A 10-gallon water heater is really only suitable for recreational vehicles and very small cottages or cabins. These water heaters are most commonly used in homes that are not used all the time and often by only one or two people. They do not meet building code for regular houses.
Small water heaters have increased in demand, as of 2015, due to the popularity of tiny houses and recreational vehicles. They can be a cheaper alternative to on-demand water heaters. Small water heaters are also useful in small shops and studios, where space needs to be used wisely and only small amounts of hot water are ever needed.