most wouldn’t want to pay for hosting when they can use Facebook for “free”.
Unless they get something they won’t find on facebook -> freedom.
I think your idea about everybody basically becoming their own instance is not as bad as it sounds. If social media was peer to peer, using bittorrent technology somehow the hosting issue might somehow be resolved.
That would still leave open the issue of self-governance: how would you genuinely determine the community wishes on any given subject? some may sabotage, others may use bots, other again may try to be disruptive and others may abuse other users or the community.