I *love* our 866 square foot home more than I ever could have anticipated before buying it, and I grew up in a house of the same size (family of four). A family of six (two parents, 4 kids) lived here for 20 years. I can address your questions while extolling what I love: the ridiculously low utility bills, how easy it is to get around (when I broke my ankle, I could scoot around easily on a rolling chair - heaven), how little cleaning I have to do. Each person can only be in one room at one time, so why do people need so many rooms?
- how for husband (in high-earning career) to save face when workplace peers and close friends live in McMansions?
There are numerous, legitimate criticisms of McMansions, especially in terms of resource usage and waste, carbon footprint, debt, and quality of construction and design. They're kind of gross and tasteless.
- how to survive with one bathroom if the whole family gets food poisoning?
You can always add a half bath or closet toilet in a garage, mud room, etc. and probably for a great deal less than a much larger home. A friend of mine did this under a staircase: toilet and tiny sink, angled ceiling, the toilet below the lower part. Works perfectly, was not too expensive at all.
Where I was raised, in Michigan, many folks also had a little toilet and sink room tacked on to the back of a garage, accessible from the backyard.
- how to secure excellent stable neighbours if not buying into a really good (read: more expensive) neighbourhood?
I feel like this is a rather classist POV. Money does not make for stable neighbors -- truly. I have had more problems with the uber rich, for-real Chinese investor gangsters across the street, in a house that went for $1.4m (San Francisco bubble; we did not pay even half that), than I ever had in the literal Detroit ghetto in which I was raised. I am not exaggerating. We're in what was, until very recently, a working class neighborhood chock full of non-obvious public, subsidized housing, and it's the best 'hood I've ever lived in. Folks have keys to each other's houses, secure each other's packages, etc.
Try to meet neighbors before you move in. Check out Next Door and other online communities in the area. Walk around at all times of night and day.
- how to comfortably house guests, especially the 4-7 (7 if future spouses come) close family members that live far away but we love to have visit?
I realize you may want to do this, but it's not an obligation. Are there AirBNBs nearby? If so, use them; you can offer to cost share, even (we did that when we had a 400 square foot 1 BR apartment, and wanted folks to visit). Can one room have a Murphy bed or similar? This is what my father-in-law did in his tiny office, and what a friend did in his very small, 1 BR San Francisco condo. If you have one or two walls that can house Murphy beds and shelving, and the sofa is a fold out, you can make it work. We fill literally every room when we have guests (save kitchen and bathroom), and it's fine for short periods of time.
- how to give multiple kids their own space?
Honestly, kids do not need this. My brother and I did not have our own space. If kids need it they can go outside or for a walk (and we grew up in very cold winter Michigan), or in the garage. Other friends of ours built little cubby nooks for smaller kids who have to share bedrooms - one even made the top of a closet a little kid nook, with a ladder that goes up to what would normally be a top closet shelf, and put a sliding, lattice door on it. The kids have a sort of inside club house. There's another nook in the bedroom that's part of shelving.
Are there any fun outdoor things you could do to create private spaces? A garden shed with a reading nook, maybe some radiant heat flooring and a wool blanket? A sauna and/or hot tub room tacked on outside? Can you soup up the garage with radiant heat flooring and some insulation, pull the car out, and have a nicer room?
- how to get kids attending excellent public school if not buying into a neighbourhood with bigger nicer homes?
My only advice here is to be as open minded about schools and metrics as you would be about a neighborhood. San Francisco, for example, is notorious for "bad" public schools, but when friends of mine deeply looked into it, they found some surprises. If you care about test scores, for example, that's one metric, but is it the most important or best one? One school, for example, "raised" test scores by having the principle pressure lower-scoring kids--young kids--into leaving. Do you want your child at a school like that? Take an MMM approach to school just like you would rethinking other cultural norms. What metrics really matter to you? How are the schools constructing the data they're showing?
- how to store all your stuff and not have to be super minimalist?
There are lots of creative solutions (especially these things that go on garage ceilings, some of which lower down - have you seen those?), but I err on the side of: If I think I need more storage, it's probably time to get rid of something.
- how to have adult relations with your partner and not have to run down the hall to the bathroom afterwards? (See: living without a master bedroom ensuite).
Kleenex? :)
- how to host large dinner parties (and in general be social and have large groups over) during Canadian winter (can’t eat outside) or other poor weather circumstances?
You don't need a big space to have big parties. Our street is full of tiny houses and folks still invite dozens and dozens of people over and they just fill every room. The food is in the kitchen and maybe another drink table and that's that. New Yorkers are the masters of this! Fill up the house and don't worry, everyone has a good time. If you want to be more formal, rent a room at a community center with a kitchen, or go to restaurant - that's what I did for my husband's 40th birthday, for example. One big dinner in a private room is so much cheaper than the additional housing cost, to have something like a dining room we'd never use.
Enjoy, and good luck!