Faeries can be found in a wide variety of places, indeed almost anywhere in the world, and several places which aren't. But there are a number of areas and types of places where they can be frequently found. In recent times faeries are often portrayed as living in forests, but in the ancient myths they are creatures of the soil. The 'Hollow Hills' of the Brittish isles are the sacred residences of the wee folk. These hill sofen thought to be the burial mounds of clets, or the remains of Roman or saxon forts or rathes are called Sidhe (Shee). They are the lodgings of Spriggans, Leprachans, the Unsellie Court, and Daoine Sidhe to name but a few. Most faeries would gaurd their homes jealously against any mortal intruder, and the ill-fated man who dug or built upon their hills was in for great misery or even death. Such superstition has lasted even into the 20th century, for in Ireland local workers still refuse to desecrate the Sidhe.
The entrances to these Sidhe were notoriously hard to find, often only appearing as a door in the side of a hill once a year. Other dwellings would become visible for what they truesly were only durring celibrations, when the whole hill would be raised on great pillars. Or when the hidden doors would be thrown open to let a Faerie Rade ride off into the night. In Ireland and Scotland Sithein - (sheean) was the name for the outside of a faery hill or knowe. The inside is called the brugh.
Many of the myths that connect faeries to the spirits or gaurdians of the dead stem from their living underground. Some entrances to faerie rathes have even been thought to be the gate to the unerworld.
Another common dwelling place for faeries is beneatht he waves, and on islands. Many faeries such as the Fomorians, Merrow and [others] have strong connection with the water, and are almost never found away from it. The Fomorians and Merrow are said to live in great castles in the depths of the sea. While other faeries live in cities hidden in the bottom of lakes.
The third area where a faerie is most likely to take up residence could be your own house. Many faerie enjoy the company of humans (and their food, clothing, alchohol, and fires), or enjoy their torment. Farm houses, cottages and inns seem to be their favorite residences.
According to some The Pudding Pie Hill near Thirsk in Yorkshire was raised by fairies who lived inside it. In Ireland fairies were said to live in the hills and the barrows and mounds which are tombs of Irelands prehistoric dead like those in the Valley of Boyne, where Knowth and Newgrange raise their massive bulk. Tieveragh Hill among the beautiful glens of Antrim is one of the fairies strongholds, and misty Slieve Gullion in the Mountains of Mourne is another, while the deep waters of Lough Neagh are the glimmering walls and columns of fairy palaces.