Canada

I've done the complete opposite, we upgraded and bought an excessively large house 4 years ago.

The plan is to have our three kids continue living here upon finishing school and contributing to the household budget through at least part of their adulthood so they don't need to worry about extreme housing costs. There is enough space (and separation) for them to even all have partners living here with them, especially if we build a small accessory dwelling unit in the extra land we have.

Given how much we paid for it, and how much we've paid off, even if they're contributing only for the equivalent of a room rental (and they get more like a suite each) it would allow us to pay off the remaining mortgage very quickly and then we could even drop their cost more.

It hurts us now by costing an extra $2000 per month, but in terms of an investment in the children's future it's going to end up saving them each probably $1500 or more per month compared to a starter unit when they'd normally want to move out.

If they do eventually move out, we can downsize. If they don't, we can just stay a multi-generation house (which is actually what our house was built as) and why it's so big in the first place.