Hobbits may have some un-Fairy-like characteristics, with their furry feet and allergy to adventures, but they are much loved friends of the Fairies. After all, Hobbits are loving and careful gardeners, a trait sure to endear any creature to the Fairy Folk. They are also great tellers of tales and lovers of ales and when they move into the neighborhood, the frequency of really good parties goes up considerably.
Dig this Hobbitat into a small hill or simply set it on the ground and cover all except the front wall with dirt and sod. You might want to add a rustic bench where the residents can sit and smoke their cherished pipes, and of course a mailbox so they can keep in touch with all their cousins.