OAKLAND — When entrepreneur Luke Iseman looks at the massive stacks of red, blue and gray shipping containers that loom over the Port of Oakland, he imagines an end to the Bay Area’s housing shortage.

With the cost of renting and buying continuing to soar, Iseman’s Oakland startup is finding creative ways to turn cold, corrugated steel containers into cozy homes.

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Converting a shipping container into a living space can be much cheaper and quicker than building a traditional house, and proponents envision villages of these box homes — or towers of them stacked like apartments — offering a fresh supply of lower-cost housing. There’s also potential for a lucrative business model, using the box homes as Airbnbs or other temporary rentals.

But questions remain about where residents can put their boxes, and whether city officials will approve the alternative homes — underscoring the difficulty of solving the housing crisis.

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“These are super funky and not for everybody,” said Iseman, the founder of startup Boxouse. “But we have to do something.”

Iseman’s artsy, industrial container homes are just 160 square feet — big enough for a full-size bed, a small table and chair, a toaster oven, hot plate and kitchen sink, and a tiny bathroom. They come with a front door and one window, and are insulated with sprayed polyurethane foam, a yellow goo applied between the container shell and its interior plywood walls.

Iseman sells the homes for anywhere from about $8,000 for a bare-bones model to $50,000 for a fully loaded version complete with solar power, water and a mini septic tank. So far he’s made almost two dozen, many of which he’s sold to friends or rented to tenants. Tiny homes like the ones Iseman is building have become trendy in recent years as people look to downsize and cut costs.

But so far, Bay Area zoning and permitting rules largely have not embraced innovative housing ideas like container homes — something San Francisco entrepreneur Dennis Wong learned the hard way.

He had his own dream of using shipping containers to create immediate, temporary housing on empty lots, and bought a dozen containers to build a three-story, prototype. Wong hoped San Francisco would treat his building as a temporary structure, like a food truck. But the city instead forced him to go through the standard permitting process, which Wong feared would take years.

“They use history for their framework of how to build cities,” Wong said, “and that’s a problem for innovation.”

So he abandoned his plan and moved the containers inside a warehouse in San Francisco’s SoMa neighborhood, where he plans to open a small market with restaurants and shops — treating the containers as interior rooms rather than stand-alone buildings that need permits. Two of the containers have been turned into a mini office space, which Wong’s startup, Campsyte, rents out for $53 an hour.

Iseman, a former adviser at prestigious startup accelerator Y Combinator, plans to sell his box homes to people who will set them up in their backyards, rent them out on Airbnb, and divide the proceeds with Boxouse. But in the long term, he imagines a utopia in which villages of box houses take over Oakland’s abandoned lots, helping to end homelessness.

So far none of Iseman’s box houses are legal in Oakland, something he hopes to change by applying for permits this month. City leaders, frustrated by growing tent villages under overpasses and in public parks, have expressed interest in alternative housing.

“Anything that has the potential to solve our growing homelessness crisis is worth exploring,” Oakland councilmember Rebecca Kaplan said of Iseman’s box homes.

As an experiment, the city is working with a group dubbed The Village to set up tiny homes on city-owned land and create an impromptu homeless shelter. City leaders voted last month to push forward with the project, after identifying a handful of potential locations. The Oakland City Council also recently declared a “shelter crisis,” which relaxes zoning and permitting rules to make it easier for builders to construct housing for homeless or at-risk residents. That move that could help Iseman make his container-home village a reality.

So far, Oakland hasn’t welcomed Iseman’s vision, and twice has forced him to relocate his cluster of box houses. He originally set up in a vacant lot he leased on Mandela Parkway in West Oakland, but was told he didn’t have the proper permit to park his homes there. (In a turn of events that seems to epitomize the neighborhood’s gentrification, the lot later became a doggy boarding house, training facility and spa). Iseman then moved his homes to another lot in West Oakland that he purchased with friends, but was ultimately warned by the city that he had two months to get out, or face fines of more than $1,000 per day.

His new digs — a West Oakland warehouse and another nearby lot full of container houses — are obscured behind large fences, hidden from the eyes of city officials who might object.

Iseman is working to set up his first legal box house in Oakland, and expects permits will cost between $3,000 and $5,000. He hopes the home will be approved as an “accessory dwelling unit,” or “in-law unit” under a law Gov. Jerry Brown signed last year to make it easier for homeowners to set up and rent out small apartments or cottages on their property. But new rules Oakland laid out in response to the law say those in-law units must be rented for at least 30 days at a time, which essentially means no Airbnb rentals. That could pose a problem for Iseman’s business plan, but he’s not particularly worried — he doesn’t expect the rule to be enforced.

One recent afternoon, Iseman was waiting for an Airbnb guest who had booked the night in one of the converted shipping containers parked outside his West Oakland warehouse on a lot that’s zoned for light industrial use, which means guests technically aren’t allowed to sleep there. Inside the container, Iseman had left a stack of clean towels folded neatly on top of a tiny set of drawers.

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The unit cost him less than $10,000 to build, and he’s already recouped his costs this year by renting it out for between $40 and $120 a night.

“People very much either love it or hate it,” Iseman said, of his Airbnb guests. “Which I’m fine with.”

What does it cost to live in a shipping container?

Oakland-based Boxouse sells tiny homes made of shipping containers for anywhere from about $8,000 to $50,000. Here’s a breakdown of what such a home might cost to build:

— Shipping container: $2,000

— Wood frame: $250

— Insulation: $500

— Window and door: $500

— Wiring and lights: $200

— Plywood interior walls: $250

— Plumbing: $250

— Water heater: $150

— Shower: $500

— Toilet: $150

— Kitchen: $500

— Water tank and pump: $250

— Wastewater tanks: $250

The above estimates don’t include labor costs or all material costs.

Source: Boxouse