I think about this a lot.

You can carve dwellings into the sides of mountains or hills. If it's stone you're digging through, it takes more effort, and if it's soil, you have to worry about groundwater and internal supports. As long as all the water and condensation will drain around it and also out of it, it can work. Also, you do want sunlight, so there's a bit of a limit to how deep you want to go. You could put storage in the interior, but without the light and air exchange, it wouldn't be very suitable for regular living space.