***EDIT***
Always wanted an upgrade to your favourite racial city? Also liked the idea of some sort of player housing? Why not combine both, and have players contribute to building their own racial capital - adding improvements to it like you would a house. Upgrades are local to your client, but the new racial city is accessible to everyone in it's location.
However if you haven't worked on that city, it would be represented by a small square with all the usual vendors.. but if you work on it, like you work on a house in other games it can look amazing.
Example:
You pick the blood elf race for your city, you the hero of the blood elf people (need exalted rep with Silvermoon), are given land and title which include a small town on one of the islands off mainland Quel'thalas.
Quel'Anari is the player blood elf city that can be developed. if you work on it, eventually it will become the new blood elf capital (for you). Quel'Anari is a location like Silvermoon everyone can go to, but how developed it appears on your screen depends on whether it is a city you are building and how far you've come along.
Some Ideas and Suggestions
[Original Post]
1. Player housing is actual a city you build over time.
Start with a building, and it expands, with upgrades and extensions, incorporate class order halls to train troops, improve research that gives access to special equipement, boost commerce to compete with rival cities, embassies from different races attract more citizens. This is a system. That can function as a mini-game that has parts independent of progresion but each expansion can have a feature that is tied into that expansions system.
2. This unlike player gear doesn't reset every expansions, everything in the game now gives resources that can go towards improving your player housing
3. Different features will tie into each new expansions progression system, to help boost your character, so while expanding your city is independent f player porgression, it will alwyas be relevant to becasue something in it will connect to whatever system is being employed (ask me if you want me to expand)
4. You can pick a city based on each race's architectural style, and populate with buildings of your choice. here are the styles you have.
5. Players will share the same racial city they pick. for example if you choose to build an orcish city, when you go there you will see other players there who chose and go to the orc city, the differences in how built up the city is are local to your machine. So if you've greatly developed your city, and the player you see in the auction house hasn't, you would have no idea, on his screen, his city will be as developed as he has made it, on your screen, yours would be as you have made it... you can invite people to your city, and guilds can make their ir city in any guild members city or have their own
6. Guild members can acquire buildings in guild cities that they can decorate and facilitate when they visit the guild city
7. You can always start a second city - truth is cities will gain expansions every patch, so it is possible you could have maxed out your current city and not have much to send your contributions to, you can either invest your contributions in decorations and adornments, or start a second city while you wait. It is recommended
how it is designed. Devs have an artist sketch of all the cities and what they would look like fully developed.
they've already planned the stages for each expansion and how they grow
Every patch cycle they work on the next expansion slot for each city while you are unlocking the stuff just released, which they were working on during the previous patch - they are always one patch ahead naturally.
In time, these will grow into large cities where you can carry out things. If you've unlocked the AH in your city, you can use it there, and basically every player that has unlocked the AH in that city would have access to it, otherwise they can go to.
---***EDIT ADD ***---
Let Me Try to Explain Why
People are always asking for improved capital cities, they want for their races... many requests for player housing, and similar complaints as not much to do in cities.
Well how about you manage your city? that gives you something to do.. the city is a system and not just a place you walk into to vendor trash and pick up an occasional quest.
you can partake in this activity or not, but it's a long term based thing that is a visual and functional reward for those who play long term and don't just sign in and out. at it's heart.
The point is each player can pick a city themed after a set number of races .. you're not just building your private garrison or house, you're building a zone that will serve as the races new capital city -- (eventually, achieving capital city status is part of the progression system, when this occurs, the racial leaders will move to this capital).
the thing each city is in a racial location that is the same for every player. for e.g. if the Draenei city is in the Dalaran crater, all who choose Draenei to build their capital will build at the Dalaran Crater, once you start, you will see other players who go there, it's not private like Garrisons, but more like Class order halls, the difference is how advanced and progressed it looks depends on how far you've developed it.
You will always have a reason to go back to your capital city now, as this is where you deal with a lot of the systems that manage and improve it, you add designs to it, you open up features, eventually quest givers that are normally in other capitals will be found here, racial quests also start from here.. if you're a Goblin but building a blood elf city, Goblin racial quests will be at the goblin embassy when you've acquired them.
The idea is that not only do the races all get a capital city, but you actually are responsible for developing it and building it. It comes complete with mission tables, and feature s of its own, but it will have functions that tie into whatever the new expansions progression system is, that will always give an excuse for you to go there - this operates a bit like Class order halls did in Legion - so even if you don't develop your city and it just the one starting building and you prefer to hang out in Orgrimmar or Stormwind or the other capitals, you can still do that, but like order halls you'd still have to make the trip back to your capital.
Now some people will have no interest in improving, that's fine, the part that ties into player progression for the expansion, wouldn't require a developed city, , just a one building, which would have been part of the questing of the expansion that introduced it, just like we all have Class order halls and we all got garrisons, but if you don't want to develop this any further.. you will just have that and the portions you need that tie into that expansions progression system which connects to new capitals would be there.
For all those who wanted housing, who wanted racial capitals to be improved, available and play some sort of role in the gaming experience, having some use.. this is it.
It's perfect to introduce in a race expansion, that has a similar talent progression like covenants but this time involves races. Extra perks for developing your capital would involve things like able to command a battalion of npcs from that race in certain activities, when certain events happen that use generic alliance soldiers or horde soldiers, they would instead use the race of your characters capital.
This system is meant for long term.. it's supposed to allow the building of a great looking racial city, and be a source of driving racial story progression/campaigns but is it's own system that won't reset every expansion, so imagine with updates given every so often, in about 10 years, your wow capital zones could look amazing. ofc you'd have spent a little time building it up, it's a reward for having subscribed so long and an incentive to keep doing so.
There is no catch up, but a new player who wants to develop his city can always start, when it is first introduced, it's little expansions every patch, they don't take the whole patch cycle to fully complete, that's not the point, once you max out the improvement, you always have the option to start a second city or just coast till the next expansion arrives, so a player 10 years down the line, should probably take about 1-2 years to catch up on one city to where those who had start with the intro and kept were, but ofc, that's if he focused entirely on one city, he'd then have to spend an equal amount of time to develop the second to the current frontier.
But it's largely for aesthetics and that systems on mini-game. But it gives something useful, you can work on, improve, customise, and it will always have some function tied into the game system of that expansion, but think of that a bit like as if Class order halls never went away, where in one expansion it tied into Artifact power, in another Azerite, etc, if race campaigns became a thing, it would be perfect, you'd get racial quests every patch that advance the story of the race, these will come form the new capital