonald said. “We’ve heard it. There are campgrounds around and different parks that have some (similar units) in there, so I think demand will be pretty high.”

Individual approach

Hans Christensen had the space and was looking for a business to complement Cheap Cars, a used-auto dealership he owns at 4004 W. 12th St.

He decided to become a dealer for Old Hickory Buildings and Sheds a couple of years ago and has found it’s a growth niche.

His territory is Milwaukee through northern Minnesota to Pierre and down to Sioux City.

“We handle the Sioux Falls area, so you can get free delivery anywhere in eastern South Dakota,” Christensen said.

Tennessee-based Old Hickory has 500 locations nationwide and products including barns, playhouses and sheds. The company uses Mennonite builders, and the units are “built fantastically,” Christensen said.

“The portable-shed business has been around for years down South. Old Hickory is the biggest,” he added.

“It’s relatively new for us. They just expanded and did controlled growth.”

His largest unit is 14 feet by 40 feet and sells for $10,000 unfinished.

While they mostly are meant as additional buildings for homeowners, they are starting to be sold as residences.

“In the Black Hills, there are several people buying these and making a cabin out of them,” Christensen said. “When North Dakota was in its heyday, they were using them for man camps because it’s easier and cheaper than a camper.”

He has sold the buildings for “all kinds of purposes,” he added. “To raise birds. Pet kennels. Dog breeders. We’ve sold one for a scrap metal office. A lot of arts and crafts things. People want to finish (them) off and make a man cave or party thing for the kids. They can put a garage door on the back end.”

The Internet has allowed for plenty of idea sharing. The Old Hickory website includes photos showing how buyers have customized their units. A search of Old Hickory tiny houses reveals elaborate transformations, including wrap-around porches, sliding doors, fireplaces, stainless steel appliances and a full Jacuzzi tub.

“There are plans on the Internet, and you can go to YouTube and see how people do it,” Christensen said. “Of course, when they order them, there are all kinds of dreams. Whether it happens, I don’t know.”

From a design standpoint, tiny houses require “taking advantage of every little possibility,” said Gene Fennell, owner of Fennell Design Inc. in Custer and president of AIA South Dakota. “You’re looking for ways for things to be things they’re normally not and really looking toward efficiency and things having multiple uses.”

That could mean a cabinet that stores pots and pans but also supports a cutting board that slides out the top of the door. A couch could unfold and have a toy box under the cushions. Stairways contain storage compartments or serve as bookshelves.

“If you take the idea of the tiny house and apply it principally to a normal residence, you could see houses go from 1,900 square feet down to 1,500 just by doing efficient things.”

He has seen some tiny houses for sale in the Black Hills and saw one sold after about two years to be used as a cabin.

“But immediately the people added on a little porch and little garage,” he said. “It’s becoming more of a retreat than a tiny house.”

His firm is working on a one-touch house for a client. While not technically a tiny house, it is tied by only one point to the ground for water and sewer and is intended to hover above the land otherwise.

But the market for such properties typically is as unique as the individuals who buy them, Fennell said.

“If you watch the programs, it is a very unique individual. Kind of like passive solar homes, every one is unique to the individual,” he said. “They have to understand they are the singular market for that house. Someone else will downgrade your price because they’re going to make changes.”