It's not about squeezing as many people as possible in a small space. I think I could accommodate at least 15 more children in my home, with bunk beds, loosing the study etc.
2 kids might be very happy to share, but they might not. It's unfair to impose cramped conditions on kids. Little ones don't really mind, I could put all my young ones on a mattress together, they'd be happy. It's not right when they grow up however.
According to the World Health Organization, overcrowding refers to the situation in which more people are living within a single dwelling than there is space for, so that movement is restricted, privacy secluded, hygiene impossible, rest and sleep difficult.
I know people used to live in crowded conditions in this country, 4 families sharing a bathroom even, but that is not right. (and not allowed nowadays).
I honestly think that to have a peaceful house, you do need at least one room per occupant. I don't mean a bedroom, but a space to be in peace (even if dad is in the kitchen, mum in the study, one child in playroom, one is his room etc...). If someone is ill, need to study, sleep or wants to be alone, they have the space to do so in their own home.