If SE were to restrict a certain kind of housing (FC vs individual) to the wards it should be FC in the wards and individual to instance. I wish they would implement instance housing that isn't restricted to one room (looking at you apartments). Make it so you can have any size house you want and a yard - I know a lot of people who would turn in their ward house for an instance option such as that (so long as they allow you to let your friends visit your instance house which I imagine SE would since you can do that with apartments).

As for forcing small FCs to grow their member count for some housing, that is silly. Some people like being in large FCs and others do not. Those who choose to have a small or medium FC member count for that close-knit community feel shouldn't be penalized for it in regards to housing.