I know more popular interpretations of why the messed up stuff is happening in This House Has People In It are "AB is spying on suburban families unwittingly living in haunted houses" and "the family got contaminated by the clay that has the disease and now it's spreading," but I think it's also less... literal than that? There's a magical realism quality to everything that's not jumpscare-y and more slow-creeping, which is why I think THHPII stands out from other analogue horror.
I interpreted it as a story about the horror of neglect. Family neglect, neglecting upkeep of a house, neglect in general. The daughter is phasing through the floor, and the parents only notice after 2 hours, thinking she's being overdramatic beforehand. And that can be a metaphor for depression/mental health. The daughter is going through something that is beyond the understanding/experience of her parents, so all their attempts to solve the problem aren't helpful (using planks of wood, trying to pull her, the dad saying, "Everyone, tell her, 'I love you'!"), because they don't ask what's causing the problem. The parents are more concerned about keeping up appearances than asking the partygoers' parents for help.
The floor-sinking starts on the son's birthday, and no one is paying attention to him. When he's told the party has to be cancelled, he doesn't try to argue (despite being a young kid who hasn't been told that there's an emergency happening), and reacts like he was expecting this to happen, like he's used to this.
The grandmother is handed the baby, and she puts her down to watch tv and the baby just... crawls away... until she's out of the house and leaving the yard.
The whole 2+ hour story is happening while the house is being renovated, and corners are being cut. The builder says a lesser version of the drywall is being used. The house is literally and metaphorically growing more toxic. Dennis accidentally destroys one of the surveillance cameras because he (assumedly) tore a hole in the wrong section of the basement. We see notes on the fridge saying "BEDSHEETS" because the parents still haven't obtained sheets for their son's bed. Things the size of an adult human are getting into the house through holes in the foundations.
The mother leaves the stove on and forgets about it, creating more and more smoke that spreads into other rooms as the drama escalates in parallel. It never actually gets turned off by the end of the scene.
I think that's why the dad's argument with his wife near the end stands out so much. While everything he's saying is technically positive on paper, the context twists it into something uncomfortable ("We're a FAMILY! No matter what ANYONE says! That is our STRENGTH!").
This House Has People In It. As in, "This isn't a home anymore, this is a house. This isn't a family anymore, these are just people living in the same house."
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