I think the problem is that people building a village where our village is is seen as a problem. I understand reserving land for development of the "town" and strictly controlling what happens there, but what we seem to have is reservation of the wilderness, with allowance to do things anywhere granted.
As someone who has successfully managed player towns in multiplayer games, you should be encouraging growth and activity, not limiting and restraining it. The best leadership in a building game is to be present, marvel at what people are accomplishing, compliment them for their creativity and initiative, and advise them how best to incorporate their ideas into the larger picture. I think leveling and walling off a square for people to be creative in is kinda backwards. Let people be creative, and they will want to protect it, and will be more willing to work together building a wall to protect what they value.
It isn't being a community that people are chafing under, i think everyone's on board with that, its having what they want to do repressed, or if they do build being harrassed about it. This is a game, people are playing to make friends and have some recreation. If it becomes unfun, unlike life they have alternatives.
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In a nutshell: We cannot prohibit them, so we have to loosely manage them.
I see the problem in a nutshell: There is a desire to prohibit them.
So reserve the deed, fence off an area for expanding the deed, lay out some roadlines, and let people do their thing everywhere else.