This one is close to what you're describing:
https://www.lihihousing.org/tinyhouses
(Consider donating!)
These tiny house villages are real tiny homes, providing privacy & dignity.
And you're right about people preferring anything over a shelter:
"Some of the people we spoke with told us that if given a choice between staying in a nearby homeless shelter or spending their nights in a tent, they will choose the tent" (https://www.krem.com/article/money/economy/boomtown-inland-n...)
A tiny house in a small-by-design village is a better solution than a tent in a large encampment or shelter.