Dwelling is a building which determines how much your population is. For the 11th and 12th level you need an architect to be present. The more dwellings you have and the higher levels they are, the higher your castle's population. An advantage of a high population is that you can get more money when you hire the tax collecter. Though more people might seem like a great thing to you, it slows down the production of your plants which include: farmhouse, stone quarry, woodcutter, barracks, due to the decrease in Public Order. At the lower levels having 12 dwellings within your main is needed for a quest which gives you XP points, but it is recommended that after you finish this quest you should demolish all 12. Demolishing these dwellings will make room for more Public Order, which will allow you to keep as many troops within your castle as possible.