My biggest question is: why?
If it’s safe from mice, bugs, and fire, then it just seems like the housing equivalent of wearing a boot on your head. You can do it. It’s not hurting you or anyone around you. But it’s kinda just weird. Is there some sort of benefits to this over a normal house? Or is it just a boot on your head?
Pros: Cheap, good insulator, doesn’t require any experience to install, local, low environmental footprint.
Cons: Thick, does not handle moisture well at all so it must be completely sealed. A small leak will ruin all the hay in the exposed area and, with a bit of airflow, can spontaneously combust. More likely, though, is that it just degrades rapidly. Like a lot of things, good planning can keep you fine.