Instances exist in the form of apartments and FC rooms, but they are very small rooms.
The reason for the ward system is so you can have neighbours, but that creates the drawbacks that we have. They can't keep adding wards automatically because they are actual zones that have their own server programs and the same considerations as adding any new area.
There isn't unlimited storage space, either, because SE doesn't use cloud servers, whereas I assume other MMORPGs seem more open to this so they can be flexible with housing.
They have been adding new wards and even sub-districts over time, it's just that whenever they do, they get taken immediately and there is still more demand than whatever they added.
But as you are saying, other MMORPGs managed it in an instanced way so they could just consider making an instanced version of the housing system that includes gardens.