[GOD_Over_Djinn]

This is the opposite of what you said. You implied that people’s expectations of how much house they should have are overly inflated, and that is the problem.

Your second comment implies that the costs of land, permits, inspections, etc outstrip the actual construction costs to the point that building smaller is disincentivized

[jleyank]

Both, I think, can be true. People don't want a closet. Housing anywhere the job nexus is seems to be expensive. (Stupid) regulations seem to be a thing. What is desired might not be possible in the desired areas. I worry it's just not possible.