There's also that eco movement for tiny multipurpose 1 room housing.
Not saying I don't prefer more rooms but I certainly wouldn't go as far as saying something is wrong with 1 room.
I mean, how are you supposed to have sex when your parents / children are in the same room? How can you get a good quality of sleep when other people are awake in the same room or when you are forced to go to bed because other people want to sleep? How can you focus when doing your homework is the room someone is watching TV or playing video games?
I know sometimes you don't have the choice, but I can't see it as something good or even neutral.
Really quietly ;-)
But in all seriousness, for a big family to sleep in the same room/place was the norm for much of humanity's existence.
I agree that I'd find it awkward to be intimate without some privacy, but it doesn't seem to have stopped our ancestors.