I definitely agree with this!! We live in a 1600 sq foot home. ALL 6 of us! I love it. People always ask why we don't move? Don't we want a bigger home? Shouldn't the kids all have there own space? But I love this small home and what it means to our family. We have plenty of space for all of us. It never feels "small".
I think the need in America for "space" is a quality I don't really understand. When did everyone start "needing" there own space and stop "needing" family interaction? My mom had 6 siblings growing up and my dad had 5. They all shared a room. I think in 1950 this was just more acceptable than it is today.
I shared a room with my sister until I went to college. Of course we didn't always get along. There were times I wanted my own room, but there were some great times too that I wouldn't have had with my sister if we were not sharing that room. It has made us stronger siblings today. It also made it really easy for me to go to college and share a tiny dorm room with a stranger. I already had the sharing part down while a lot of other kids I met had a hard time with that.
Sometimes I see families and everyone is so accustomed to their "own" space that it seems like people hardly interact. They are so busy doing thier own thing. I couldn't imagine that. It might work well for some, but it would bother me.
We have a trundle bed in one bedroom and a bunk in the other. My kids have a playroom for toys and we have a very large yard and deck, so a lot of time is spent outside playing. We are lucky to be right on the Atlantic ocean too, so swimming is right out our back door. We have to be creative about storage, but we have a large attic and a garage and we store most things there. Every square inch is utilized in our home. We have bins under beds, spice racks built into walls, book shelves everywhere. And it is much easier for me to clean and keep clean. (One thing I can't stand is mess. I am a little OCD about that!

) Everything has a place and the kids know where that place is. I also think it helps us keep from getting clutter everywhere. We go though our toys every couple of months after birthdays and holidays and the kids pick though and decide on things they don't need or want anymore. Then we donate them or sell them on CL. I don't waste money buying art work or furniture we don't need because we have everything we need and there isn't any room for extras. I personally like that the house keeps us "in check" that way. I have no desire for a bigger house or a bigger mortgage. I enjoy my kids learning to get along and work things out.
We do try to offer them their own space when they need it. Because they share a room, we have tried to carve out little "away" spots for the older two because we do realize there are times when privacy is important and you do just want to be by yourself. Our son has a little loft in the garage he can go out to to hang out alone. And our DD has a special reading area with a notebook that she and I write notes to each other in. Everyone is allowed to ask for space and when it is asked for we try to give it. But again, I see that as a valuable lesson for all of us.