When it comes to Lakeville's robust homebuilding market, small is beautiful.

Single-family houses built on smaller lots continue to be popular with buyers who don't care to pay for big yards. The city changed its zoning rules in 2010 to allow houses on lots that are 70 feet wide instead of the standard 85 feet. The narrower lots also have shorter setbacks, reducing the size of front yards.

Although most new homes in Lakeville still are built on standard-sized lots, smaller-lot houses have helped make the city's home construction market one of the most active in the metro area. Lakeville ranked third last year behind Blaine and Woodbury in the number of housing permits issued, according to the Builders Association of the Twin Cities. For the first nine months of this year, the city is second behind Woodbury.

More than one-quarter of the houses built in Lakeville in 2012 and this year have been homes on smaller lots, according to the city's planning department.

Many smaller lots are in developments originally planned for townhouses, where demand for new properties has been sluggish. Large numbers of unsold townhouse units — some built just before the housing market meltdown — are sitting on the market throughout the Twin Cities.

At the Donnelly Farms subdivision, Summergate Cos. this year completed work on converting former townhouse lots to 24 small lots for single-family homes. Summergate Senior Vice President Casey Wollschlager said all have been snapped up by homebuilders.

Another developer recently sought city approval to scale down standard-sized lots in a Lakeville subdivision once destined solely for larger single-family homes. Winkler Development Co. is preparing plans for more than 140 acres of vacant land north of County Road 50 between Hamburg and Holyoke avenues and is asking that some of it be rezoned to allow 108 smaller lots. Another 247 would be unchanged, continuing to be 85 feet wide, according to city documents.

Planning Director Daryl Morey said the Winkler project is in the early planning stage. He expects the city to review final plans for the development next summer.

Representatives of the company did not respond to interview requests. A report by city planners said Winkler is seeking the change partly because "this is what the market is calling for."

Morey said builders tell him the newest generation of home buyers are dictating much of the shift to houses on smaller lots.

"The millennials don't want to spend their free time doing yard work. They have other things they'd prefer to do," Morey said.

"People are willing to go to a park to play," Wollschlager said. "They're happy if they have enough space in back for a small patio, a cooker and a small garden."

The downsized lots also allow builders to offer buyers lower-priced homes, a feature that has become increasingly popular as postrecession land and construction costs have climbed.

"It's definitely a price point play, with land being a big component of that," said Jacob Fick, a project manager at Tradition Development, whose projects include Spirit of Brandtjen Farm. Fick said 65 to 75 new homes should be added to the Lakeville development this year, about two-thirds of them on smaller lots with an average price of about $430,000. New homes on standard lots in the development have an average price of about $600,000, he said. Fick and Wollschlager said the houses built on the downsized lots aren't much smaller than those on standard 85-foot lots. "If you look at the [construction] pads, they haven't shrunk that much," Wollschlager said. "There's less space between houses and less of a setback from the street. People are still getting the house they want."

The smaller homes at Spirit of Brandtjen Farm are two stories with 2,700 to 3,200 square feet. Most have three-car garages. Fick said they're designed to emphasize "front-to-back rather than side-to-side living." The design also minimizes the presence of the garages, he said.

"I see this thing continuing on for awhile," said Fick of the trend toward smaller single-family lots.