Increased demand for affordable housing and the limited availability of flat terrain for its construction are two major problems facing the provision of houses of acceptable quality in many countries around the world. There is limited research integrating the utilization of a stepped approach to sloping terrain with appropriate housing models to minimize slope instability potential. This paper introduces a new semi-tiered housing model where the footprint of the house is located on tiers prepared with short vertical cuts of 1.5–2m. Such vertical cuts are found to be stable with laterite soil which is a commonly available type of soil in the tropics. The excess soil generated from cut material was transformed into cement stabilized rammed earth, which is a cost effective material with low embodied energy. This is an ideal candidate for the construction of retaining walls and foundations, and such applications are demonstrated with adequate details. Further, many other types of sustainable building materials are highlighted with a case study of this housing model in a scheme of 13 housing units in Sri Lanka. The attention to detail required in construction and the applicability of alternative building materials and methods to improve the sustainability of such houses have been discussed in detail. These semi-tiered houses have the potential to address many of the current construction challenges.