it's an ERE thing, and I don't think it's the best way to look at it. IF you lived in a place where you could house a family of 3 for 600, you could also house a family of 4 for 600. Moving up to 5 would require another bedroom (legally, unless you own), but in a market where you can afford living in a 2 BR for 600, you probably won't be spending $1k on 3 BR. Overall, kids can cost less than adults (although if you choose to make kids expensive, they can also cost much, much more).
Here in the Boston area, rent alone on even the most affordable 2 bedroom home is going to cost my family more than 900/month. I guess you could argue that an ERE principle would be to not live in an area where housing is so expensive, but if that's where the good paying job is, then I don't really see why not... It really comes back to what your rate of savings can be. But beyond that, your rate of savings can be enhanced if you live in an expensive area. For instance, if you live in a place where cost of living is 150% of the national average, and you manage to achieve a 55% savings rate, then you can conclude (if you want to) that you only need to reach the point where you're generating 30% of your income in order to retire to an area where the CoL is average. so realistically, in order to beat living in the 150% CoL place and maintaining a 55% savings rate, you'd have to find a job in a 100% CoL place where you can achieve a 70% savings rate.
Just some food for thought :).