While at a first glance, instanced housing seems to solve all the problems, it is worth remembering that this game dates to an earlier era, and has both finite resources—as opposed to resources that dynamically scale—and that almost all instancing systems do have a point where the instancing system runs out of actual "space to put instances" (or otherwise breaks down).

We've seen this in the game already in a number of places. It's obscured for dungeons because we do not expect an instance to always be available immediately; many people are queued in as incomplete parties, and if you run out of servers to instance a duty on, you can just temporarily not fill those incomplete parties and leave people in queue until resources free up.

But other systems can make the limits more obvious. Even with the current limited housing, it's possible to run up against hard limits. We saw it early in Endwalker, where people could not enter their houses because there were simply no more servers left on which to instance said housing. We've seen it on other systems, too, like the infamous "Raubahn (Extreme)" situation at Stormblood's launch, among other things.

Instance servers are likely not entirely interchangeable. And while it's possible to add resources to make it possible to have more instances, it's not possible to make it entirely open-ended. If every single player suddenly created housing for themselves, you could have anywhere from "no one in houses at this time" to "every single online player at once", and that's a wide range of potentially required resources.

This game's server architecture is, in all likelihood, a Mess. (Many server architectures are.) And the main reason I strongly suspect there are architectural issues that do not allow housing instances (which we already have for house interiors) to scale to the level that you could have one for every single player?

Originally, when this system came out, Square-Enix would talk about how they thought it was a good idea. But now? Any time they mention housing, it is to apologize, or else to try to stick band-aids on it to hold it together. If they still believed it was the right approach, we would see them explain why this system is a good one—what the benefits they see in it are. The fact that they don't do that—that they instead apologize for it—tells me they don't have that faith in it any longer. It feels like there's no way they don't know it's a bad system at this point.

So the fact that they haven't tried to do more than scale the current system—and apologize for it along the way—strongly suggests to me that there are issues with the game's current architecture which make it impractical to do.