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one thing i know is the built in storage gets bigger and that can be helpful
The generic storage increase would indeed help. I have seen a number of tier 2 burgage plots fill up with military equipment as 4 male occupants can easily use up 16 generic storage just for weapons, shields and armour.
[EDIT] P.S. I aways avoid making Duplex burgage plots into Blacksmiths etc. now, as it locks too many families.
Lv 3 houses eat more food etc so having the minimum possible is advisable and only upgrade once you have several large warehouses and granaries feeding into market stalls. And at least 1.5k of food, clothing etc.
The moment you upgrade your first burage to tier 2 you increase the resources needed to stay happy. Make sure you can fill the needs of the burgages before you build/upgrade them.
Only upgrade burgages to tier 3 if you need the extra workforce for that particular burgage (such as a brewery, since you need tons of ale). Otherwise it's better to have 2 different tier 1 blacksmiths than a tier 3 one. Easier to maintain happiness that way for things like taxes and troop morale.
I tend to build and upgrade 2 burgages to tier 2 just to get the development point for the "Better Deals" Development. Then I destroy them. That gives me affordable access to every resource via trade without having extra happiness requirements. This method keeps my happiness very high for rapid population gain, while developing a massive trade enterprise, exporting food, planks, leather, cloaks, tools. Basically every non-burgage building that produces something is something I build. By the time I start building artisans I already have 40 families, 2 full militia groups, mercenaries, and ale.
Example screenshot with no tier 2 burgages on Challenging Difficulty.
https://steamcommunity.com/id/fortigan/screenshot/2518152404346446748/
Likewise, the moment I get the 6th and final development point, I replace almost all my tier 3 burgages with tier 1. I'll keep my artisans at tier 2 (except for brewery) and I keep my other burgages at tier 1 (except for tier 3 vegetable gardens and orchards, as I build them large and need the labor force).
lvl 3 houses eat more food because there are more people living there, but they also double the wealth they generate for the region.
Those families can also equip better armor, they will wear any chainmail you have instead of only gambisons and helmets.
Upgrading your armorsmith for instance might be a great choice since they will be the first to get the chainmail armor, instead of it going into storage and then another family claiming it, and if you have 4 families living there that means 4 helmets and 4 chainmail immediately going to your best troops that are also giving you the most money.
Edit* Farming burgs like veggies and orchards will also get farmed faster with more families, then freeing those people up faster to go work on their assigned jobs or construction.
That is a reasonable counter argument to avoid duplexing your craftshops, I hadn't really thought of that and almost always expand my burgs.
I find even single-plot lvl2 crafting Artisans, assuming you have a decent resource supply, they rapidly make 200-300+ product in weeks/not many months, sucking up all resources. So I pause them, and often don't have to turn on again for months...exception being bread (if you have that) and ale, especially ale. Because the towns people are serious drunkards, and the community ovens suck.
Or, especially if you're going the Trade price DP route, lots of lvl3 houses in general (whatever their size) can equal even faster to get to the point of being able to buy pretty much everything constantly, without having to make/sell too much of anything to make up for all the buying. I think that's actually "broken" a bit - except maybe once you reach 800+ populations - the prices shouldn't drop quite as low as they do, maybe.
So outside of specific use/play goals, or because you like the way they look better, I don't see much reason to go to Lvl3 houses, except for the "because I just want to." As always, that's just me, tho!