The moments when we miss living in a larger space the most are for those rare occasions when we want to host a large number of people. Some examples are a large birthday party, anniversary party, kids party etc. A recent example is a girlfriend's baby shower that I offered to host. Now it would be lovely to host these events at our home with a huge dining table and a backyard to spill out onto. But for the 3 or 4 times a year that we wish to host big events, we don't have to decline hosting, we just have to find a new space. You can still host a great event in a space other than your own. It may cost a little more but compared to the cost of a larger home that you don't use constantly, the cost cost comparison seems laughable (what's a couple hundred dollar rental vs. $200,000 mortgage upgrade?).
In the case of the baby shower, we found a beautiful local coffee shop willing to host us on a day they are closed. The small rental fee included coffee for everyone and we can bring our own treats. Not to mention the fact that I don't have to make my house spotless or worry about toddler nap schedules.
Some other venue ideas in Vancouver are:
Living small doesn't means isolation and never hosting friends but it does help to look at the entire city as a venue and outsource what you don't have (space) to enjoy what you do have (friends, family, extra $)