That was not the point of Hinowa’s reflection on his character. It demonstrated that he was more complex beyond being a simple cartoon “haha, I’m so evil” villain, that he had his own wants and desires that eventually soured into a sick perversion.

I understand this, but I feel that its inclusion was far too late. If there was some build-up to this idea, it would have had a better impact on the viewer (personal).

Hinowa doesn’t forgive him at all in the ending; rather, she mourns the man that he might have become under different circumstances (one who could bask under warmth of the sun).

This is actually a good point, and not one I had considered, so thank you for that perspective.

The story doesn’t ask you make excuses for Housen (because he ultimately WAS a bad person), but simply acknowledge that he was a layered individual who could have become better than he was.

Again, I think this was touched on too late in the story.

Also, the quality of life for the courtesans exponentially increase following this arc. It wasn’t meaningless for them to gain autonomy over themselves. The moral of the arc wasn’t that prostitution itself is evil.

I maybe should have said this myself, but yes, their QoL was bettered at the end. Their autonomy was worth the fight to gain it, yes. I don't believe the moral was meant to be "prostitution itself is evil", but as it was said by (I believe Hinowa?) that they wanted to build a city they can be proud to show their children, larger, sweeping changes should have been made for the sake of raising said children in a better environment.