Let's see. There was a merging process which took place ever few months (basically when two hoods are down to about 35 players), players always had a low number of neighbors, plus the age discrepancies were enormous because the merging was based on date of joining and ranking points. That was replaced with a bi-weekly merging process and the criteria was changed to tech tree progress with the aim to have hoods which span at most 3 ages. The first merging system was there for about a year and a half, the second merging system is now there for about a year and a half. At no stage did the game die or lose excess players so it seems to me it's not that big of an issue to classify it as something that would send into a death spiral --- it's an established game with millions of players, players who have already spent months or years on the game they're not likely to leave for a problem which resolves itself after 2 weeks.
The issue that is experienced by some is simply the inability to place certain chunks of players anywhere. It happens when a chunk of players is taken out from a previous hood because they no longer fit in there, but now there is no appropriate hood for them so the game simply places them in the next-best hood. Since this doesn't happen with a single chunk of players but multiple, it means some chunks end up in hoods which aren't at all appropriate for them. Is that good? No. Is it something that can send the game into a death spiral? No. It's 2 weeks, anyone who can't manage it likely won't survive the game either, they would have stopped playing at another point.
It would be good if it can be improved, but it certainly isn't the end of the world problem like folks are portraying it.