Do people not function in smaller homes? :lol:
People want more walls, rooms, etc, things get more expensive.
It's a personal choice to live the way you do.
Living in a smaller home, does not change the dynamics of civilization.
You are aware that "more walls, rooms, etc" are the only things setting us apart from the Dark Ages? The fact people want and are capable of such things is what spurs the technological and economic advancement of civilization to begin with.
If your proposal became the cultural and economic norm for avoiding the private debt that is plunging the middle class into poverty, expect the following consequences:
(1) Housing sector utterly destroyed
(2) Financing sector heavily damaged
(3) All venture capitalism destroyed as a result of (2)
(4) Broader economic recession due to (1), (2), and (3) to a lesser extent
(4) Increased social unrest due to perceptions that the political and economic elite forced the general population to such extremes to survive in accordance with pre-existing trends, as well as to capture a larger share of what can still be had
(5) Bigger, more intrusive government to address an increasingly unruly and transient population
(6) Disorder on an international scale due to the recessions and political upheaval in the nation with the greatest influence in the world
(7) American enemies and rivals suffer themselves, but also make military, economic, and diplomatic strides in the power vaccum -- both due to (6), paving the way for a formation of a world order very hostile to a vastly weakened United States
Pretty much everything about the "New World Order" depends on Americans not just wanting to "beat the Joneses", but also being able to do it.