Cheaper property, no foundation or basement, lower or no property taxes, avoidance of some building codes or high cost labor, some amount of factory construction like a modular home, and fewer materials in general because of the small size.
Okay… That assumes the primary goal is efficiency. Even more efficient would be to live in an aprtment with another family. You can always find ways to be more efficient. But homes are a tradeoff between many factors, only one of which is efficiency.
I lived in apartments for the first decade I was on my own. It was fine when I was young and single, and was out a lot and had an active social life and all the rest.
You couldn’t pay me to live in one now. I had a friend who bought a condo, in part because the fees were a low $199 per month. It turned out that the fees were so low because the building owners weren’t maintaining the place properly so they coild keep the fees low to sell the units. Within a couple of years the fees went from $199 to $399, then $599. Plus special charges for specific repairs like new roofing. High condo fees also drive down the value of your property.
My mother lived in a trailer park. Over the years they raised the lot rent so high that no one would move in. She lost 60% of the value of her home when she was forced to sell.
Another friend in an apartment recently had the upstairs neightbor leave water running when they went out, which caused a flood whicb leaked down into her apartment wrecking the flooring and some of her stuff. Then she had to find a place to live while they repaired the damage.
In the cheap apartments I lived in, you could hear loud-ish conversations through the walls, it was always too hot or too cold, and you got to smell what everyone was cooking for dinner. God help you if an asshole moved in next door.
Lots of people don’t want to live like that, and will pay a healthy premium to get away from it. If you can’t afford a full sized house or don’t want the maintenance of a large place, a tiny home can fill the gap between house and an apartment.