I recently came across this great news article about Jay Schafer, who really helped to start the tiny house movement:
I like his houses, because his has really explored two interesting areas deeply. He clearly has thought about what functions take place in a home, and how to make space for those functions in his designs. If you do not design the space for the tasks/hobbies/interests that a client needs, they will end up feeling that their space is too small. This is not actually because their space is not the right size, but because it does not do the things that they need it to do. In the video linked above, Jay mentions that he designed a folding bulletin board system, so he could pin up current projects and look at them. He clearly needed to see things laid out when he is designing his projects, and if his house design did not include space for that to happen, he would not have been happy in his home. If you need it, if it makes your heart happy, make room for it in your home, however small.
The second thing he has explored is the way that home design details make people feel at home in a building. Whether you love modern design, traditional or eclectic design, it is the details of a home that make a difference and make that home feel right for you. Jay's houses have details like porches, beautifully proportioned windows, and woodwork detail, that make the small spaces feel luxurious.
I know myself well enough to know that I could not live in 200 sf, my design books and wind up toy collection alone, demand a little more space. However the lesson of the tiny house is that we should know WHY we want things in our home, and WHAT is truly important. If you do not love it, if it is not improving your life, perhaps it does not need you to make space for it.
If you want to check out small houses, There are so many wonderful resources, don't miss Sarah Susanka's book "The Not So Big House",
“If you want a golden rule that will fit everything, this is it: Have nothing in your houses that you do not know to be useful or believe to be beautiful.”
― William Morris