Well, like others have said, your landlord is responsible for fixing anything that can be considered a safety or health hazard (stuck windows, electrical, cracks in ceiling, etc). If they are not willing to fix these issues, you are legally able to get out of your lease (talk to a lawyer). So, I'd suggest talking to the landlord first--ask nicely and formally (write up a letter--keep a copy). If they don't respond (or respond negatively), start looking for a new place and talking to a lawyer. To be honest it is a buyer's (renter's) market, so as long as you are a good tenant (quiet, pay rent on time, etc), your landlord should be bending over backwards to keep you there!
For the past 3 years DH and I lived in a 950 sq foot condo that we BOUGHT. It was a rushed decision since we had just moved from across the country, were living in my parents' house, and could only get bank approved for very little $$. Besides being small, there's very limited extra storage (3x5 space in the "basement"), our unit is on the 2nd floor, so there are stairs, the upstairs neighbors were noisy (I swear they must have a pet elephant who suffers from insomnia), the downstairs neighbor is a college kid who loves to party til the wee hours of the morning, the balcony is practically falling apart, the dryer (stacked set located in the hall closet) doesn't have a vent, we only had 1 parking space, oh, the list could go on and on and on.
But, it worked for us. We were 2 people in a 2-bedroom condo, we could easily afford the mortgage + HOA payments, and it was very convenient to everywhere in the city! 1 year later, DD came along. We adjusted, and it was fine until she became mobile. After 2 years of living there, we decided to put it on the market and try to get into a new place. Yeah, 1 year on the market and NO LUCK! We finally just decided to "bite the bullet" and use it as a rental property. Here we are 3 months later and it's going good. Fortunately, we made a lot of improvements while we lived there, so the tenant is very happy with the upgrades and "hominess" of the place.
We are currently back at my parents' house saving up money for our next house... We won't look at anything smaller than 4 bedrooms! I hope that by this summer we'll be moving into our own Dream House!