The big bet on “tiny homes” to fix homelessness

Before she moved into the first shelter village of “tiny houses” in San Francisco, Sharon Sandelin — a 66-year-old who goes by “Mama T” — had been sleeping on the streets.

Now she lives in a 64-square-foot unit with heat, electricity, a twin bed, desk, and chair. There is a combination lock on the outside. The gated community where some 70 other people now live is clean and cheerful-looking, painted teal and sea-foam green. Residents are connected with supportive services like health care and served three meals daily.

Sandelin detests traditional homeless shelters, and appreciates the privacy of her locked room on Gough Street, knowing she can rest undisturbed. But she still considers herself homeless. Though she likes her tiny cabin more than she liked being unsheltered, residents must use porta-potties, they are not allowed to have outside visitors, they can’t shower after 2 pm, and they can’t cook anything that requires more than a microwave or toaster.

“I want to eat my own cooking,” she told me. “My daughter can’t visit me, and there shouldn’t be no set time for a person to take a shower.”

Sandelin has a place to sleep in large part because of Elizabeth Funk, who spent three decades working at investment firms and tech giants like Yahoo and Microsoft, while serving on boards of various homeless nonprofits. Since 2020, Funk, now the CEO of Dignity Moves, which fundraised and developed the San Francisco village, has brought her experience and Rolodex to bear on a singular goal: to, as Silicon Valley puts it, disrupt the problem of homelessness in America.

Since 2016, unsheltered homelessness — meaning those sleeping somewhere not designed for human residence, like a car, a park, or a train station — has been going up. Particularly on the West Coast where housing costs are often prohibitive, local governments have struggled to curb sprawling and politically unpopular tent encampments, and many unhoused people prefer sleeping outside to crowded shelters with bunk beds. The challenge has been exacerbated by Martin v. Boise, a 2018 court ruling that said people can’t be punished for sleeping outside on public property if there are no adequate alternatives available.

To Funk and other tiny house proponents, villages like the one where Sandelin now lives offer creative solutions to all these issues. The small, relocatable cabins provide leaders new ways to bypass restrictive zoning rules, by leveraging emergency building codes and “borrowing” rather than purchasing land. They also offer, at least for some, a more dignified shelter option, providing an affordable answer to the difficult reality that many people prefer to sleep outside rather than endure the rules and conditions of typical shelters.

Advocates of “tiny homes” as a solution to the homeless crisis say the units should be understood as a key tool to preventing chronic homelessness amid a brutal housing shortage. If people lose their homes but can get quickly off the streets into a temporary private dwelling, then they’re in a much better position to get back on their feet, and avoid the tumble into longer-term homelessness that can transpire from even just a few weeks without shelter.

For elected officials, the villages also mean that fewer people have to see — or think about — homeless people on a daily basis. Tiny homes provide leaders with a faster and cheaper alternative to building permanent housing or congregate shelters, and may provide cities with the legal authority to then clear out any remaining tent encampments: Funk told me she can determine “exactly how many units you need in order to make it illegal to sleep on the streets within the city limits in San Francisco.” All this has thrilled leaders eager to reclaim their cities from what they see as spiraling chaos and disorder.

Advocates for the homeless, meanwhile, worry that the tiny shelter boom will divert funds that could otherwise go to new permanent housing, preventing people from moving into a real home for even longer. The rush of private industry into the space also gives advocates pause, and they worry that cities will buy bare-bones, cheaper models, place them in remote parts of town, and criminalize those who refuse to go.

At the heart of the tiny houses debate is a question about the meaning of housing and shelter itself. As more companies rush to manufacture models with varying features — some out of plastic, some out of repurposed shipping containers, some built on factory assembly lines, others on-site or on wheels, some with in-suite bathrooms, kitchenettes, and storage space, others lacking plumbing and electricity and with virtually no amenities at all — there is little consensus on what a “tiny home” is, or what standards it must meet.

Tiny house shelter units are typically between 60 and 150 square feet, but the sharp variety of products within the industry creates confusion. How spartan is acceptable? Is anything better than sleeping outside?

Lots of arrangements can be tolerated if they’re understood as emergency solutions — but some communities have also started to explore the idea of treating the units less as temporary shelters and more as something approaching new housing options.

“Harnessing NIMBY” to expand tiny houses

America has a housing shortage in part because it’s become so expensive and difficult to build new housing. The cost to purchase new land has skyrocketed, byzantine zoning rules make residential construction hard, and people living in communities often protest new development — wary of decreased property values, new neighbors, noise, traffic, or general change. This barrier is so common it goes by NIMBY, short for “not in my backyard.”

Yet over the last few years, “tiny home” shelters have been built in communities through what you could call creative hacks of the zoning code. In some places, structures smaller than 120 square feet are not classified as permanent dwellings, and therefore not subject to the same regulations applicable to residential buildings. Other groups have capitalized on cities that declared local states of emergency, which give governments more flexibility to build units with faster permitting.

Dignity Moves formed in 2020 as a task force within the Young Presidents Organization, a global networking group of chief executives. The group wanted to “apply private sector approaches and Silicon Valley-style ‘disruptive thinking’” to America’s homelessness crisis, as they describe it.

Funk could hardly hold back her grin as she outlined Dignity Moves’ theory of change. Instead of buying expensive land for tiny houses, she told me, they “borrow” it from developers who aren’t yet ready to use it.

Leveraging emergency building codes and word-of-mouth networking, “we take advantage of under-utilized assets,” she said. Maybe the shelters will go on a plot of land for two or three years, and then get transferred via forklift to another location when the developer needs their property back. (There are certain tax breaks available for landowners interested in making this deal.) The San Francisco village I visited on Gough Street rests on such borrowed land.

Sometimes Dignity Moves encourages faith-based groups or local governments to pony up their vacant property — like parking lots or land reserved for future infrastructure projects. In Santa Barbara, leaders countywide have jointly committed to finding locations for tiny houses in their neighborhoods and giving shelter priority to those sleeping outside in the surrounding areas. Funk’s group is spearheading this, and envisions the future playing out similarly in cities all over the country. By erecting many villages at the same time, Funk thinks it’ll be possible to get people off the street at once, a strong incentive for housed residents who are tired of seeing individuals living on sidewalks. “Then we can harness NIMBYism, which is a very powerful force,” she said.

There are at least some encouraging signs that local opposition to tiny house shelters wanes. When researchers at Portland State University surveyed housed neighbors who lived around various Portland “tiny homes” villages, they found the neighbors’ concerns about crime and decreased property values significantly diminished over time. “Some of the biggest initial opponents became some of the biggest champions,” Todd Ferry, a lead researcher of the study, told me. “I genuinely think it became beloved to many people in the neighborhood.”

Perhaps no politician has been more enthusiastic about the potential of tiny house shelters than San Jose Mayor Matt Mahan, who proposed this past summer to divert more than a third of his city’s housing funds to increase village production. Up for reelection in March, Mahan has made moving unhoused people quickly off the street a major part of his pitch.

San Jose started opening “tiny home” shelters about four years ago, originally to reduce the risk of contagion during the pandemic. About 500 units currently exist now in the city across six locations, and hundreds more are in the pipeline. Mahan credits their growth with reducing San Jose’s unsheltered homeless population by 11 percent in the last year, though he laments that new units seem to be taking longer to build than they did during Covid-19 and coming with new requirements.

“We were standing these up in six months at a cost of $80,000 or less all-in, including the utility hookup and common space, and now it’s taking progressively longer and costing more,” he told me, pointing to a new village project that cost the city $250,000 a door. Another San Jose village that took a year and a half to build saw costs go from originally $100,000 per unit to more than $175,000.

In September, Mahan urged his colleagues to quit making excuses for why they couldn’t build more units faster, and led a successful push to adopt a shelter crisis emergency declaration so San Jose could bypass certain building rules. Mahan says he’s motivated not only by a desire to help the homeless but to improve local neighborhoods generally. Calls for crime, fire, and blight in the immediate areas of the villages went down a year after they were built, according to a city analysis.

Each tiny house village in San Jose costs about $15 million to launch, and $3-4 million annually thereafter to operate. In June, the city’s budget director said funding roughly 1,400 of these shelter units will cost upward of $60 million by 2030, a “difficult” figure for San Jose to manage. The mayor, for his part, remains optimistic that external funding sources will come through.

Out of sight, out of mind?

Another reason some have grown excited about “tiny home” shelters is often left unsaid: to no longer have to witness homeless people outside on a daily basis.

Tiny houses provide elected officials with faster and cheaper alternatives to building permanent housing or congregate shelters, and may provide cities with the legal authority to then clear out any remaining tent encampments. This has roused city elites anxious about their increasingly visible homeless crisis.

A federal lawsuit led by Los Angeles business leaders frustrated with their city’s lack of action around tent encampments resulted in LA pledging to construct up to 16,000 new shelter beds by 2027, to house 60 percent of the homeless population in each of the fifteen council districts. These can include “tiny home” shelters, and in exchange, LA officials can sweep remaining tents and resume enforcing anti-camping bans.

“We are now getting much more excited about this 60 percent thing,” Funk, of Dignity Moves, told me. “I’m going to be working privately, quietly, but [to] give you a little preview, [we’re] thinking about doing this for San Francisco specifically as well in San Jose.” If San Francisco has about 4,500 people sleeping outside, according to the last Point In Time count, then Funk believes leaders can confidently estimate how many shelter beds will be necessary to build to start enforcing anti-camping laws again. “Let’s be clear,” she said, “one of the big motives here is Martin v. Boise, and people being concerned about getting sued.”

Funk’s legislative partner in the California state Senate, Josh Becker, plans to reintroduce a bill that would make it easier for cities to build tiny house shelters, and potentially even allow cities to count them toward their state-mandated housing production goals. Given that the tiny structures are much cheaper to build than both traditional housing and permanent supportive housing, a state green-light to include them in production targets could prove to be a major incentive. But that’s worrying news for those concerned the units may be less of a temporary, emergency solution after all.

“We’re definitely seeing some cities focusing on this model as more than what I would call an interim solution and a gap solution,” said Amy King, the CEO of Pallet Shelter, a Washington-based company that produces tiny houses between $7,500 to $12,000 apiece.

When Becker’s bill was first introduced earlier this year and included the possibility that shelter units, including those produced by Pallet Shelter, could one day be considered permanent housing and even accept rent or housing vouchers, King’s company came out against it. “There’s just so much opportunity for people to take advantage,” King said of the idea.

Homeless advocates worry about a scenario where cities start to invest in lower-quality shelters that aren’t suitable for everyone, reduce investments in permanent housing, and grow more aggressive about fining or arresting those resistant to shelter offers. “We see sweeps and tiny homes going hand-in-hand,” said Alex Visotzky, with the National Alliance to End Homelessness.

A senior official with the US Department of Housing and Urban Development, who was not authorized to speak publicly, told me the agency has no hard-and-fast policy yet on tiny houses, but is currently “evaluating whether there’s a place for them” in their efforts to end homelessness. As part of that the federal housing agency is investigating whether communities have been abiding by fair housing and civil rights laws as they expand the units.

“Not just segregation, but are people put there by choice?” the official asked. “Are there potential consequences if you don’t go there — like subject to arrest or other penalties? We’re considering all of that.”

The line between housing and shelter

In 2020 a fire broke out within a Pallet Shelter community in Banning, California — destroying 19 prefabricated homes, and displacing 38 people. Two years later another fire broke out within a Pallet Shelter community in Oakland, California, burning down three of the structures. One resident told Curbed she barely made it out as “the walls were melting” around her.

Pallet has denied responsibility for these fires, though the company did make changes to the building materials it uses. The two incidents loom large as leaders debate how cheaply they can build these structures and how tightly together they can pack them together on high-priced land.

Some housing advocates say the challenges cities are running into with building tiny shelters now mirror the same issues that often derail producing more housing at all. Proponents fear that as more pandemic-era emergency codes expire, and if more accidents like those in Banning and Oakland occur, such “quick-build bridge housing” will be built far less quickly.

“Our biggest challenge is the regulations, the code compliance to make sure everything meets all the parameters of the building code,” said Viken Ohanesian, CEO of Boss Cubez, which manufactured the prefabricated units used at the San Francisco shelter village. “It’s kind of like you can never have too much insurance, you can never be too safe in this world that we live in because it’s a litigious world.”

One option is to try and convince state lawmakers to pre-empt cities from tacking on new regulatory requirements. California lawmakers already took this step last year in banning mandates for fire sprinklers in “temporary sleeping cabins.” Funk says she’s “really, quite frankly, tempted to take the 10 other things that cities are starting to ask for, take them up to Daddy and say, ‘Can you break this rule?’” The costly rules and regulations, she believes, are a big part of how we got the housing crisis in the first place.

“I think our definition of housing with a capital ‘H’ is causing homelessness,” she said. “So we can either solve it or we can be stuck to our like, you know, our principles.”

Beyond worrying about building requirements and the practical longevity of tiny shelters, a broader, more existential set of criticisms have emerged around the policy idea.

One major concern is that investments in “tiny home” structures actually sustain homelessness, by diverting needed investments from permanent housing. Many people living in temporary shelters of all kinds end up returning to the streets after their allotted time to stay ends, not having anywhere else to go.

“Until there is more affordable housing, this ‘solution’ leads nowhere,” argued Josh Kruger, a formerly homeless journalist in Philadelphia. “Instead, these are just feel-good boondoggles so middle and upper class people can feel like they’re doing something ... They’re storage sheds for human beings who otherwise remind us all of our society’s failure to care.”

In 2021 the Washington state’s Lived Experience Coalition — a group of current and formerly homeless individuals — issued a statement lambasting the “dehumanizing conditions and lack of services” some experience in tiny house villages, and warned of lawmakers who avert focus from more permanent solutions. In Seattle, for example, some residents lived in tiny wood huts that lacked heat and electricity, where school children had to do their homework with flashlights.

Barbara Poppe, the former executive director of the US Interagency Council on Homelessness during the Obama administration, said while some models are better than existing congregate homeless shelters, some are “far worse.” What really alarms her, she told me, is the “corporate investor model, for-profit industry” that’s cropped up, naming companies like Tuff Shed and Pallet Shelter as examples.

“Some of these are quite inhumane, and some of those cost studies — Pallet will say it costs $12,000 [per door], but that’s a sleight of hand, it’s very deceiving, because there’s all the site preparation cost on top,” she said. “It seems like what the public wants and by extension what the elected officials say they want is an easy answer and a cheaper answer to the fact that we have an extreme affordable housing crisis that sits on top of growing inequality.”

For advocates like Visotzky with the National Alliance to End Homelessness, conceptualizing housing and shelter as distinct categories remains important. “If we start calling [tiny homes] housing then folks are going to potentially lose eligibility for a lot of key services and resources,” he said. “We need to make commitments and not shortcuts.”

Supporters of building more tiny houses say their critics are stuck in the status quo, implicitly accepting that thousands of people will remain outside. They say it’s a false choice that cities can’t invest in both permanent and interim solutions at once, and that the crisis demands vision and urgency.

“One of the biggest hurdles that’s blocking us from ending unsheltered homelessness is lost optimism,” said Funk. “Dignity Moves’ value-add can be to come in and say, ‘Oh, no, it’s very possible, here’s exactly the paint-by-color map of how.”

What does a real dignified investment look like?

The Connect Homes factory in San Bernardino, California, located about an hour outside Los Angeles, had homeless shelters on the assembly line the day I visited in mid-October. The company was working to fulfill a contract for Long Beach, California, which plans to open its first village of tiny house shelters in early 2025.

Originally founded in 2012 to produce factory-built houses, Connect Homes leaders realized during the pandemic they could use virtually their same industrial tools to develop shelters, too. The company now wants to build shelters nationwide.

“Is it housing, or is it shelter? Well I think what we’re seeing is it can be both,” said co-founder Gordon Stott. While at a higher price point than some of his competitors — units can be sold to cities at $80,000 per door — Stott believes his products are more durable investments, and prove homeless shelters don’t have to be ugly or stigmatized.

The shelter units set for Long Beach will be between 110 and 185 square feet (the larger ones will be ADA-accessible) and the city specifically looked for vendors who could build units with en suite bathrooms. The city used part of a $25 million state grant to finance the construction and expects to spend about $930,000 per year annually in operating costs.

“We’re in a moment where cities are having to step up and do things they haven’t done before,” Rex Richardson, Long Beach’s mayor, told me. “We’ve had a big history of dealing with homelessness and providing housing but we weren’t prepared for the crisis — the way it manifested — with a 62 percent increase between 2020 and 2022.”

Models with private bathrooms might deter some local governments, tempted to spend as little as possible. But if the structures are likely to stick around for years in a city, and if people are likely to live in them for extended periods of time, then investing in nicer units with higher standards makes more sense. Ferry, with Portland State University, said he tells municipalities considering tiny house villages “to think really carefully about” their request for proposals, or RFPs. If you put out a contract for a non-congregate shelter between 70 and 150 square feet with no other specifications, then you’re generally obligated to go with the cheapest bidder.

For now though, most leaders have been drawn to companies that offer cheaper upfront products. While most players on the market say their relocatable shelters can last at least a decade if not more, none have been operating long enough to really put their claims to the test, to truly see if “tiny home” units can last, bouncing around from plot of land to plot of land.

Patrick Monahan, a 42-year-old resident of the shelter village in San Francisco, had been sleeping outside off and on for almost 10 years before he moved into his tiny cabin on Gough Street.

Monahan never wanted to stay in traditional homeless shelters, and he’s appreciative of what the village offers him: a “fairly safe” environment that’s “very pretty and clean” and where the “food’s not great, but it’s free.” He doesn’t love using a porta-potty but thinks it’s better than going on the street.

Still, Monahan holds out hope that one day he’ll have something more. “I can’t have visitors here,” he said. “I rather have my own place, that’s mine.”