The government is to consider curbing the building of so-called "rabbit hutch" homes in England.
In a consultation being launched on Tuesday, it said it was considering the introduction of basic space standards.
The Department for Communities and Local Government (DCLG) said England may already have some of the smallest houses in Europe.
Since the 1920s the average living space in some types of home has fallen by more than a third.
As a result the DCLG is also thinking about the possibility of "space labelling", which would give consumers a clear understanding of how much room there was in any property.
The idea has been welcomed by the Royal Institute of British Architects (Riba).
"We are pleased to see the government consulting on space standards, our public research has repeatedly revealed that space in new homes is a major concern," said Harry Rich, Riba's chief executive.
According to Riba figures, the size of a typical new terraced house has shrunk from more than 1,000 sq ft in the 1920s, to 645 sq ft now.
Architects have also highlighted the lack of storage space in new homes, and poor daylight.
At the same time the DCLG wants to cut red tape for housebuilders.
It is planning to abolish 90 out of 100 housebuilding rules that can be applied by local authorities.
Among the rules set to go are a requirement for some buildings to collect their own rainwater.
The DCLG has pointed out that up to now this rule has applied even in areas where there is no water shortage.
Also set to go is a rule that home offices should have multiple phone sockets, on top of any broadband connection.
"Moving from 100 standards to 10 is a good start in reducing red tape, while safeguarding good quality home building," said David Orr, the chief executive of the National Housing Federation.
"But we look forward to seeing further details of the review," he said.
The government consultation will run until October 2013.