San Francisco has approved micro-apartments, following in the footsteps of New York, Vancouver and elsewhere. These type of units first showed up in Japan and their appearance here in the US seeks to meet the same challenge, of providing more affordable housing in expensive urban areas.
The photo above (from the linked article in Wired) is actually for a unit in San Francisco that is 65 sf bigger than what the City just approved, so we are talking small.
In many ways the question is whether single people would prefer to have their own very small units rather than share rooms in houses or apartments. If they do, then this will free up these other units for families and presumably lower the rents for these units.
One would hope that the amount of design going into these units is high so that you get maximum utilization of the space and to make them spaces you could feel like staying in. What isn’t explained is whether these types of buildings have other amenities (such as storage, places for bikes, or common areas) that would help mitigate the small units and whether this is required or not.