Don't get the wrong idea—Greenwood isn't a commune. People own their own homes, condo style: They belong to an owners' association that covers upkeep of the common areas. The cottages all have private front yards and backyards defined by a low fence, and the homes are limited in height (1 1/2-story maximum) so one doesn't tower over another. Windows are thoughtfully placed to avoid openings that peer into the home next door.

Greenwood as well as Jim and Linda's first grand experiment on Third Street in Langley both took inspiration from the rehabilitation of a historic cottage district in Seattle during the early 1990s. Jim recognized the demand for well-designed, small single-family homes—set within good, safe, established neighborhoods. By building cottage communities in locales that fit that description, he believed he could provide a type of housing that would respond directly to America's fast-changing household demographics.

Creating the codes is easier said than done, of course. Most cities did not have land-use codes on the books that would allow this type of infill in single-family residential areas. While he could have easily developed areas in many outlying suburbs, Jim didn't want to create pocket neighborhoods where neighborhoods didn't already exist. Rather than contributing to urban sprawl, he wanted to use existing areas within cities in a better way.

Teaming up with architect Chapin, Jim learned that Langley had just adopted a Cottage Housing Development (CHD) code that would allow his vision of a court community. In fact, Langley was actively encouraging developments that would retain and enhance the village's character and foster strong neighborhoods while increasing the options for detached in-town housing. The pocket neighborhood concept fit perfectly.

Linda was cautious at first: Weren't most homeowners looking for sprawling mansions, she wondered? And what about Jim's interest in front porches? Not everyone was a "front porch kind of person." Would the tiny, quirky courtyard houses sell? She needn't have worried. Soon after The Cottage Company completed its first venture, every unit sold. They've since completed two more developments and are finishing another, Conover Commons.

Linda has long forgotten her initial concerns about finding appreciative customers. They arrived in droves. After all, they said, what's not to like about a cluster of beautiful cottages facing a garden instead of a street full of cars? What's not to like about feeling that you've come home when you turn the corner and see such an appealing place? What's not to like about knowing the names of each of your neighbors (and even their pets)?

"When we started, I was inspired by the bungalow courts that once existed all over California," Jim says. "All we've done here is create communities that many people didn't think were possible anymore."