Don't forget that most people want to raise children some day. Sure maybe some solution could be made to work for single people, but for anyone in a family, you need space.
But that doesn't mean your space usage can't be optimized so that you can get away with less space without feeling cramped (and yes, that house is way too cramped), and it is interesting to explore these possibilities.
I have a large-ish house. But it feels cramped very quickly when it's messy. There's a vast number of things to do that gives the feeling of space with less.
For example, in my case, one thing I've started working on is digitizing as much as I can of my life so I can put my dvd's and books in boxes and clear the walls and surfaces, for example. I realize that there's very few physical objects in my house I actually need, and I've started systematically working to pare it down.
But other factors makes a big difference too, such as simply keeping surfaces bare and everything tidy... More and more of our stuff goes in boxes and drawers - the space taken by extra storage is paid back many times over in the feeling of extra space from less clutter...
