I already have a house and Ragnarok as a whole is not as crowded as many other servers so this isn't really my problem but a friend and I were talking about this again the other day:

Instanced housing. I really, really think it's the main way to go.

It can be little things like personal room appartments with plant box usable window sills or it can be huge mansions on private islands. It can have as many or as few elements as they want and they can add more whenever they feel like it of course.

When players don't access it for more than a couple of days or weeks (or there may even be a way for a player to manually activate this themselves), their plot becomes archived and removed until they try to go back to it. It may have a short delay on re entry to get the property back into the game but it should mean a lot more properties are possible on every server without placing anywhere near as much stress on the servers. It doesn't have to be persistent and once it gets archived it doesn't have to exist at all as far as the game knows (aside from a little 1 or 0 indicating it exists). It can also offer a much wider range of options, from sizes to locations to themes.

Keep neighbourhoods, there's no reason to get rid of them, but a lot of people have saved up money for houses that are bought out within minutes of their creation on some worlds.