In many municipalities it’s illegal to live in a house below a certain size, even if it’s up to code in every other way. This is why most “tiny homes” are on trailers, putting them on wheels makes them technically not homes.

There are also often limits on adding new dwelling space to your land. I would need a permit to add a detached studio to my back yard if it crosses the threshold of being a “dwelling unit”. Usually a bathroom is enough to trigger this regulation.