The ideas of replacing the entire housing system with instances or introducing a housing rent fee all smack of jealousy and spitefulness to me, honestly. "If I can't have it, nobody should!" is the feeling I'm getting here.

The solution is simple, and already in the game. APARTMENTS. Instanced housing with potentially unlimited quantity. All they need to do is remove the cap on room numbers and add different room sizes, and it'd be problem solved. Homeowners get to keep their virtual real estate, and everyone else gets their instances. It's a win-win for everyone.