While I like this idea, I believe that so many houses in one area would put massive strain on server resources along with client. If 100 people in one area can cause lag and delay in appearance of objects/player/enemies, I dread to think of the implications of over 100 houses in close proximity plus all their outside decor.
Server resources is also a reason why they don't have more wards like some people are suggesting.
For the record I'm not against increased housing (I for one would like an M house instead of an S).