The Southwest provinces of China are locations with a rich variety of different dwelling design typologies based on traditional cultures and ethnic groups. In this area, the Province of Yunnan has many such dwelling types, and it is also an area with most frequent earthquakes in China. The seismic problems of housing structure must therefore be solved as part of the study on sustainable development of villages to provide relevant advice for future design options. This paper reports research, which evolved over a ten-year period that deals with the seismic capacity of residential buildings. Simulations using shaking table tests were carried out to assess the performance of traditional residential structures as well with the impacts of material modifications and the structural strengthening of common residential building components found in Yunnan. Relevant and pertinent construction technology solutions that could enhance the seismic capacity of residential buildings and act as innovative improvements for the sustainability of rural dwellings are suggested.