It'd be a simple matter to build a couple extra houses in Cyseal to house all the NPC's that do not currently have homes. Tents and floor mats for the legion, or expand the jail to include barracks. Maybe add some more guards to cycle out day/night shift.
There's a lot of extra space where stuff could be built. And as far as I know, the abandoned house in Cyseal serves absolutely no purpose aside from an exit point for a tunnel, so that could be converted to a house for some people.
