Yeah, I wonder if it is a psychological thing. I imagine that with your "tiny home," you feel a greater sense of ownership, and with that comes a pride that translates in to a sense of community, and positive mental health. The "dormitory" already exists in homeless shelters, halfway houses etc. this is "your home." -that's a powerful thing.
Having a place in which to retreat that is yours alone does offer a certain amount of psychological comfort. Knowing that your well being does not depend on the room you're sharing with people or the current space availability of a govt. program or the good graces of strangers could provide the base level emotional stability that so many homeless folks would benefit from. Fits well with Maslow's hierarchy of needs.