I'm in a similar situation. My household has 8 people in it, so space is at a premium. My solution was to set up a good sized desk and work area near a window. I have a box fan to take spray out of the window when airbrushing. I'm also working on building a spraybooth that can easily be taken down and put in a small place. I have a relatively small & quiet compressor.
The other stuff really doesn't take a lot of space. Keep the amount of kits you have stockpiled low. Mine fit on a single shelf. Paints, glues, putties and sand paper don't take a lot of space.
When you fnish a kit, you may want to see if the hobby shop would be willing to display it. It could possibly be hung from the cealing or in a case there or something.