I am quite stumped on this as well. No matter what I do, I cannot seem to progress.

- Cannot steal any smelly clothes from any of the fourt suspects (pickpocket 1 is too low apparently)
- Cannot break into any of the houses of the four suspects short of destroying their doors and losing weapons in the process (lockpick 1 is not enough)
- Talking to any of them does not lead to any new options
- The letter on the murder scene does not really help bring the story forward either

So is my only way really forcefully breaking into the respective houses?