The size of an average new house has been increasing for a while. One source says 250% over the last sixty years. Recently, there's been a growing movement for tiny houses. It's important for people to ensure that practical sized homes are still permitted, say 700 to 1000 s.f.
Cities and counties usually have minimum square footage requirements for the construction of single-family houses. In the early twentieth century, houses under 1000 s.f. were quite common. That isn't always possible today.
One of the reasons the availability of smaller houses is really important is the cost of building new apartments and multi-family units. Nowadays, these types of structures often require costly features such as thicker drywall, sprinklers, emergency lighting, and hydrants as a result of "code creep." People need options, such as small houses.
Other relevant issues include occupancy limits and minimum bedroom number and minimum lot size requirements. Single bedroom homes shouldn't be a problem, especially with the smaller current household sizes. Impact fees can be prohibitive with a smaller house as opposed to a larger, more expensive house because they account for a larger fraction of the total cost.