The actual quote says that they didn't think they could do it in the way the fans would want. If you think about Skyrim with actual houses in town you can go into and buy- maybe they meant they didn't think fans would be happy with an instanced zone for houses? Personally I wouldn't mind an instance for houses.
Care to explain instances zone housing? I'm something of an MMO-new player, sorry.
But player housing doesn't need to be much. Just a few houses to choose from - lets say each player can only own one house, and there are player houses available in each province. Heck, even guild halls with player-owned beds and storage would be enough!