File System in /home can be clustered very quickly nowadays where the amount of data are massive. Residing all the users in one /home directory will cause the administrator to quickly reach the limits of the File System especially if the File System is not a Parallel File System.
One thought is to perhaps using the /home directory to store their user specific files that govern the user environment such as .bashrc .bash_profile .login etc only. All other files such as output, project files etc should not be stored immediately under the /home/user1 files system. Of course no one should be running their computation on the home directory.
If the users is large and you know that the /home directory will be broken further into further hierachy which can be divided into more volume. For example, /home/student/users1 or /home/staff/user2, /home/Department/user3
For more information, do see http://www.tldp.org/LDP/Linux-Filesystem-Hierarchy/html/home.html