If you sell residences the people move to another town but Im not sure of the impact of this because they dont pay taxes.
The local economy collapses and the businesses shut down, the remaining people either move or go on unemployment and you have a ghost town . . . .but what impact it has in Township may be different
I think the nearest analogy to this hypothetical scenario,is only viable if in real life if you demolished the houses,and nowhere to live means no people.Hence the ghost town. But on Township I am reluctant to make space that way,because the optimist in me is forever expecting an exciting update. There is an award for the dev(iant)s for this......
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When you sell a house, you will only receive half the amount of the actual price of the house (same as when you sell decorations for example) and your population amount will decrease.
Population amount has impact on how many fields you have, however, your existing fields will not disappear even if you no longer have population for them. You will not be able to add new fields until your population reaches the required amount.
In addition to this, population has impact on whether you can build a particular factory or not. When you finish a Community Building, you get a message that your population has increased by x. Sometimes, you can't get to that amount of population by combining newly available houses so your factory development might be delayed for a couple of levels. In that situation, you can easily calculate which small house you need to sell in order to build bigger ones so your population increases by x.
Population also impacts the expansions.
Once you have built all the houses and have max amount of fields you can sell the houses you don't like. However, if new update comes with added fields or factories or expansions you will need to repurchase the houses.