All my houses are level 18 but their combined capacity is not enough to meet the required capacity..

You should have just enough. At 18 you will have 5 houses. At level 18 this will give you 110,000 plus the castle/base also add some population as well. You will need to have 120,000. From memory I believe you will have 121,000 with the 5 houses maxed. If this is not the case for you check that all of your houses are connected to roads and maxed and your population is full (need to have food and water to maintain a full population).