I can't imagine something like this hasn't been suggested. But, here's my take.
Problem:
There is currently no real purpose to building decorations.
Solution:
Incentivize decoration building by adding complex yet non-random system of village-level rewards based on creating decorated areas within the village.
System:
Create a category of dominant decorations. A dominant decoration is a larger decorative centerpiece intended to establish a small decorative zone which can be filled with related, subordinate decorations. Example: a decorative pond. Should be a non-trivial, mid-game resource investment. Should be marked as having a theme, such as "garden" for a pond.
Assign all other decorations a value and a theme. For example, a bell fountain would have attached the theme "garden" and a value relative to other decorations in its theme.
Someone then builds a dominant decoration, such as the pond. The pond has a radius, and any valued decorations (bell fountain) built within the radius intensify the effect slightly, depending on point value and theme, which can all be checked by inspecting the dominant decoration (ideally).
The effects of the arrangement are added to the village as local bonuses.
Possible Effects:
Reducing stamina drain on specific tasks within village (harvest, building, tree tasks, etc.)
Increasing LP gain within village.
Adding a quality bump on cooked food, baked food, etc.
Increase the length of time light sources burn.
Broadly speaking, the bonuses should not overlap with the realm effects. Those suggested above are mostly QoL stuff.
Ultimate Value:
Add a meaningful reason to add aesthetic choices to the world(s). Also increase meaningful mid-game content.
On the dev end, devs could periodically add new decorations/themes when they need something small to push.
Conclusion: I'm sure the community could offer plenty of suggestions for decoration types/effects.