Yes. Very yes. A small house would be fine if it had a basement.
Have you been in any of the small houses on our server? There's a couple, and they're pretty decked out. Table, chairs, couch, bed, hot tub, wall decorations and more. I agree that every house should have a basement, but a small house isn't as small as you might think.
And that's why they need a basement. But they're hardly non-functional.
