SALEM -- Parked outside the Oregon Capitol building last week, Cameron Scott's cedar-shingled tiny home made for a stark contrast against the austere granite walls of the state government seat.

Scott, who runs a Prineville company manufacturing the units, says a 2017 rule change cut his business off from customers in the state, making it difficult for him to capitalize locally on a bohemian trend that has hit the mainstream.

"I was actively looking to hire more people," said Scott. "When the rules changed, not only did I not get to hire people, I had to lay three people off."

Scott, an affiliate of the Oregon chapter of the National Tiny House Association, was at the Capitol as part of an effort by the group to get the state to reverse the change. Others gave similar accounts of businesses stunted after the Oregon Department of Consumer and Business Services added language excluding tiny homes from the agency's definition of a "recreational vehicle."

Mark Long, head of building codes at the agency, said the effect was accidental, and that his agency and the Department of Motor Vehicles are working on a fix to be released as soon as this week.

But regulatory uncertainty remains, and a state investigation has also raised questions about the safety of units classed as travel trailers -- essentially temporary habitations -- being advertised and sold as permanent dwellings.

Built on towable frames, tiny homes have grown in popularity nationwide since media coverage of early adopters, including Portland resident Dee Williams, who extolled the virtues of compact living.

But two lines added to state code last July target the style that has come to typify "tiny houses" -- excluding from the definition of "recreational vehicle" the wood siding, pitched roofs, and bay windows that contribute to the trend's distinctive life-in-miniature aesthetic.

The Department of Motor Vehicles uses that official definition, and stopped issuing titles to tiny home owners.

Long said the change was only meant to clarify that requirements for using licensed tradesmen didn't apply traditional RV's: The agency hadn't realized that the state motor vehicles department would interpret the change as excluding tiny houses. In response, Long said officials are working on a way to give titles to tiny homes, and expect to unveil a solution sometime this week.

The effect on the state's nascent tiny home industry has been significant, say Scott and other business owners. Without titles, customers have struggled to arrange financing or insurance for tiny homes, which often cost upward of $50,000.

After the rule change, Scott said he lost contracts for about $250,000 in sales, and has had to shift to selling out-of-state.

Other builders described similar experiences. Nathan Watson, who runs an Albany company, described laying off seven and seeing sales drop by three-quarters after the change.

The situation highlights the ambiguous regulatory position of tiny houses more broadly, which advocates concede cross existing definitions of vehicle, trailer, and dwelling -- and which raise their own unique safety concerns.

The 2017 rule change followed an investigation of 10 builders in the state which found that none used certified electricians or plumbers. All built their units to meet national standards for recreational vehicles -- designed for temporary habitation -- but advertised them as permanent dwellings.

In particular, the report singled out small sleeping lofts -- a common design feature in tiny homes -- and the potential for deadly gasses to quickly accumulate in them during a fire.

But builders say that even as regulation lags, the trend is being embraced by empty nesters, young couples, and property owners hoping to rent them out.

A growing number of cities are also allowing tiny home settlements as part of a solution to rising homelessness, and proponents say permitting the small structures - including as so-called in-fill development - can densify existing neighborhoods.

"You have this portability and affordability," said Walt Quade, a Portland-area tiny home designer. "Tiny houses are perfect for that."

For now, concern remains in the industry over how tiny houses will be regulated and titled, said Slaughter, of the Oregon association, and the group has asked lawmakers to either reverse the 2017 change or adopt another standard.

-- The Associated Press