Why does a 150 sqft house cost as much as a 400 sqft house?

Miniaturization costs money. It is more difficult to design and engineer spaces in a nonstandard way than in a standard way. If most houses have a 12 x 12′ livingroom area and a 5 x 6′ kitchen, then it’s easy to just find a design someone else has already used.

Better resources (premium wood, odd-size windows, etc.) cost more, even when you’re using less of the resource. Example: 7 teak wood steps cost more per step, but don’t cost as much as an entire floor.