I'm not sure on which inspector would need to give approval, but being electric verses gas, it should be easier.
As to the volume...most of those smaller units do not have high wattage elements, and some only have one verses an upper an lower. You can typically get maybe 80% of the volume out of a tank type WH before you start to notice it cooling off significantly. Those with an upper element tend to be a little better. To partially offset the cooling off of the outlet, my preference is to use a thermostatically controlled shower valve...it will adjust itself to maintain your desired setting as the hot cools off. It obviously can't make hot water, but it can help keep the outlet temp constant until there's just not enough hot to do the job.
You can also extend the amount of effective hot water for your shower by installing a tempering valve on the WH, and raising the temperature. The tempering valve keeps the outlet temp safe, adding cold water, until things get too cool, and it just lets out the hot supply, whatever it is at that point. The combination of a tempering valve, higher storage temp, and a thermostatically controlled valve, and you should have a pretty stable shower temp for the longest possible time.