How to Increase Happiness
There are a handful of pretty simple methods for increasing happiness, or as this game refers to it “Desirability”.
First and most easy, the yard objects for peasant homes. 3 of these objects provide stacking +3 desirability bonuses for 6 easy desirability points, but I typically go with 1 desirability object and one food object.
Second you’re already doing, which is making sure the homes have an inn and a theatre nearby and the house is within those buildings radii. If they also have well access that will get desirability up around 10-15ish depending on how many yard objects you built.
Now the third part, is preventing desirability debuffs from industry buildings. Certain buildings like the coal burner, the sawmill, and the stone quarry all have debuff radius’ that reduce desirability for homes within those circles of influence. For this reason you want to keep these buildings far enough away from residential districts that they don’t impact your Fablings negatively.
That should do it! Hope this helps!