I've seen the inside of some of these in Portland, Ore. Some are very fancy (and obviously expensive to build), but others are very small and limited. For instance, one I saw had only a mini-fridge, microwave, toaster oven, and sink for the kitchen. From what I was told, there were very few issues filling vacancies.
Tenants seem to like the benefit of their "own place", having no shared walls, possibly having access to yard, garden, etc., and being close to downtown without paying huge rents. It's also a very hip/cool way to live.
mrsggrowsveg - It sounds like you're on a bit of land, is that correct? How much land would you be using, for the house + whatever portion is the tenants yard to use as they please? I wonder if you could build 2-3 tiny homes on the lot, creating a kind of community feel, with a covered picnic table, garden spaces for each house, etc. Tenants may still get the benefits they're looking for, and you get to double or triple your gross rental income.