The house is lovely, but...tiny homes in the US are mostly detached and surrounded by wide open spaces or have long views out of the windows. They also have plenty of natural light. These factors don't make the homes feel tiny.
The real challenge for most cities is to build high-density housing where you might not have pleasant long views out of your window or lots of natural light. Higher-density housing doesn't mean high-rise, but it probably won't include building (many) detached homes. Apartments and terraced (row) houses are more suited to high-density developments.
Could you still live in a 200 square feet home if it was a single-aspect apartment in an apartment block? (Single aspect = windows along just one side of the apartment compared to a double-aspect apartment with windows at the front and back of the apartment). Or could you live in an equivalent tiny terraced house?
Just for comparison, London now has minimum space standards for new homes (but England and Wales do not). A one bedroom apartment for two people must be a minimum of 50 square metres (538 square feet). In Germany, the equivalent apartment is 60 square metres.
http://designofhomes.co.uk/images/046/space-standards-london...
To me these spaces are modest in size rather that palatial but space is relative and we all have different ideas of what tiny, small or large mean to us depending on where we live. New build homes in the UK tend to be the smallest in Europe and the quality of many new build homes is poor. Here's a comparison of the average size of new homes in the UK, Ireland, Netherlands and Denmark:
http://www.withoutspaceandlight.com/resources/img/space/comp...
