Montana uses tiny homes to combat housing crisis

Nov 06, 2024

Allison Smith-Estelle watches as the second floor of a tiny home is lifted over power lines into her back yard in Red Lodge.

Neighbors watch as the second floor of a tiny home is lifted over power lines into her back yard in Red Lodge.

Not long ago, moving into a 400-square-foot home was countercultural: For hippies opposed to the consumerism and conformity associated with white- picket-fence suburban life. But as the affordable housing crisis rages on, with a recent report identifying Montana as the least affordable market for homebuyers, living in a small home is increasingly for realists, not idealists.

“The affordability of a regular house was really out of my reach,” said Liz Blanton, a Livingston resident who moved into a 330 square foot “tiny home" in May 2023. Blanton had previously owned a home in Seattle during a previous marriage but had been renting since getting divorced.

Blanton’s home was built by Woodland Ridge Tiny Home Crafters, a Livingston-based business founded by Cody Wood and Rick Gilliland in 2020. Montana’s affordable housing crisis was still in its early stages, but Wood was coming to see that his teenage children likely wouldn’t be able to afford to stay in Livingston as adults.

Meanwhile, the world was falling apart, and he and Gilliland were contemplating career pivots.

“We wanted to make a difference in the housing crisis. So we said, ‘Let’s build one and see how it goes, see if we enjoy it.’ And we fell in love with it,” Wood said.

There will be no silver bullet when it comes to fixing the housing crisis, but building smaller homes increases affordability by saving on the costs of material, labor and land — with the added benefit of decreasing sprawl. In fact, tiny homes present the far end of a broader trend toward smaller homes, driven by economic and cultural shifts.

Though tiny home proponents understand that giving up the majority of one’s possessions to live in a 8.5- by 40-foot space may not be for everyone, they argue that there are several demographics for whom small homes are more appropriate than traditional homes — such as single adults and elderly people — and that building for those demographics benefits everybody by freeing up housing stock.

The state government shares this belief. A bill passed during the 2023 legislative session requires cities to adopt regulations to promote construction of smaller homes on the same parcel of land as existing homes, known as accessory dwelling units.

Prior to this law, Wood and Gilliland advocated to reform the Livingston building code to allow for ADUs.

“At first they were illegal in Livingston, so we went to commission meetings and invited them to see what we were building,” Wood said. “Now the city is saying ‘We want as many as we can get.’”

Wood and Gilliland have built tiny homes to be used for workforce housing (including three units at Chico Hot Springs), as accessory dwelling units and as stand-alone homes. They estimate that 50% of the homes they build are for primary residences, 25% are workforce housing and 25% are rentals.

Their business caters to the state’s “missing middle”: “The people that make too much to qualify for housing assistance but cannot afford a $500,000 to $600,000 home,” per Wood.

Though there are builders specializing in tiny homes across the country, Woodland Ridge’s tiny homes are built with Montana winters in mind. The business is the most established builder of tiny homes in the state, having built more than 30 homes.

Many tiny homes are built on a trailer frame rather than a foundation which can lead to water issues in sub-freezing temperatures. All Woodland Ridge homes have water pipes inside of the structure, yet hidden, to keep them heated. For the few feet that pipes are exposed between the ground and the home, the owner must skirt the tiny home and insulate the pipe with heat tape.

The first house took Wood and Gilliland a year to build, which they did in Wood’s barn. They sold it before they finished building it and then sold two more to the same couple. They now have nine employees and are looking to hire one or two more. They work on four houses at a time and build houses in less than six weeks.

They’ve built homes as small as 240 square feet and as large as 900 square feet, though the technical definition of a tiny home is a structure under 400 square feet.

Allison Smith-Estelle watches as the second floor of a tiny home is lifted over power lines into her back yard in Red Lodge.

All of the business’s homes are still custom built. Customizable elements of the home include internal and external storage, whether to have an open floorplan or separate rooms, putting the bed in a loft or on the ground floor, whether the bathroom has a bathtub or a shower and the option to include a mini wood-burning stove. Woodland Ridge tiny homes cost between $90,000 and $200,000 to build, averaging about $150,000.

Customers have been able to work with banks to finance their homes, as homes do not qualify for traditional mortgage financing unless they are built on a foundation and are at least 400 square feet.

The cost per square foot to build a home increased 34% between 2019 and 2022 due to increased costs of labor and materials, according to the National Homebuilders Association.

Wood and Gilliland now spend more on materials to build a home than they sold finished homes for in 2020. Meanwhile, the median cost to build a 2,500 square foot home is $392,241, an increase of almost $100,000 since 2019.

The NAHB's cost estimate is on the low end for building in Montana, particularly in areas where the cost of materials includes the additional cost of transportation to remote areas. Brad Caton, programs director for the Red Lodge Area Community Foundation, which builds affordable housing in Carbon County, estimates the cost to build there to be around $400 per square foot.

Tiny homes are also cheaper than traditional site-built homes because they are built in a shop, which means workers don't have to spend time setting up and closing up the building site everyday or face unpredictable variables such as the weather. Woodland Ridge also saves on costs by doing all their work in house, without subcontractors.

Tiny homes aside, houses across the nation are getting smaller to save on construction costs. The median size of a home constructed in 2023 was 2,100 square feet, down from a peak of almost 2,500 square feet in 2015. The average size of a home has declined every year since 2015, according to NAHB.

A 2024 study by NAHB found that homebuyers want smaller homes. Builders have been shrinking the size of homes to meet this demand and to cut costs, according to the 2024 U.S. Residential Architecture and Design Survey. The survey suggests that new homes have fewer hallways, which decreases square footage and the number of interior walls.

“McMansions, with their outsized proportions and price tags, are out,” Julie Taylor, a writer for Realtor.com, wrote in a July 2024 article.

In the first quarter of 2024, new homes were the smallest they had been since the second half of 2009, but homes are still much larger than they used to be. The median home built in 1973 was 1,525 square feet, according to the Census Bureau.

Tiny homes are attractive to prospective owners because they allow people to build a home at their price point that is “cute and not shabby," according to Julie Lasky, a real estate journalist for the New York Times who writes a column about downsized living arrangements called “Living Small.”

“If you’ve got only a few square feet for tile, you can get some really great high-end tile and not spend a fortune, whereas you can put in easily $3,000 worth of tile in a fairly normal sized room,” she said.

Montana famously has plenty of space, so historically it hasn't been necessary for homebuilders to sacrifice square footage — whereas residents of dense, metropolitan areas have always lived in homes with hundreds rather than thousands of square feet.

Wood and Gilliland have found that the state’s abundance of space may actually encourage residents to downsize, because many Montanans would rather spend their time outdoors rather than sitting around at home. Plus, increased housing density is the only way to meet the need for housing without sprawling into undeveloped land.

“I tend to want to spend the vast majority of my time in the great outdoors,” Blanton, the tiny home dweller from Livingston, said. “Home is just a place to sleep and be cozy.”

That said, Blanton is not recreating to avoid her house.

“I look forward to being in this house every single day,” she said.

“Her lifestyle is in the mountains,” Gilliland said of Blanton. “Without having a $700,000 mortgage, she can go do the thing she wants to do.”

Smaller homes also liberate their owners from time-consuming upkeep.

"It probably takes (Liz) 10 minutes to clean her house,” Gilliland added.

Wood said that young people today are more minimalist, “bucking against the big house and the accumulation of stuff.”

Allison Smith-Estelle, who has had two tiny homes built on her property in Red Lodge to use as workforce housing, believes that the tiny home lifestyle as attractive to young people in mountain towns. She sees this in her 21-year-old son, who’s an avid outdoorsman.

Allison Smith-Estelle watches as the second floor of a tiny home is lifted over power lines into her back yard in Red Lodge.

“He just needs a warm place to microwave his Costco pizza,” she said.

The importance to many Montanans of preserving undeveloped land is another reason to promote housing options that increase densification, rather than contributing to sprawl and the conversion of undeveloped land.

Sprawl "impacts the view and the things that make people want to live here," Wood said.

Though a tiny home may not be an option for adults with children, a considerable number of homebuyers are single adults, which Woodland Ridge has seen reflected in their clientele.

“Our number-one demographic is 35- to 55-year-old single, professional women,” Wood said.

Nineteen percent of recent homebuyers were single females and 10% were single males, according to a 2024 National Association of Realtors report.

The business has also built quite a few homes for senior customers, who want an ADU to put on their kid’s place. Another prime demographic for ADUs is people who want an ADU for their adult child to live in, Lasky said.

Giving elderly people options for downsizing would free up more housing for families, according to Andy Shirtliff, executive director of the Montana Building Industry Association and a city commissioner in Helena.

Many seniors struggle with the size of their home: They don’t want to have a house to clean or take care of, and struggle to keep up with property taxes and the cost of maintaining it while on a fixed income.

“They’re stuck where they’re at,” Shirtliff said.

"(They) would probably move out if they had more options," he added.

Smith-Estelle’s tiny homes in Red Lodge are the first built by Woodland Ridge on a foundation rather than a trailer frame. Tiny home builders across the country traditionally constructed homes on wheels or trailer frames because when cities were hostile to ADUs they needed to be considered mobile homes to be legal.

Allison Smith-Estelle watches as the second floor of a tiny home is lifted over power lines into her back yard in Red Lodge.

Now that ADUs are welcome in the state, Wood and Gilliland are excited to present customers with the option to build homes on foundations, which options the door to traditional mortgage financing.

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