In his book, How Buildings Learn, Stuart Brand speaks of the difference between "use value” and "market value”:
Economists dating back to Aristotle make a distinction between "use value” and "market value.” If you maximize use value, your home will steadily become more idiosyncratic and highly adapted over the years. Maximizing market value means becoming episodically more standard, stylish, and in — spectable in order to meet the imagined desires of a potential buyer. Seeking to be anybody’s house it becomes nobody’s5
On the surface, small dwellings may seem to afford greater utility than marketability. These places are typically produced by people who are more concerned about how well a house performs as a home than how much it could sell for. The creation of a smart little house has traditionally been a labor of love because, until recently, love of home has been its only apparent reward. As a rule, Americans like to buy big things. Like fast food, the standard American house offers more frills for less money. This is achieved primarily by reducing quality for quantity’s sake.
Financiers have been banking on this knowledge for decades. From their perspective, a sound investment is one that corresponds with the dominant market trend. Oversized houses are more readily financed because they are what most Americans are looking for. For a lender, two bedrooms are better than one, because, whether the second room gets used or not, this is what the market calls for. Sometimes a bank will simply refuse to finance a small home because the cost per square foot is too high or the land upon which the house sits is too expensive in proportion to the structure. The design, construction or purchase of a small house has thus been further discouraged.
Despite all obstacles, a few relentless claustrophiles do continue to fight for their right to the tiny, and it has finally begun to pay off. Lawsuits concerning the constitutionality of minimum-size standards have recently forced some municipalities to drop the restrictions. Where this is the case, little dwellings have begun to pop up, and they are selling fast. Americans looking for smaller, well-built houses are out there, and their needs have been refused for decades. This minority, comprised mostly of singles, may be small, but it is ready to buy. It seems the composition of American households changed some time ago, and the dwellings that house them are just now being allowed to catch up.
Some developers on the West Coast have been quick to take advantage of the fresh market potential. In one high-income neighborhood, new houses of just 400 square feet are selling for over $120,000, and some at 800 square feet are going for more than $300,000. That is about 10 percent more per square foot than the cost of 2,000 square-foot houses in the immediate area. Needless to say, post-occupancy reports show that, though less expensive overall, these little homes have not had a negative impact on neighboring property values. In fact, the resale value of American houses of 2,500 square feet or more appreciated 57 percent between 1980 and 2000, while houses of 1,200 or less appreciated 78 percent (Elizabeth Rhodes, Seattle Times, 2001). Small houses appreciated $37 more per square foot.
