I mean, if you HAD to then yes. But would I want to? No.
I am a firm believer in personal space. I have 3 kids, a hubby, 2 dogs and 2 cats. I think it would be very difficult to share a 300-500 sq ft house. Def would add a ton of stress and a lot more fighting/arguing.
Wow! Our house is 1,000 square feet and I feel like I live in a box lol. It doesn't help that our previous home was more then double, so it's been a big adjustment. However, now we own and it's in a much better condition then the place we rented, so for us it was well worth the down size. Once we have our basement finished and the kids have their play room, things will only get better ;)