We seem to be mixing two venue types. There are scheduled house concerts wherein the performer(s) are paid - usually the gate. In some cases, a minimum is guaranteed. In my experience the host(s) rarely 'charges' for the use of the house. Nevertheless, guests may be encouraged to bring something to share or perhaps to informally pay for refreshments. In many cases local folk music clubs like the FSGW underwrite the house concerts.
Now there are also what was cited above as the private, exclusive, post concert house concerts. Like any activity in one's home, these are as private as the host wished them to be. In many cases the host has agreed to provide a place for the performer to stay overnight. In fact host and performer may be old friends. With the performer's permission, the host 'invites' people to join them for a little social get-together, mini-concert, and informal jam with the performer. This is a private party, i.e. exclusive, unless the host announces it over the PA system or posts flyers around the neighborhood. These are usually free, unless the host feels a need to charge for refreshments. A little tacky IMHO.
WRT smoking, in both cases it is entirely the host's and the performer's option.
WRT to paying the performer, IMNSHO there is only one answer, "Of course pay the performer". All of us in folk music reap a great deal of enjoyment from that small special breed of person who will traverse the country side, sleep in cars, vans, and other people's homes, and perform live-and-in-person at clubs, homes, churches, and schools. Granted, considering fees and tape sales, they can bring in "hundreds of dollars' each month! I've heard tell that some even make "thousands"!
We owe them so much more.