I can only picture it as being instanced. This game isn't trying to simulate an entire planet worth of area to explore, and even if it did, it would only be one world to be shared by almost innumerous players. There would be no way of making their housings cohesively fit in the world.
Being instanced, all players can walk up to specific locations created for housing, yet they will only see their own house when they look at it, and when they enter it it will be their own domain. Moreover, the housing itself that is rendered will probably be the one from the leader of the party. If you want to invite a friend to visit your mausoleum, you need leave someone else's party and create your own, so that others can load into your instance and visualize what you have created.
That way, everyone can have their own space in the world without forcing housing upon housing on a single map, and the housing locations actually make sense.
Now, as for customization, it would depend on what the housing itself is. If you can have more than one kind of housing, it would make sense to have altars on temples and churches, while it would be more fitting to have ramparts on fortresses, and cellars for dungeons. So I would like the customizations to be thematically fitting, for the most part.
But above all, I'd like to have some customizations that are functional, rather than cosmetic. You being able to determined where each feature of your character management is located, such as your crafting station, your portal chamber, your inventory displays, etc.
I would like to have some customizations that are focused on us, and some that are focused on visitors, such as allowing them to check out what we have on our characters, like the inventory displays.