One alternative to the housing shortage crisis is to build really small homes and reduce costs

The view from the front entrance of a small home. 

(Photo by Ivan McClellan, The New York Times)

Once relegated to the world of socks, compression has come to the housing world. "Thanks to soaring housing prices, the era of the 400-square-foot subdivision house is upon us," reports Conor Dougherty of The New York Times. "This is not a colony of 'tiny houses,' popular among minimalists and aesthetes looking to simplify their lives. . . . It's a chance to hold on to ownership."

Ten years ago, the housing market was booming, making home ownership for a roomy 3-bedroom out of reach for many people. In response, "Home builders have methodically nipped their dwellings to keep prices in reach of buyers," Dougherty explains. "The downsizing accelerated last year when the interest rate on a 30-year fixed rate mortgage reached a two-decade high, just shy of 8 percent."

The period of mega-square-foot homes might be giving way to the not-so-big house. "A move toward smaller, affordable homes — in some cases smaller than a studio apartment — seems poised to outlast the mortgage spike, reshaping the housing market for years to come and changing notions of what a middle-class life looks like," Dougherty writes. 

Some state and local governments are working to encourage the "great compression" by making construction more doable. "To reduce housing costs, or at least keep them from rising so fast, governments around the country have passed hundreds of new bills that make it easier for builders to erect smaller units at greater densities," Dougherty reports. "Some cities and states — like Oregon — have essentially banned single-family zoning rules.