When he's expecting visitors, Steve James watches out the windows so he can catch the look on their faces when they see his house for the first time. "It's always the same," he say. "There's an intense stare and total mystification, as if they can't quite believe what they are seeing." This may be because James's house is made of straw and has a turf roof covered in flowers.

James is passionate about eco homes and deeply proud of the cottage, which huddles by a loch near Dumfries. His kitchen is made from a cedar that blew over in a Glasgow park. His sink came from a skip. To one side is a Moroccan marbled shower room, to the other are sofas and a log-burning stove. He sleeps in a galleried bedroom. A compost loo and rainwater filtration system complete the picture.

The total cost: £4,000. "Actually, you could make it for less than that," James says. "I'd cut the wood myself next time instead of going to the sawmill. That would knock off a thousand." He finds the whole concept of mortgages quite amusing.

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His home is strong, warm and utterly watertight. The only maintenance is a lime wash on the walls every year or two. The turf roof repairs itself. "I'm building a water wheel next," James says. "In the meantime, I'm getting power from a car battery that my partner, Eli, charges for me at her house. You'd be amazed what you can run from that battery – a digital recording studio, a stereo, tools, lights and a laptop."

James, 52, a software engineer, took 10 months to build his house, finishing it in November last year. Now, he's set up a website about straw-bale homes, runs eco-engineering courses and takes commissions making straw-bale buildings; the latest is a changing room for a Hull primary school.

The benefits run much deeper than simply wanting to save cash and the planet. "Now that it's built, the initial buzz has grown into a sort of permanent primeval satisfaction. I sit here, it's warm and quiet and there's snow flying past the windows, and I think: yes, this is what it's all about."

Straw bales can be used to make all kinds of buildings. If you're just building a summer house, you may not need planning permission. The best way to get started is to go on a course or help someone else build a straw-bale house; James's website can put you in touch with someone.

But it's not hard to do it yourself, he says. "Straw is perfect for a beginner. It's easy to work with and you can make your house any shape you want. You can use straw to make any kind of buildings – from a four-storey office block to a house I know, which is a spiral. Go mad, have fun, start living!" It'll help to follow these seven steps. But you will need a bit of DIY sense – and some manual labour from your friends.

Steve James's website is at www.envisioneer.net

1. Build the foundations

I made a solid, 2ft-high base from rocks. It's sort of like building a solid dry-stone wall – you don't need mortar. Take time to get the rocks to fit together well, but it's good to leave gaps; this will ventilate the straw and keep it dry.

2. Add the wooden floor

You need a wooden frame on which to lay your flooring and build the walls. I used flat reclaimed timbers as joists, laying them in a grid and nailing them together. To create a curve at the front, I used thick plywood. The whole thing just sits on the stones – the straw-bale walls will hold it down.

3. Assemble the roof frame

Make the roof frame, so that it's ready to go on as soon as the walls are up. Start with a sturdy frame the same shape as the base. Attach the rafters and fix them together in a tepee shape. It's easiest to hold it all together with screws.

4. Walls and windows

I used 200 oat-straw bales to make my house. They cost £1 each. First, lay a complete layer of bales around the edge of the base. Using twine, stitch these to the wooden base. Build upwards, stacking the bales like bricks. Drive thin, pointed wooden stakes through them at intervals to hold them together. I got the walls up in five days – with help from friends. You can cut the straw to fit any shape you like, and stuff extra bits in any gaps. All my windows came from skips. I laid a polythene membrane between the frames and the straw, to protect the frames from damp.

5. Get the roof on

Using plenty of manual labour, lift the roof frame into position. Use some stakes to attach it to the straw walls. I built a galleried bedroom into the roof space, laying a tree-trunk through the span of the roof to support the bedroom floor. I nailed on wooden slats in overlapping rows on top of the roof and covered it in natural rubber pond liner. Then a layer of turf went on top, along with a handful of flower seeds.

6. Render the outside

I used a mix of gravel, sand and water from the loch, and added quicklime. This makes hot lime render, which you can slap on while it's warm and make interesting shapes with. My partner Eli used it to make sculptures at the corners.

7. The interior

For the flooring, a nearby sawmill cut some leftover trees from our local forest into planks, and I nailed them to the joists. I used linseed oil to protect and polish them. I made the kitchen window sills, shelves and work surfaces from a tree that blew over in a park in Glasgow. It was a Lebanon cedar – beautiful. The Belfast sink came from a skip. I made the stove myself, using old paving slabs. It heats the whole house with very little firewood, and it makes killer pizzas.