Despite the popularity of so-called “tiny homes” — and a major boost in sales during the onset of the COVID-19 pandemic in 2020 — not every business focusing on these has benefited. Filings in July and August 2021 displayed the difficult nature of the nationwide housing market, as West Coast Tiny Homes LLC and Humble Homes Management LLC d/b/a Humble Houses each filed for Chapter 7 bankruptcy.
West Coast Tiny Homes, based in Thousand Palms, California, filed on August 5, 2021, citing mounting debts as a major problem for the otherwise profitable business.
Though debts weren’t a problem for the Germantown, Maryland-based Humble Houses — which filed for bankruptcy on July 22, 2021 — profitability was, as the company reported negative gross revenue for the three fiscal years prior to its bankruptcy filing.
West Coast Tiny Homes notes that it’s involved in all of the major aspects of construction that go into the completion of tiny homes, providing services in chassis fabrication, framing, roofing, painting, electrical and mechanical setup, insulation, and flooring.
The company also adds that it considers its homes “park models” in order to meet standards set by the Department of Housing and Urban Development — noting that the homes “are also known as park models because we build them to…[also carry] the designation of a recreational park trailer (RPT) from HUD.”
Humble Homes markets itself as “specialists in the construction of unique and inspiring tiny houses and recreational structures,” continuing to note that “We pride ourselves on delivering outstanding quality and design for clients that want to right-size their priorities starting with a right-sized house.”
Similar to West Coast Tiny Homes, the company is in charge of the full process of construction and fabrication of its homes, and it notes that its work is held to the “highest possible standards”:
“Not only do we follow standards and codes enforced by RVIA, NOAH, and IBC, but we also have our own quality control program with over three hundred quality checkpoints.” Humble Houses’ website notes that this quality has led to work with a number of “trusted partners,” as the company lists major businesses Mitsubishi and Kohler as “some of the amazing partners we work with to bring you the best possible tiny houses and recreational structures.”
Chapter 7 bankruptcy puts these businesses in especially difficult positions, as it is sometimes known as liquidation bankruptcy and it doesn’t provide for the filing company to develop any plan of repayment and restructuring (as in Chapter 11 bankruptcy filings). Instead, it requires the filing company to have its nonexempt assets liquidated in order to pay back its creditors — which generally leads to the folding of the company, along with loss of property and any assets.
These bankruptcies aren’t the only times that people have seen problems with tiny house construction companies recently. A recent report from Insider noted that the folding of contractor Alpine Tiny Homes caused buyers to end up with unfinished, lackluster products.
“One thing that we are absolutely essentially lacking in this industry is a uniform set of definitions for what makes a building a tiny home…the result is that it turned into the Wild West,” said Zack Giffin, the host of television series Tiny House Nation.
“All these builders that are screwing people over and not building up to the standards that we would be expecting would not be able to do that if we had these universal definitions.”
Despite the difficulties that some people are seeing, proponents of tiny houses are standing by the burgeoning movement and its importance. “[The tiny-house movement has] got nothing to do with it being a fad,” said Giffin. “It’s got everything to do with providing solutions where hardly anybody else is actually offering any ideas.”
West Coast Tiny Homes saw revenue increases, but owes to over 40 creditors
West Coast Tiny Homes notes, as per its website, that it came to tiny home construction following its prior work on standard-sized homes: “Due to repetitive quality control and communication issues with out-of-town builders, [West Coast Tiny Homes parent company Faber Construction] asked us to get involved with the tiny home construction. We jumped at the opportunity – we built big homes well, so why couldn’t we do the same with tiny ones?”
To at least an extent, this mindset has been successful for the company’s revenue. The company, surprisingly, reported significant revenue in prior years. From January 1, 2020, to December 31, 2020, the company reported gross revenue of $141,493.00 — and surprisingly from January 1, 2021, to the company’s filing date of August 5, 2021, the company had gross revenue coming to $749,945.43.
However, this has not necessarily led to success for the company, as its debts have come to outweigh their gains: West Coast Tiny Homes now owes to 41 separate creditors, with total liabilities coming to $776,912.65. The company claims $35,757.08 in personal property, as well, which includes a total of $20,207.08 in accounts receivable and what it claims as $250 total in intellectual property.
A significant amount of the company’s debts are owed to construction businesses for warranty claims and otherwise returns, including $12,589.01 to ABC Supply and $65,682.33 to Parker Lumber.
The company additionally notes in its filing that it was evicted from its business location, leading to the loss of $9,000 in materials.
The mounting debts weren’t the only problem for the company: West Coast Tiny Homes is additionally involved in a pending lawsuit in Santa Cruz County over a breach of contract.
Humble Houses saw negative income for years prior to bankruptcy filing
The situation for Humble Houses is much different than that of West Coast Tiny Houses’, as the company actually has no listed liabilities. However, Humble Houses has dealt with declining revenue in prior years, putting its finances in an insurmountably difficult position.
Since May 1, 2018, the business has reported major losses, with its gross revenue coming to a total of -$126,645. From May 1, 2020, to April 30, 2021, the business reported gross revenues of -$40,000 — with revenues of -$45,718 from May 1, 2019, to April 30, 2020, and -$40,927 from May 1, 2018, to April 30, 2019.
The company additionally lists only $6,839.63 in assets, though it has no debts or creditors.