This is just a way to getting around building codes. Same with mobile homes. Neither one will be built to the same standards as a stick built house has to be built to. Not without jacking the cost way way up.
If I am not mistaken a site built house can not be built to that low of a square footage. I know where I live in northern Michigan you will not be building some thing that small and meet the building codes.
Just another example of people trying to get around laws imposed by stupid people. They just keep adding more and more cost to building a house so that the lower income could never possibly afford one.
And why put this in a city with that many vacant houses. They are vacant for a reason.
In my area (which has much less space than Michigan) I don’t think the square footage of a come is the problem; the larger concern is off-street parking. We have homes built in the last few decades that, even though they have a double-wide driveway and double garage, only have one space in front removed from the curb to provide access to the driveway. We also have towns with no overnight parking on the streets - all residences and businesses have to have off-street parking for all vehicles. Overall, I get the impression that people are being conditioned to accept a lot less living space (and everything else) as we’re reduced to Red China’s standard of living.
As for why they are trying this out in a city with so many vacant homes, I can only get they feel they have to try something. Nobody will live there at “before-times” pricing/tax levels, and this probably reduces both significantly.