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At one time it was needed so that active players could have houses. There used to be a shortage of spots on most shards. Same goes for the 1 house per account limitation.
Maybe a little less PC, but because it encourages semi-active people to continue to pay monthly....
(It works on me--I pay 12 months a year, and have probably spent 20 hours in game this calendar year. But I can't stand the idea of losing my house, and all the crap I have holed up in there.)
Also bear in mind that they don't decay unless they're not associated with an paid account. I'm not sure if you were aware of this from the question. I don't know what you mean by terrains decaying.
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