The issue with downsizing is that there are two completely separate factors to consider.
1. Smaller/more convenient living space.
2. Lower cost?
While many people might want #1, the problem is the #2 may cost <more> than the existing #1. At which time the economic reason for downsizing goes away.
I will use myself for an example. I split a 2300 SQ Foot house with my brother. (We're both old bachelors - never married). It is paid for, no mortgage. Taxes, insurance (including car insurance for each person, it's a combined policy), yard care (in season) run about $800 a month. Utilities run about $800 a month, on average. Net $1600 a month, plus repairs (We budget $400 a month), for $2000 a month. Divide by 2, and you have $1000 a month per person.
In the area we live in, a large 1 BDR apartment (with single car garage, we get hail storms rolling through every few years, don't want my car banged up) runs $1500 a month and up. (mostly up. . .) Times two is $3000 a month and up. Where's the economy in downsizing? (Condos/townhomes are even worse economically)
Now there may be a preferred lifestyle difference, that people are willing to pay for, (to each their own), But for me, the economics are just not there.