FAQs About Building, Using, or Renting Out a Tiny House

The tiny house movement is trying to catch on, but legal limitations can interfere with building or using one, whether for yourself or as an investment.

By , J.D. · University of Washington School of Law

What's better: remodel my garage or replace it with prefab tiny house?

My detached garage has fallen into disrepair and is full of junk. I'd like to either remodel it or replace it with a prefabricated tiny house on wheels. In either case, I want to rent the new space to a residential tenant. Which would be better?


Which is better will largely depend on the health of the local real estate market (including the rental market), construction costs (if you remodel), purchase price (if buying a tiny house), and what return on investment (ROI) you can expect. Additionally, local zoning ordinances and building codes govern what type of building is permitted.

Some benefits of remodeling the garage include:

  • Less onerous building and zoning requirements. Building and zoning requirements for converting a garage to an accessory dwelling unit ("ADU") are often less burdensome than getting approval to use a tiny house as a dwelling. Why? First, because a garage conversion will use the footprint and shell of an existing building, obtaining a permit will likely be more straightforward than for a whole new building. Second, while not all residential areas permit ADUs, it's more likely that it will be approved as part of a garage remodel than as a tiny house. Tiny houses have yet to find widespread acceptance for residential use, and their use is prohibited in many locations.
  • Return on investment. An ADU is part of the real property it's built on, and should add to resale value if well constructed. A tiny house, like a car, tends to depreciate over time; as personal (not real) property, it doesn't add value to the property it sits on (although you can always sell it separately). So, while the rental income from either an ADU or tiny house might end up paying for the investment in the long term, garage remodels typically hold their value longer.
  • Financing opportunities. It's relatively easy to obtain a home remodel or home equity loan. Since a tiny house on wheels is personal property, however, your loan for it will be more expensive; the interest rates will likely be higher and the repayment term shorter.
  • Livable size. A 900-square-foot ADU is more traditional and will be more popular with some potential tenants than a 400-square-foot (or smaller) tiny house. Although tiny houses are a "thing," many people just aren't yet willing to downsize that much. It could be easier to find a tenant for the garage conversion (and charge more rent for the larger size).

Some benefits of demolishing the garage and buying a prefab tiny house include:

  • Lower cost. A prefabricated tiny house can cost you less overall than a garage remodel and should be easier to budget for. With a remodel, only after the work is well underway will it be possible to know the full extent of what's necessary. The price of the prefab tiny house, by contrast, will be more or less fixed once it's ordered. Of course there will be other charges, like delivery, setup, and permits, but most of those can be anticipated in advance and budgeted for.
  • Long-term flexibility. A tiny house on wheels allows the owner to be flexible. For example, if you have a small backyard and are not sure you want an ADU taking up most of the space, or think long term you might not even want a tiny house in the back, a tiny house on wheels can be sold and removed relatively easily. A garage remodel, on the other hand, cannot be resold or moved.
  • Project completion time. A tiny house can be delivered, set up, and lived in quicker than a garage conversion, and with less dust, noise, and mess. If the tiny house you want is already constructed, it's just a matter of having it delivered and hooked up. Or if you custom order a new tiny house, some companies tout the short build time. Converting a garage into an ADU can take a long time (during which you might have to placate irritated neighbors), depending on how much work is required and whether you do it yourself or hire a contractor.
  • Low utility expenses. Monthly utility expenses for a tiny house, due to its small size, will be less than with a garage converted to an ADU.
  • Small footprint. A tiny house will take up less space in your yard than a garage remodel. This leaves more room for outdoor living and activities.

First, confirm what uses are lawful in your area. If you don't, you might find after you've started the project that either your garage conversion or the tiny house is illegal.

Review the building code and zoning ordinance, talk to staff in the local planning department, and if you have questions, talk to a land use or real estate attorney. A local real estate expert can help you understand what type of living space will be most popular with tenants as well as the rental rates you'll be able to charge.

Can I place a tiny house on wheels on a vacant lot?

I dream of owning a second home. To make that affordable, I'd like to place a tiny house on a vacant lot; preferably one that's on wheels. Is it legal to put this on on a vacant lot?


The first issue is whether the applicable zoning ordinance permits your desired use. Zoning ordinances control how land can be used. For example, a part of your town might be dedicated to residential uses, while another area could be only for commercial uses.

Zoning ordinances often make it difficult to get approval for tiny houses, especially since those on wheels might be considered "recreational vehicles." The restrictions vary from place to place, but the more common ones include:

  • minimum house-size requirements for single-family residences (in many locations, the minimum house size is 900 square feet)
  • prohibitions against living in structures not permitted for residential use, including recreational vehicles
  • prohibitions or limitations on how many nights an RV can be slept in (you might see a prohibition against "camping" for more than five consecutive nights, for example), and
  • requirements that tiny homes and RVs be located only in designated communities, similar to a mobile home park.

Due to these restrictions, tiny houses are often not lawful for residential purposes (even if they're just temporary). However, it's not uncommon for camping to be permitted on residential property. If you'll be using the tiny house as a second home, it might be considered "camping."

Given the number of restrictions you might encounter, it's important to find out whether the applicable zoning ordinance permits your tiny house on wheels before spending money on your tiny house. In many locations, the planning department will be able to help you answer this.

If the local zoning rules permit a tiny house on wheels for your intended use, you'll also need to inquire what safety standards apply to the structure. (See Do I Need a Building Permit to Construct a Tiny House in My Backyard?)

For single-family houses, those safety standards are in the local building code. Your tiny house, since it's on wheels, might have to meet safety standards used for RVs. Or, because tiny houses are relatively new to the planning world, other safety standards might be imposed.

Some of the informational websites relating to tiny houses encourage people to ignore local building codes and zoning ordinances. Doing so is risky. A cranky neighbor or inquisitive code enforcer could file a complaint or initiate a code enforcement proceeding. You could find yourself paying a large fine and removing your tiny house from your property. If inclined to forgo the permitting process, talk to an attorney to make sure you fully understand the risks.

If you haven't already purchased a vacant lot, shop around to find a location that will allow a tiny house. From city to city, and county to county, the rules regarding tiny houses vary.

Renting out my tiny house is illegal: Now what?

Last year, we placed a tiny house in our backyard. We rent it out occasionally as a vacation rental. Last week, we got a letter from the local code enforcement department telling us the tiny house cannot be used as a rental. We need the income. What do we do?


Use of tiny houses for residential purposes hasn't gained widespread acceptance among zoning and building authorities. Many codes require houses used for residential purposes, including rentals, to be a minimum size (for example, 900 square feet). In many areas, tiny houses are not permitted for use as a residence at all.

That said, tiny-house owners shouldn't give up without looking at all options.

Code enforcement officers typically initiate investigation of unlawful uses on private property after private citizens file a complaint. They usually follow up by sending a notice of violation letter to the property owner.

The letter usually provides instructions to the owner on what must be done, as well as information about deadlines (and what happens if you don't meet them). As you review the letter, take note of:

  • the alleged facts giving rise to the complaint (are there inaccuracies?)
  • code sections cited in the letter (land use codes and ordinances are available online or at the local planning department office, so review the cited sections), and
  • any deadlines that apply (put them on your calendar).

These letters sometimes instruct the property owner to contact the code enforcement officer. This is a good opportunity to explain any inaccuracies and provide additional information. The officer will likely want to schedule a visit to your property. Before responding to or letting the officer on your property, however, it might be helpful to contact a local land use attorney.

If you talk to the code enforcement officer, don't allow yourself to get mad. They're simply doing their job by responding to a complaint. A good officer will make no judgment on whether you're in violation until after investigating.

If it looks like your tiny house is indeed unlawful, you're not out of luck just yet. Consider seeking an amendment to the code allowing tiny houses to lawfully be used as vacation rentals. Amending a land use code can be expensive and time-consuming, but if your local jurisdiction feels enough public pressure, it might willingly make the change. It can be helpful to work with other tiny house owners who want to see the same change.

Another option is to see whether your area offers community mediation for code enforcement actions. If so, you might be able to sit down with the person who filed the complaint to try for a reasonable resolution. Perhaps the person just wants assurances that the renter in your tiny house won't be blaring music late at night.

If living in my tiny house not allowed, can I use it as an art studio or office?

After we placed a tiny house in our backyard to use as a mother-in-law suite, we learned that such use is not legal, due to a minimum 300-square-feet requirement. Our tiny house isn't that big. We don't want to move or sell the tiny house. Can we use it as an art studio, home office, or something similar?


A good place to start is with the applicable zoning ordinance (also sometimes called a "development code"). It consists of two parts: a zoning map and land use regulations. The map shows how property is zoned throughout the city or county, while the regulations control the allowable uses in each zone. Both can usually be found online.

Identify the zoning district that your property is located in on the map, which will hopefully be color coded. Or, contact the local planning department to inquire how your property is zoned.

Determine what uses are allowed in your zone by looking at the land use regulations. For example, in a high density residential zone, you might find that single-family dwellings, accessory dwelling units, multi-family dwellings, and home occupations are allowable uses.

Some uses might not be permitted outright outright, but potentially as a "conditional" or "special" use. So, in a low density residential zone, single family residences might be permitted outright, while accessory buildings and home occupations might be permitted only as conditional uses. Special uses and and conditional uses normally require a more burdensome application process and, if approved, certain conditions can be imposed. For example, you might have to add on-site parking.

In many locations, tiny houses don't meet the minimum requirements for a structure to qualify as a dwelling. One option is to consider whether a home office or art studio could qualify as an "accessory use" (or similarly defined use).

The definition of "accessory use" varies from place to place, but it is usually something like: "Accessory uses and structures are those of a nature customarily incidental and subordinate to the principal use or structure on the same lot. Typical accessory structures include detached garages, sheds, workshops, green houses and similar structures not intended for habitation by people."

Even if it looks like your desired use could be allowed, the process is not over; you might still need to get a land use permit for the specific use. Through the permitting process, the local jurisdiction may impose setback and other physical restrictions on the placement of structures. For example, the tiny house might need to be located ten feet from property lines and be no taller than 20 feet.

Land use regulations are rarely crystal clear. If you cannot discern whether an office or art studio is lawful on your property, don't hesitate to ask the local planning department. If it is not, ask what uses are permitted. Perhaps something similar is allowed. A land use attorney can also help you sift through what uses are permitted, and help address questions or concerns you have about your tiny house.

Would a tiny house used as an accessory dwelling unit (ADU) be a good investment?

The rental market in my area is hot, and I own a house with enough land around it to build a tiny house as an accessory dwelling unit ("ADU"). Would this be a good investment?


The value a tiny-house ADU could add to a given piece of property is hard to calculate. You might not know the return on investment until you sell the property, which could be years away. It's also going to depend heavily on your financial situation and goals. Questions to consider include:

1. Is the ADU lawful on your property? If not, an appraiser is unlikely to assign it any value. That's a potential problem if you ever need to refinance or sell, because lenders will not lend money if the underlying collateral isn't legal. Also, if you build an ADU unlawfully, you will have to worry about a code enforcement action that results in you paying a fine and/or removing the ADU. The local zoning ordinance will provide guidance on whether an ADU is lawful, or consult a land use attorney.

2. If an ADU is lawful, is building one feasible on your property? Check the zoning ordinance regarding what the local government will require before issuing a permit. Will you have to provide additional on-site parking? Will setback rules restrict where a detached ADU can be located? Is an attached ADU permitted, but not a detached ADU? If the zoning ordinance includes restrictions preventing you from building an ADU, you might need to seek a "variance." However, these add cost and complexity to a land use application, and aren't always granted.

3. How much will building the ADU cost? Once you have an idea of the project's scope, get bids from several reputable general contractors with experience building tiny-house ADUs. Also realize that you will have to pay for building and land use permits and design (architecture), and possibly financing expenses. You might also have to pay for professional services from an engineer, surveyor, or attorney.

4. How will you finance construction? If you have the cash on hand, you are one step ahead. Or if you have equity in your property, you might be able to refinance and pull cash out to cover the construction expenses. If you do not have equity in your property, but have steady income from a job or other source, you might qualify for a renovation loan. Do your research to see which lender offers the best option. Taking out a loan to finance ADU construction will add to your cost, since you'll have to pay lending fees and interest. Talk with your lender so as to better estimate your financing cost.

5. What are the rental rates for similar tiny-house ADUs? Answering this will help you estimate your monthly cash flow and calculate whether you will be able to cover any financing costs and otherwise meet your financial goals. Finding reliable data on rental rates can be a challenge. Some real estate agents who specialize in investment properties are familiar with residential rental rates. You also can research websites of local property managers.

6. Will there be tax consequences? The ADU might impact your property tax bill and you might have to pay rent on any rental income received. Talking to a tax professional can help you fully understand these tax consequences.

It's worth talking to a financial adviser about whether an ADU is a good investment in light of your short-term and long-term financial goals. It's also a good idea to talk to a land use attorney about whether a tiny-house ADU is lawful in your neighborhood and the procedures for having one approved.

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