Size could matter when it comes to increasing density across U.S. cities. With many major metros around the country facing rising construction and land costs, companies are looking toward small prefab modular units and manufactured tiny homes to increase housing stock more quickly and with less on-site labor.

In places like the San Francisco Bay Area, where home prices average $1.2M, tiny homes are particularly popular among millennials seeking to reduce housing expenses through alternative living. As of 2016, there were 10,000 tiny homes in the country, but more companies are offering options for tiny homes and that number is likely to rise significantly.

Boxhouse, a startup in Oakland, is using shipping containers to build 160 SF homes that cost less than $10K to build and sell for $8K to $50K. In Detroit, Cass Community Social Services has been building 250 SF to 400 SF homes that cost $45K to provide low-income earners with a place to live in a rent-to-own situation. Amazon also is delivering tiny homes.

Kasita recently received state permitting approval to build its tiny home products as accessory dwelling units in California and Nevada. It already offered its product in Texas.

“We have a high-density, high-quality product that is appealing to a certain demographic and creates more supply in the market,” Kasita CEO Martyn Hoffmann said.

Kasita is taking its tiny homes a step further and plans to offer stackable modular units. It is in permitting review for all states and could begin manufacturing in February, according to Hoffmann.

Kasita is not the only company turning toward modular as an option for multifamily. Place Properties in Atlanta plans to build the city’s first prefab modular development in October. Panoramic Interests in the Bay Area has been building prefab micro-units for student and multifamily housing.

Increasing Density

While Kasita sells a stripped-down version of its tiny units for about $89K with no tech and appliances, Hoffmann said Kasita homes are not being marketed as affordable units. Units equipped with appliances, furniture and home automation cost about $139K on average, with stackable units costing about $99K. Instead, Kasita is expanding housing availability, which is part of the puzzle.

“It’s really a way to alleviate the housing crisis not through affordable housing, but to increase the housing stock,” Hoffmann said.

For its prefabricated stackable product, Kasita uses a similar 400 SF unit as its tiny home product. These units can be doubled for a two-bedroom unit, if needed. The stackable units can be used to build mid-rise buildings with a mix of studio, one-bedroom and two-bedroom units.

Hoffmann estimates the stackable product can be delivered to a developer 40% to 50% faster than a typical build-out, allowing for a developer to begin leasing within 12 months to 24 months.

Kasita is negotiating a deal to bring a 50-unit project to Austin, Texas. Kasita is finishing up design and engineering of the stackable product by the end of this year and is aiming to get permits by February to begin manufacturing in mid-February.

Each Kasita unit comes with a fully integrated home automation system that can control lighting, climate and sound through voice commands and a mobile app. Hoffmann said each of these homes utilize every cubic inch so a 400 SF home feels more like a 500 SF home. Instead of an in-wall Murphy bed, the bed slides in and out of a sofa platform, turning a living room into a bedroom.

“We produce a product that is quick to deploy, high in quality, dense and maximizes spaces,” he said.

Its accessory dwelling unit product can be manufactured and delivered to a customer within 10 weeks. By receiving state-level permitting, these units do not need to go through local permit inspections. Units can typically be installed within a day.

The tiny homes are not only being used as a secondary dwelling that can be rented out or used as a guest bedroom or office, but they are gaining traction in the short-term rental market via Airbnb, Hoffmann said.