It'll diffuse the negative effect throughout so it won't be visible to MIT detractors. The happiness is likely inconsequential.
I speak strongly and pessimistically about this because of some very fresh in my mind experiences from my university, where I watched drug abuse (and some far more heinous acts) be covered up and untreated as long as they could be by staff, and then pushed under the rug after kicking out the students who likely could have been helped earlier with tactful interventions (of which dissolving the house/support structure in OP certainly is not). The incentives at many universities are heavily misaligned to what I believe we'd like them to be.
[Edit] As a postscript; I'd add in a ramble, as there's another thought weighing on me: (as there seem to be two stories here, "are we properly helping students" and "what's happening to the heterogeneity of universities")
My own undergrad would have been remarkably less positive if I didn't have my own groups of "outsiders" to associate with, whom I'll openly admit likely correlated with increased drug use, dropout rates, and lower GPAs, as a side effect of being composed of students who might have different priority systems, not as some corrupting effect. Without these groups I likely wouldn't have landed a majority of my professional-life jobs, I wouldn't have shared in a vast amount of their knowledge and experience, and I would have lost both many good friends, and likely my wife. In the decade since then, I've seen a "real world" in which I've been told to my face, "we avoid hiring nonconformists". And while I can understand the "business justification" for that, and the university changes, I have some fear for what will be lost resulting from a push to dissolve these pockets.