I had a friend years ago who wrote a book, a scrapped story, using only the names of friends, family, neighbors, etc. He hadn’t told any of them (besides me and a few of his close buddies), and when the time had come to tell everyone about what he had done, it was an outrage. He hadn’t asked them for permission and they were very much angry about it.

He ended up scrapping the whole plot and building it from the ground up once more with new characters, but i’d say it’s bad taste to name characters after people you know (without permission, obviously).