I agree, instanced houses alongside the current ward system would be the most logical way forward. The wards will never be able to meet demand and not everyone is into the neighbourhood. I honestly can't remember when I last saw a neighbour, some time last year perhaps.

Given the choice of a small house in a ward or an instanced house with a nice view and exactly the size that I want, I'd take instanced. I would definitely want it not to be subject to the timer though.