Shelter has called for more affordable family-sized housing after a survey on the extent of overcrowding in England.
The statutory definition allows living rooms to be used as sleeping areas
Children were sleeping with their parent or parents in three-quarters of the 505 overcrowded households that completed the housing charity's survey.
A quarter had children sleeping in living or dining rooms and a tenth had teenagers of different sexes sharing.
Shelter said: "In 21st Century Britain, having adequate space in which to live ought to be a realistic expectation."
"For one in 10 children in this country, living conditions have more in common with the Dickensian era, when the statutory definition was first drawn up, than those expected of a modern, thriving nation," director Adam Sampson said.
The following should have one bedroom:
Single adults over 21
Pairs of children under 10
Pairs of same sex children aged 10-21
*Benchmark used by Shelter and in government and social research since 1960s
"The health, education and future chances of thousands of youngsters are being blighted by cramped conditions."
In all, 77% of those who responded to Shelter's questionnaire strongly agreed that overcrowding harmed family relationships.
Some 81% said there was no room for their children to play and 71% that overcrowding affected the health of family members.
Respondents from black and minority ethnic groups were twice as likely as white British families to be severely overcrowded - defined as lacking two or more bedrooms under the Bedroom Standard.
Shelter has called for more "affordable, family-sized homes with adequately sized rooms, storage and outside space".
It has also recommended introducing a 10-year target on overcrowding.
The charity has urged the government to revise the 1935 statutory definition to reflect the Bedroom Standard, which has been used in research since the 1960s.
Shelter estimated that around 20,000 households in England would be considered overcrowded under the statutory definition, compared to 473,000 under the Bedroom Standard.
The power to change the standard is included in the Housing Act 2004, which was granted Royal assent in November last year.
Mr Sampson said: "Ministers must grasp the nettle and introduce a definition of overcrowding that reflects a modern understanding of the need for space and privacy."
Short-term, Shelter is urging an emergency programme of acquisitions in areas where there are acute housing shortages.
Little privacy 92%
Depression, anxiety or stress 86%
No room to play 84%
Children to fight 81%
Sleep disturbance 75
Can't have friends over 72%
Difficulties with daily routines 72%
Reading/homework to be more difficult 70%
Harm to children's health 68%
Illness to spread faster 68%
*Shelter's Full House survey
Additionally, it would like increased measures to discourage private owners from leaving houses empty.
Other recommendations include a review of the financial practices of housing providers and funders to ensure that funding and value-for-money criteria do not prevent larger homes being built.
For example, it says grants could be allocated "per bed" rather than "per unit".
Shelter sent out surveys to 2,788 households who were on local authority or registered social landlord transfer or waiting lists as a result of overcrowding, in seven areas.
These were: Luton, Leicester, Bradford and the London boroughs of Tower Hamlets, Hackney and Islington.