Hi chris63
Yes, it was common for several families to live at the same address in crowded residential areas. Houses were very often informally divided up into tenements of a room or two, or a storey, and let on that basis to several families or individuals simultaneously.
Where in "London & Middlesex" was this Wallis Yard? Even if you don't know precisely, a registration district would help a lot. I'm also a little confused as to whether Eliza's name at birth was Baxter, Algar or Smith. Was Baxter her married name?
I am not easily finding the John & Mary Algar/Elizabeth Smith household you refer to in 1871.