The determining factor whether or not the concept of 'tiny houses' will succeed is entirely dependent on selling the City and County of Denver on the concept. That's City Council, The Zoning Department, Neighborhood Planning and Development... the list goes on and on. Until that happens, stories such as Ms. Rost-Rothman's will be the norm.
While I applaud Ms. Rost-Rothman's initiative and desire to own a tiny home, she ran afoul of a system that's very set in its ways, means and methods; from both a regulatory standpoint, and a 'culture' standpoint. Construction and Zoning departments are steeped in a culture of 'it's either this way, or not at all'.