Are people really running out of space due to the 50 tile limit?
Easily. Alarmingly easily. If you end up with several resources in range and you build houses to level your town, you'll run out of tiles fast.
I completely disagree and I pray to god Stardock doesn't change it. This "annoying" gameplay issue adds more weight to the decision what to build in cities and where to build cities instead of mindless city and improvement spamming in other games.
Well, I completely disagree with you and I also fail to see any reason to bring up "other games" - whatever that refers to. In any game like this the choice to build or not build is yours, as is the choice to specialize or generalize. Gameplay should not force this - it should be your choice.
Specializing cities should be a choice, not forced.
You can easily have several resources nearby in a good city spot. Of course you want to use them. Many resources appear later, so no matter what you do you could easily get a lot of resources "in" your city and if you need to intentionally avoid them to keep tiles free for buildings, that is just stupid. There is no other word for it. You also, thru research, unlock the ability to build a TON of buildings and with all the resources you have you can easily build them without pick and choosing. And on top of that, you can level your cities - so of course you want to level your cities, which requires a LOT of tiles of housing.
There is no logical reason by cities should be limited in how many tiles they occupy unless it is tied to some kind of civic tech - that would make sense, that you have to research stuff that lets you grow bigger. There is a ton of stuff you can research in the game so logically tying tech to growth would fit. Or tie it to influence. Tie it to something. An arbitrary limit is just flat out stupid. The only thing that should ever firmly limit the size of your cities is running out of land to build on.
If you want forced specialization or limits on number of towns or sizes of towns, the way to do it is to reduce the resources you get, not have artificial limits. In my games, I have so much material, easily amass gold, etc - I can build anything I want to build. Building leads to more building as you jack up the resources with bonuses from buildings. The game design itself encourages building up and growing.