The Housing problem and my proposed solution

[Naunet]

The advantage is it not being instanced. The neighborhood feel is very nice.

Instanced housing + voluntary linking of homes to create neighborhoods... it's been done before.

That is what Wildstar does. You csn set access to private, friends, neighbors, or public.
Neighbors is determined in some method I'm not knowledgeable on.

Everyone gets a plot at level 14 (of 50), for free, and you have to buy the building, furniture, trees/landscaping. But the basic buildings are cheap.

Neighbor status is basically an invite status. You can also set people as "roommate", which lets them edit the housing plot.

Honestly, WS's housing system is the best out there. More MMOs could stand to emulate it.

Obviously tou never played Wilsstar.
Hint: the housing deaign community is larger than the raiding community.

Indeed. If the housing system is good enough, a community will form around it. It's one of the biggest communities in the entire game in WildStar.