Could tiny homes be the solution to the housing crisis?

Compact homes may be the answer to New Zealand's housing crisis.

Dubbed 'The Snug' by non-profit organisation PrefabNZ, the small houses take just weeks to build - and 180,000 could be moved into existing backyards if plans were to go ahead.

The prefabs may be small, but chief executive Pamela Bell says they have all the room modern Kiwis need. 

"Our average house has blown out beyond 200 square metres, and this only happened in the 1980s," says chief executive Pamela Bell. 

"Before that we only needed 140 square metres.

"But of course, our demographics are changing. We need more one-bedroom homes because our population size in the house is getting smaller."

Prefab NZ says these small prefabs, which could be produced locally, will make the Government's plan to build 100,000 homes in 10 years possible. Each is expected to cost just over $100,000 - a far more attainable price than the average Auckland house.

"We've got a lot of young professionals and a lot of ageing people who would like to live really close to their families - literally in their own backyards," says Ms Bell. 

The company has launched a competition for Kiwis to design smaller, smarter homes. Most of the designs are expected to be between 45 to 60 square metres - not much bigger than a small apartment.

One entry measures up at just 22 square metres.

When we asked Kiwis if they could live in a tiny prefab, they had mixed feelings. 

"I would," one says. "Not with children though."

"With a mezzanine floor or something going on, I reckon I could do it," says another.

On Thursday, PrefabNZ will release a report into the industry's capacity to turn out these houses for KiwiBuild, which could change the faces of neighbourhoods all over the country.