I decorate their houses and try to get real creative. I would like to use them for path space, but I end up using all their pattern space for wallpapers and furniture.
I have a Harry Potter town so I made my three residents Hermione, Tom (Riddle), and Luna (Lovegood). They are so useful because I can have more paths and patterns to decorate my town and houses. The houses meant that I have more rooms to make them based on movie scenes! I never needed the extra storage but playing as other characters is really fun. I hope in the next Animal Crossing game you can actually see those characters wandering around town like your villagers