Strange to think that cheap housing could be considered a problem, considering most of the US is experiencing the opposite, expensive housing being the problem.
Cheap housing isn't the problem. The problems are people speculating on the appreciation of property, banking system depending on property value as loan collaterals and local governments depending on property sales for revenue generation.
And if you build cheap housing and there is no one to live in it, what is the purpose? China has hundreds of thousands of empty units? Entirely empty cities?
I don't think people mind having bigger spaces but market is not clearing. In the US you have slums and bombed out building shells in prime urban locations as well. It is fascinating how human expectations work against each other.