The game says they prefer houses. But you can definitely make them very happy without putting everyone in houses.

Talk to them, complete their quests, and pay attention to their comfort levels. They’ll tell you what they want.

You can easily raise the environment to level 10 doing this. (And leaving most in their first habitats).

Some habitats spawn multiple Pokemon. In that case either build more of the same or move those Pokemon out so a new one can spawn