I've said this elsewhere but, I think apartments would satisfy most people's desire for a house if:

a) they had an additional room (like the free company workshop) that looks like a small outdoor terrace and allows for the placement of one gardening plot so apartment owners can engage in crossbreeding. Such a terrace would also allow for the placement of a few outdoor housing decorations like the kiddie pool.

b) they had the same interior item limit as a small house (which is double what apartments allow right now). The current limit on apartment placeables is far too restrictive.

c) a free company that does not currently own a house can purchase a free company apartment instead, which while being the same size as a personal apartment, also has a workshop room as well as an outdoor terrace room, allowing free companies who can't get a non-instanced house to still have access to all the amenities that come with free company housing.

Non-instanced housing would still hold prestige, but it would no longer lock players out of certain features like crossbreeding and airship/sub missions. If the only difference between a standard small house and an apartment (as far as features go) is that one is out in the neighborhood and the other is instanced, I believe that most people would be satisfied with an apartment. Even moreso would likely be satisfied if apartments came in multiple sizes for a greater cost (with the expected increase in furnishings allowed).

If the additional rooms suggested in A) and C) aren't doable, then at the very least create placeable items that can be used inside a standard apartment that allow access to the features those rooms provide. An "indoor hydroponics planter" that allows crossbreeding and an "airship/sub remote access panel" could serve well enough in a pinch.