When there are not enough resources for a large house to maintain psychological and social health, build a smaller one that winds around:
“There is widespread evidence to show that overcrowding in small dwellings causes psychological and social damage…Privacy for individuals or couples is almost impossible…

It would be simple to solve these problems by providing more space- but space is expensive, and it is usually impossible to buy more than a certain very limited amount of it. So the question is:
For a given fixed area, which shape will create the greatest feeling of spaciousness?
There is a mathematical answer to this question. The feeling of overcrowding is largely created by the mean point-to-point distances inside a building. In a small house these distances are small- as a result it is not possible to walk far inside the house nor to get away from annoying disturbances; and it is hard to get away from noise sources, even when they are in other rooms.

To reduce this effect the building should have a shape for which the mean point-to-point distance is high. ...The mean point-to-point distance is low in compact shapes like circles and squares, and high in those distended shapes like long thin rectangles, and branched shapes, and tall narrow towers. These shapes increase the separation between places inside the building and therefore increase the relative privacy which people are able to get within a given area.

Of course, in practice there are limits on the long-thinness of a building. If it is too long and thin, the cost of walls becomes prohibitive, the cost of heating is too high, and the plan is not useful...

A small building can actually be much narrower than people imagine…

And a long thin house can also be a tower, or pair of towers, connected at ground level. Towers, like floors can be much narrower than people realize. A building which is 12 feet square, and three stories high, with an exterior stair, makes a wonderful house. The rooms are so far apart, psychologically, that you feel as if you are in a mansion.

Therefore: In small buildings, don’t cluster all the rooms together around each other; instead string out the rooms one after another, so that distance between each room is as great as it can be. You can do this horizontally- so that the plan becomes a thin, long rectangle; or you can do it vertically- so that the building becomes a tall narrow tower. In either case, the building can be surprisingly narrow and still work- 8, 10, and 12 feet are all quite possible.”

-Excerpts from
A Pattern Language
by Christopher Alexander et al.