Demand for tiny homes spikes as housing affordability crisis weighs on would-be buyers
Amplify Credit Union CEO Kendall Garrison is working with several developers to create tiny home communities to help those looking to save for a down payment.
The housing affordability crisis that continues to trouble would-be homebuyers is sparking an increase in demand for tiny homes.
In response to this demand for more affordable properties, an innovative tiny home community called Mustard Seed Village emerged in Austin, Texas, last year with Amplify Credit Union playing a critical role in its development. Within the year, the village had already reached full occupancy.
Amplify Credit Union CEO Kendall Garrison told FOX Business that he sees the community as an opportunity for people to save more money for a down payment so they can move into homeownership faster and build up their equity.
That's the main reason why Garrison was eager to provide the lending to make the community a reality, and help renters who are faced with high housing costs and mortgage rates that are still hovering near 7%.
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"One of the things that's really well-known, is that the median net worth of a homeowner is 40 times greater than that of a non-homeowner," Garrison said. "If we can help people on the path to housing, whether it's their first house or a move-up house, that's really what our business model is all about."
ACU provides fee-free and digital-first banking and lending services to more than 50,000 members.
The Mustard Seed community has 28 tiny homes, each offering two bedrooms and a bathroom. The rent for each is capped at $1,375 per month. While there is no proper definition for a tiny home, Garrison said they can range between 300 and 750 square feet.
These tiny homes are a great way to "get the ball rolling," according to Garrison.
This is especially true in Austin, where housing affordability has been difficult. In recent years, especially when the area became a pandemic hotspot, Garrison has seen plenty of people that have been priced out of the market.
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As homes went up in value, so did the real estate taxes, "so people couldn't afford to pay their taxes and had to sell," he said.
"The big challenge to having affordable housing is finding affordable real estate to build these houses on," he said. The good news is that it has taken a "progressive look at the land use code," he said. The city recently lowered the minimum lot size to 1,800 square feet from 5,750 square feet.
This means more units can be built on a piece of land.
Garrison said they have already worked with a developer on a community of tiny homes near downtown Houston that have a starting price of about $300,000, and are in talks about bringing more projects to Austin, including ones for purchase.
Realtor.com senior economist Hannah Jones told FOX Business that the affordable home inventory has surged over the last few months.
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In June, there were 50% more affordable homes between $200,000 and $250,000 for sale compared with the prior year. Jones attributed this growth to the increase in small, affordable homes for sale in the South.
"As housing costs remain relatively high, buyers may be drawn to smaller, more affordable homes," Jones said. "Whether buyers will go as far as tiny homes remains unclear, but more affordable inventory will no doubt be welcomed by buyers trying to navigate today's market."