Luma, great background story for your challenge! I like how you have the blog organized as well. As for adding people and other houses... you are permitted to add houses as your children move out. You have to purchase the house out of your funds. You're not supposed to add extra housing for people to move into or other families.
I just restarted mine and didn't want to lose the family's friends from college, so I moved them to the next neighborhood with the family. They are going to be part of my background story.