Granny flat, sleepout or tiny house: what is the difference?

A granny flat is a home

In the rules it is a small standalone dwelling: a new, single storey, self-contained building with its own kitchen, bathroom and toilet, on foundations, connected to water, wastewater and power. Up to 70m² and inside the conditions, it can be built without a building consent under the 2026 exemption. It can be rented to a tenant, lived in by family, insured as a dwelling, and counted by a valuer as a second home on the title.

A sleepout is a room

A sleepout has no kitchen and usually no bathroom. It is a bedroom, office or studio that relies on the main house for everything else. Under the ordinary Schedule 1 rules a detached building up to 30m² can be exempt from consent if it is designed by a licensed professional or is a compliant kitset, and up to 10m² with almost no conditions. It is cheaper and quicker than a granny flat, and it cannot legally be let as a self-contained home, because it is not one.

A tiny house on wheels is a vehicle, or is it?

This is the grey area. If it is genuinely a vehicle, on a registered trailer and moveable, it can sit outside the Building Act, and MBIE has separate guidance for that. The moment it is connected to services, has the wheels removed, or is treated as a permanent home, councils tend to treat it as a building, and then it needs to comply like one. Banks and insurers often struggle with them for the same reason. The 2026 granny flat exemption specifically excludes them.

Which one do you actually need?

• A parent, an adult child, or a tenant living independently: granny flat. Nothing else does this legally and properly.
• Rental income: granny flat. A sleepout cannot be let as a self-contained unit, and a tiny house on wheels is hard to finance and insure.
• A teenager's room, an office, a studio or a guest bed: sleepout. Cheaper, faster, and does the job.
• Something you will move to another property later: tiny house, with the trade offs above.
• Adding value to the property: granny flat, with the full document pack. Valuers count a compliant dwelling. They discount the other two.

The cost difference is smaller than people expect

A sleepout with a bathroom bolted on and power and water run to it has done most of the expensive work of a granny flat without any of the benefits. If there is any chance you will want someone to live in it, build the granny flat. The extra cost buys the kitchen, the compliance and the right to rent it.

Building rules summarised from the Building Act Schedule 1 exemptions and MBIE guidance on granny flats and tiny houses. Resource consent rules are separate and vary by council.