Until about five years ago, I did not know about Machiyas, traditional wooden townhouses in Kyoto, have been renovated and used as inns. These guest houses offer cheaper nightly rates than many hotels in the area. According to websites, these places seem to operate kind of like hostels. I am not familiar to hostels in other countries, but the hostels I have stayed in Japan all had dorm rooms (men and women are separate) and individual rooms.
Photos from Guest House Waraku-An
Kyoto has numerous traditional upscale ryokans and high-end hotels. Those types of places are gorgeous but often lack uniqueness. Machiya inns will be the focal point of my next trip to kyoto, whenever that is.
For a list of Machiya and other guest houses in Kyoto area, check out this website. Most tourism-related sites have English pages.
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