High density and world business center cities have naturally high costs of living, especially when it comes to housing.
Hong Kong has been trying to find solutions for this and their idea of transitional is something that is not quite a 'house' but a place to have basic services BEFORE getting a 'house'.
You may have heard of very small hotel rooms there, etc. but millions live in micro-housing. Architect James Law has suggested 120 SF units built inside drainage pipes that could be stacked. See below.
Small bamboo units are being built in old warehouses right now and hundreds of thousands live with several people in under 150 SF units.
Here in the U.S. some of us may have started in mobile homes which have in single wides three bedrooms and one or two baths. And a Kitchen, Dining/Living area. The older ones had bedrooms about 9 x 7 feet with a built-in closet. If you are brought up in tight spaces you will adapt and learn to live that way. The same applies to 8ft. ceilings for example.
The smallest house I have designed was a project at Texas A&M in the College of Architecture. It was a cube two-story design with a living/dining room and kitchen on the first floor, powder room, and two bedrooms and two baths upstairs. I extended the design with a second cube that contained a terrace over the two car garage.
A few years later I developed a series of starter homes from 1,200 to 1,600 SF in Austin, Texas.
The median size of newly built houses in 2015 hit an all-time high of 2,467 SF. In the 1920s 'custom' houses were built at about 900 to 1300 SF. Here is one with great 'character' at approx. 1200 SF.
Americans can live in smaller spaces no doubt but obviously, over the years our economy and land use has allowed larger and larger homes. We should consider how much energy and natural resources the typical American house in the typical American suburb consumes, not just in building materials costs, but the infrastructure of roads, sidewalks, utilities, etc. plus extension of medical and fire services. Think also about the time and energy (pollution too) consumed from driving cars and buses to and fro, etc.
Are high-density neighborhoods or cities the answer??
Micro-units above, free-standing in Hong Kong and the use of concrete pipes stacked and placed in areas where conventional units cannot be built, below. The average flat in HK sells for 19 times the gross average income, a new record. Flats smaller than 100 SF are rented out for as much as $300/ month. The average rent for a 2 bedroom apartment unit in Orlando is $1,339 at 1,200 SF.