LOTRO does not have instanced housing, it has a neighbourhood system like XIV does. The only difference is that when a neighbourhood fills up, a new one is generated, at the cost of less ability to decorate the way that you can in XIV (I have screenshots from my own house and guild house
here). FFXI's housing is instanced, everyone gets one from the start, and mog houses outside your home city just act like an inn room that you can't decorate, as is SWTOR's.
Not to say I wouldn't like a system where a new neighbourhood is auto-generated, but I imagine the same thing would have to happen re: not having as many outdoor hooks to place items or as many houses in each ward to keep sizes down, as well as the fact that the devs would have to go back and revamp the entire system... which takes manpower to do. Everyone's already saying there's less and less to do, taking dev resources and time away from playable content would just make people more upset. They could work on it slowly but then it's "well it's taking too long" lmao.
And re: housing demos, Yoshida didn't want to do that or paying upkeep at all, but the players asked for auto-demos when demand for housing was starting to overtake the supply back in
2.x. He caved because the players asked, just like they did for lottos to ease not having to try to beat botters to placard click and the demand for it only grew. Maybe it will work for instanced housing eventually too.