Happiness Levels

Happiness is a measurement of how happy your Residents are to live in your village. The current amount of happiness determines how many Houses (and therefore how many Residents) you can have. Placing Decor items and some structures increases Happiness, and when enough happiness is obtained your village's Happiness Level will increase, which also increases the total number of houses you can build.

Attempting to build a House after already reaching the maximum number of Houses for your current Happiness Level will result in a popup message stating that the purchase is prohibited.

Happiness is lost from placed objects when you sell them, or when you place them in the Inventory (although you get the happiness back when you return items from your inventory back to your village).

If you own more Houses than your allotment, this popup message can display "You have 24/20 Houses" but will not force any penalty, other than not being able to build a new one

The game only counts the number of Houses that are currently in any stage of being built in your main Village. See Exploits below. Houses in Spook Row or Snowy Hills are exempt; you may build as many Spooky Houses as you like for additional Cheer and XP.

See also: Happiness, Houses

Exploits
There are currently methods for getting around the limit on the number of Houses permitted. Note that these exploits could potentially be fixed by Kiwi without warning.
 * Houses in your Inventory are not counted, so you can move existing Houses to your Inventory, build more of them in the village, and then return the stored Houses from the inventory back to the village at no penalty.
 * As of Feb 1, 2014, this exploit is still open.
 * If you put multiple copies of the same House into Inventory, it only shows up in one slot, but it still contains all the copies of the House.  When you put one back to your village, the next one shows up in the same slot.