Yes people pay more for housing, however in 1975 the average American home was 560 Sq Ft/person in 2015 it hit 1058 Sq Ft/person. https://thefioneers.com/average-home-size/
So people are paying more for housing, they are also getting a lot more of it. Similarly people keep moving to expensive cities which shockingly have expensive housing.
It costs exponentially more, but cancer is killing fewer people today than a generation ago. https://www.cdc.gov/cancer/dcpc/research/update-on-cancer-de...
People move to expensive cities because that's where the jobs are. Nobody moves to Fort Bragg, even though it has practically the same climate and coastline as San Francisco, because there's no money to be made.
Handwaving these economic forces away as "quality increases" is misleading.
Also as a home builder once you realize how expensive the permitting process can be you're suddenly motivated to build big. The permitting doesn't scale with structure size, it is fixed in most areas.
The finishes have also gotten worse, in many ways. These expensive McMansions have worse trim, doors (interior and exterior), and sometimes flooring than cheap working-class houses in the '60s and '70s. Better windows I guess. At least as far as energy efficiency goes. Better insulation. Basically if code says it has to be better, it is, and everything else is worse.
Are more things really adding to our quality of life, or is that just consumerism talking?
Lots of families need multiple incomes to pay for those bigger houses, compared to 1975 [0]. And zoning regulations don't allow enough housing to be built in the cities with good job and social opportunities where people would like to live. Seems to be more optimized for investors than families and quality of life.
[0] https://listwithclever.com/research/home-price-v-income-hist...
Consumerism isn’t a need. Give up the large house in an expensive area, cellphone, high tech car, computer, cable TV, etc and suddenly you can get by without working so hard just like my parents generation.