Small but perfectly formed: Welcome to the world of tiny homes

'Bigger is better' has defined American house-building for the past 50 years. But the economic downturn could be changing all that

Jay Shafer is aware that people have regarded him as seriously eccentric for the past 10 years. During this time he has lived in homes that sit on wheels – not foundations – and which are so small they might otherwise pass for kennels in your average Dallas suburb. He even had the impertinence to expect others to follow his can't-swing-a-cat example by starting a company dedicated to building and designing homes that are as diminutive as his.

Today, however, Mr Shafer is feeling a lot more confident about both his lifestyle and his business. This month you will find him driving cross-country from San Francisco to Manhattan, with a 120sq ft house made by his company, The Tumbleweed Tiny House Company, hitched to his car. He hopes to set it down in a parking space near Times Square and invite a few folk in for tea. As publicity stunts go – he has a new book out on mini-home living, The Small House Book (tumbleweedhouses.com) – it is almost certain to succeed.

"Bigger is better" has defined cultural tastes in the United States since the Second World War. As the American Dream grew fatter, along with the cars, the refrigerators and the helpings on the dinner plate, so did the home. Since the 1950s, the average American dwelling has almost doubled in size to a massive 2,349sq ft. But a reverse trend is now asserting itself; call it a backlash, if you like. Aspiring to live in a McMansion has suddenly lost some of its appeal – due partly to the stumbling economy, itself a product of excess in the home-mortgage industry, as well as heightened ecological awareness.

"Bring those two elements together and it's a perfect storm," says Mr Shafer, who moved into his first miniature house in Iowa City, Iowa, in 1999. He founded his company one year later. "I think people had an intuition that living with less was a reasonable idea. But I didn't become 'certifiably sane' until after people became more aware of their footprints, economically and ecologically." Business grew steadily, he said, but in the past two years it has really started to take off.

For some, of course, living small – in homes of 750sq ft – is a necessity. A job is lost, the household income has shrunk and the budget can't cover all the bonus rooms. For others, it's more about the challenge of designing better instead of bigger. It is an opportunity to create a house that is as efficient as it is lovely. Other small-home converts, meanwhile, are motivated by something more existential, to do with putting the planet and sustainability before granite counter-tops and second bathrooms. "Sustainability is at the heart of the small house movement," says Jo Vinson, inventor of the JoT House, a prefabricated dwelling with removable inside walls and energy conservation features. "And the search for a sustainable lifestyle is very much becoming the new common goal of humanity."

Modest though they may be, these houses offer most of the amenities of larger dwellings, including full kitchens and bathrooms. Commonly, though, they consist of just living/sleeping spaces. Some micro-homes compensate for their small layout by maximising the use of vertical space, custom-designing cabinets and furniture, raising ceilings to build in sleeping lofts, or even using flat-roof space as a deck or patio area. Converts find that with a smaller footprint, the land takes centre stage and an intimacy with the landscape develops. In terms of their look, a mini home can be anything from pod-like utilitarian modern to rustic chic. Each of Brad Kittel's "Tiny Texas Houses", for example, evoke a period style, whether it's a "Queen Anne" with gingerbread trim or a hipped-roofed "Dutch Colonial".

The phenomenon is not entirely new. The American author and abolitionist Henry Thoreau famously sequestered himself into a 150sq ft house on Walden Pond in Massachusetts back in the 1840s as he dabbled with a simpler way of living. And in San Francisco, some 5,600 miniature, seismic-proof cottages were built for survivors of the 1906 earthquake. But with new companies springing up across the US that specialise in designing remarkably small dwellings, a strong revival seems likely. Gregory Johnson, a co-founder of the Small House Society in Iowa City comprising 40 builders and architects, believes that hundreds of these tiny homes have been built since 2002 costing less than $100,000 to erect and offering 500sq ft of space or much less.

Marianne Cusato had been living in a 300sq ft Manhattan apartment for years when she found inspiration in the wake of Hurricane Katrina in 2005. Seeing the refugees from the storm being corralled into barely functional trailers provided by the government, she switched all her professional energies into designing tiny but appealing homes she called Katrina Cottages. Today, they are sold in kit form through one of the largest national DIY chains. "It became clear quickly that there was demand out there for something that was both attractive and easily obtainable," she says. "We get interest from every demographic: from retired people to people who want a starter-house or just to downsize."

She thinks the movement is only just taking off. "It is not about taking a large house to a Xerox machine, shrinking it and saying here, now you have to suffer. It is liberating to design a home around how you live and connect it to the outside and to the place where you live. You don't have a big house to clean, you don't have to fill it up with tchochkes [trinkets] you don't want. The burden of living in a big house is gone."

Don't be misled, though: the number of Americans willing to live in homes smaller than the average restaurant bathroom will always be small. And if protecting the environment is really the aim, it might be worth pointing the tiny-house enthusiasts in the direction of recent data showing that the US has a growing glut of empty, unused homes.

Still, something is going on. Call it a cure for mega-mansion lust, a political statement, or a matter of thrift, teeny-weeny homes are once again making a big entrance on the American landscape, including, for a few days in June at least, in the middle of Times Square. Assuming that Mr Shafer can find a parking space big enough, that is.

Juan Carretero is an architect and designer with a national practice specialising in historic preservation. He lives and works in New York City and in the Hudson Valley