All the code, except for dynamic increase of instances (which shouldn't be too difficult to write, seeing as it would only make a check here or there and either copy a set data or not copy it), is already in the game.
Most importantly, there are apartments that are instanced locations which players can customize.

I don't want to hear this "inside or outside" crap. There is no such thing in this game. It's just graphical talk, there is zero difference for the games engine. Every instance have its set parameters, and the only difference between "inside" and "outside" is how the parameter that allows or denies certain pieces of furniture be placed is set. The other differences are superficial, in that they decided to make the outside a large instance with exits into many smaller instances. That have nothing to do with the code at all. It's just how they designed it, and there is zero reason why they couldn't do a single-plot sized instance with a single exit into a single "inside" space. The entirety of the code exists.

Why they are not doing it is clear. Money. Housing with customization does require significant amount of computing power and drive space. They would NEED to buy new physical servers to match the demand. And they find the expenses exceeding the gain. Simple as that. Everything they say about how it's not possible or whatever are just excuses to shush as many people as possible. It's a business. They lie. That's normal. As long as they lie as to why they don't bring something that they never did make a promise for, there is nothing "wrong" with that.

The only solution is to hope that whatever bonzos at Square Enix treat Final Fantasy XIV as cash cow for other projects will finally see it as a stand-alone game that should be invested in more significantly from the huge funds it earns, instead of moving that money into multiple unrelated crap-games.