WoW has already done something similar in Warlords of Draenor, iirc, when you could make and develop your outpost, but wasn't it considered to be mostly a failure because players were there and so common locations were more empty?
They surely learnt from that. Now there won't be an auction house and mail so close together, so players have at least one reason to be in the city. Oh wait, nevermind, they are already selling that for the price of 1,5x AAA game.
There are unused assets in the original World of Warcraft that suggested a player housing system was being developed but never finished. The idea is as old as MMORPGs are.
The Anime/Manga/video game series dotHack, which is about a fake MMORPG, predates WoW by several years and has player housing for some of the characters.