Tag: conference

How Income is a Factor in the Tiny Home Market

As we reviewed our notes to date from the past 5 sessions, the point we concluded from the income/age statistics didn’t identify the relationship. While the numbers proved that all household demographics could afford a tiny house, what we didn’t see at the time was a relationship between affordability and tiny home ownership. We have now made the association and are ready to apply the formula to our demographics.

We expect that tiny homes will be considered as an option for many different reasons in the future, but today the strongest interest comes from people looking for an affordable housing solution.

This can be extrapolated to suggest that those with more financial means, would be less interested in owning a tiny home. For our calculations, we have determined that an inverse relationship, meaning that the more a person or couple has available to spend, the less likely they are to spend it on a tiny home. We will call this the Affluence Factor (AF).

What we have done is taken our prospective tiny home buyer’s market after applying the disability and health factors, broken each age category apart by applying our single, couple and single parent percentages, applied the AF to each, then reassembled the groups by age. The following chart shows the market-to-date before and after the AF is applied. This reduced the market size by almost 49%. 

Health as a Factor of Tiny Home Living

Today we look at how health could affect each age groups’ propensity to live tiny. Statistics on health, in general, are elusive and we have loosely applied what we could assemble to our target groups.

First, we applied a “Prevalence to Disabilities”. The purpose was to identify that some people in each age category would not be able to or not feel comfortable living without assistance. While this does not apply specifically to tiny homes, it does relate to all forms of accommodation and living arrangements. Overall, we calculated 18.73% of the target group would be affected by disabilities making tiny home living an unfavorable choice.

Next, we looked at how health issues would affect some people’s ability and desire to live tiny. We have used Hypertension as the indicator. In general terms, hypertension is abnormally high blood pressure, indicating a state of great psychological stress. It can be an indicator of current conditions or developing conditions, so we felt it could also dictate the comfort-level of prospective tiny home owners. This was used to further reduce the number of potential tiny homeowners by 20.24% when the age-grouped percentages were applied.

The chart below begins with the tiny homeowner’s market potential that we have developed up to and including Householder demographics, shown in column 1, then the Disability factors are applied to move to column 2 and lastly, the Hypertension factor is applied in column 3. 

While it is difficult to accurately predict the true impact health and physical ability will have on independent tiny home living, we feel that these adjustments are reasonable, based on the historical data available. 

There are 3 main motivations for going tiny that we have identified:

• Affordability
• Income
• Lifestyle

We have somewhat addressed Lifestyle by looking at age and Household Demographics, and we will return to this later, but now we want to look at Affordability and Income.

For this comparison, we have used several base assumptions to provide common reference points. We have calculated the cost of the tiny home using typical home ownership for comparison. The home and rental costs are based on national averages, as are incomes.:

• Tiny home costs:
  • $69,000 tiny home cost
  • 10% down payment
  • 6% financing
  • 25-year amortization
  • $295/month site rental & utilities
• Traditional home costs:
  • $347,000 traditional home cost
  • 10% down payment
  • 3.24% financing
  • 25-year amortization
  • $3,473 annual property taxes
  • $300/month utilities/insurance
• Apartment rent costs:
  • $961/month including utilities

There are 2 calculations for each age group, singles are on the bottom, then couples are above. The bars shown in each section are cumulative, but the percentages are not. As an example, looking at singles age 17-34, renting uses up the blue and orange amount of a person’s income or 43%.

The incomes shown are national averages in each age group, and to calculate a couples’ income, we have assumed they are both in the same age group, both earning the same income. While we realize that this is rarely the individual case, looking at a national average, some earn more, and some earn less and on average, this is a fairly accurate depiction.

Based on a 30% housing cost to income ratio we can determine the following:

• Couples aged 35-54 can afford to purchase an averaged priced house
• Singles cannot afford to purchase an averaged priced house
• Couples aged 18-79 can afford to rent an average priced apartment
• Singles aged 35-54 can afford to rent an average priced apartment
• Couples aged 18-79 can afford to purchase a tiny home
• Singles aged 18-79 can afford to purchase a tiny home

These calculations do not reduce the potential tiny home buyers from yesterday’s calculations, but they do add a weighted likelihood of all age/income groups to be interested in tiny homes as a housing choice because in all cases, tiny homes:

• Require the least percentage of income to acquire and operate,
• Provide accommodation,
• Are an asset which will have some resale value.

In the previous 2 charts, we looked at age and household make-up to begin to identify who might want to live tiny. Today we apply the householder demographics to the age groups. When we looked only at age groups, we easily began with pre-children young adults and post-children empty-nesters. These 2 groups were easy to begin with, but this left out the large group that is 35 – 54 who are typically associated with raising a family. However, when we look at the household demographics, we see that 63% of the total population makes up singles, couples, and single-parent families. This means that 63% of the 35-54-year-olds should be included in our target group of potential tiny homeowners.

While applying this formula to the younger and older demographics reduces their numbers, the charts below demonstrate that overall the potential tiny homeowners increases by over 5.5 million nationally…

Today’s topic for Tiny Towns – 21st Century Affordable Housing at the Canadian Institute of Planners for the World Town Planning Day Conference looks at potential tiny home buyers from a different perspective. The following chart shows the demographics of the householder, regardless of age.

Having identified 3 key groups that make up tiny homeowners as singles, couples and single parent families, the chart demonstrates that this is group accounts for 63% of the total population of householders.

This will affect the data on yesterday’s chart, as it will reduce the numbers in the pre & post-children age groups but will also bring in some of the larger non-buyer group.