So my mission is to make a room for them in the basement. It will be 11' 6'' x 15'. This house was built in 1980 but the concrete floor in the basement isn't sealed underneath. I had plywood under the litter boxes and it molded. So I have already settled on insulating the floor with panels that have ventilation.

Then put 1/4'' 4'x8' luan on top to lock them together. The stud walls will sit on top of the panels. A wall to wall rug will go on top.
I have a lot of 2x4's for the walls. Three of the four walls will be studs. My questionable part is the outside concrete block wall. Thinking 2x2x8' furring strips vertically with foam panels between. How to attach the furring strips? I have a Powershot nailer. Used it on floors many times but not on block. Do I need plastic against the block? The block is not below grade.

The biggest question is what to use for the walls? I need a budget friendly choice but something that looks decent. Wife has ruled out 4'x8' paneling. Shiplap is pricey.