Guesthouse Stöng and Cottages is a working farm. As a guest, you will get the sense of staying in the big farmhouse with the entire crew as farm life goes on around you. Quarters are small, oldish, and simply-furnished. Bathrooms are shared. Common areas can either be lively or deadly quiet, but rarely anything in between. This is as close to hosteling as I came to on the island. Even so, it is a uniquely Icelandic experience that I highly recommend.
This place will surprise you. Even for Iceland, it has the sense of being in the middle of nowhere. There are no shops or sights within miles of here, and upon arriving (if you did as we did, in the midst of a downpour), you may get a pang of isolation, a pang of "Oh no, what have I done? What will I eat?" There is a restaurant onsite that serves lamb and fish that are raised on the farm. Wine and beer are available. Your needs will be met, and met well.
It's notable that the structures that are prominent in the property description are the cottages, and not the guesthouse.