To have or not to have lawn is the ultimate debate. The answer depends on your situation. If you have kids or pets that will actually use it then it makes sense to have some amount of it, but on the other hand if it will never get used then what would be the point of using a lot of water to irrigate it and thus increasing your water bill.
The picture to the left shows some kids playing in a large area of lawn, which makes sense to have and serves a purpose. At the same time there is the issue on the picture to the right. Lawn require significantly more water to irrigate than anything else. So if you absolutely must use it then do so with a true need or purpose. Needing and wanting something are two different things. I have said many times I want a new car but the truth is that I don't need one.
Let's say that you decided to add some lawn and are wondering how much to add. Well that is entirely up to your needs and something to discuss with your landscape designer, but the the picture to the left is a good example of what you should never do to your property. I would love to find the owner of this house and say to them bluntly "sir or madame... may I kill your lawn and subsequently reduce your water bill by planting some natives in it's place?"
If you live in California then you might be interested in checking out these lawn substitutes.
California Native Plants