I agree with the argument that there has to be a huge lifestyle change in the West (aggressive social engineering) if the current climate crisis is to be met with the needed amount of seriousness, but something tells me that the solution of small homes has the same substance as the solution of small cars...

A small house is still a house, and a small car is still a car. Meaning, lots of small homes will probably increase rather than reduce energy inefficiency. Similarly, a shift to small cars is likely to temporally unclog streets and "induce demand." (The fact that a major corporation, Daimler AG, makes the Smart Car should not be a big surprise.) Also, as an ideology, the mircro home still places the responsibility for social change on the individual. As a consequence, this ideology does not contradict the dominant market-oriented one.