Although I don't think living in 1 room when you're alone (or maybe a couple) in necessarily bad, I can't understand how living with a whole family in a single room can be ok.
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.