You'd still have a home and the associated costs if you didn't have to work from home. Utilities might be a bit higher with you home all the time but otherwise those are static costs.
Worst case scenario you're always free to find another employer. I'd be willing to take an effective $800 pay cut for work from home (if I didn't have it already, that is). But I suppose you prefer to be in the office, and that's fine.
Did you plan on living in that room forever? If it was too small for you to comfortably work from home in I imagine you'd have been moving out sometime soon anyway. At worst the job just made you take on that additional expense a bit earlier than you'd have preferred.
The company decided unilaterally that they no longer want to provide that space and are now altering our existing deal to force that cost on to me.