Doesn't matter when you're talking about sustainable debt-to-income ratios. Can't afford it == Can't afford it, no matter the quality.
A fancy kitchen might correlate to fewer restaurant meals and less prepared food purchases.
A media room might correlate to less money spent on theater or movie tickets.
Sure, there needs to be a budget, but your post denies that household spending can be reallocated from one column to another.
I doubt anybody would claim my entertainment budget is "austere", but it is substantially reduced from what it was when we lived in a smaller place. We almost completely stopped ordering out on weekdays, and we eat out about half as much as we used to on weekends.
We went from buying everything, to buying only things we don't know how to cook, or that are a pain to cook.