Municipal government are starting to realize the costs of suburbs filled with "mcmansions" because the "they generate more property tax" is not true when taking into account the amount of resources they consume and the infrastructure which they require.

https://www.strongtowns.org/journal/2017/1/9/the-real-reason...

Still, many tiny homes projects are unlikely to be generating tax at all, at least those run by the charitable sector. However they can significantly reduce municipal and provincial spending on the needs of caring for the unhoused population. So they are likely to be a net benefit to government budgets.