Yes, people's expectations around living space and privacy have inflated. What's your point? It's not as if Americans or Europeans are suddenly going to go back to tolerating having a bunch of kids in a cramped urban flat. And it was never "preferred". They mostly only ever did that in the first place due to religion and lack of birth control.
My point is that small living spaces aren't the reason Europeans aren't having kids. Middle-class Americans aren't having kids either, even though they live in suburbs with oversized houses that they're spending all their income on.
The number of children per family is absolutely higher in suburbs than in dense cities. So your point is at least partly wrong, although there are likely other causative factors as well.
