The homecities in LAN are the same as those in the singleplayer. Many people don't take the time to level their HC in an old game, so you won't get banned. I advice to not play treaty games (they are always discouraged, as wol is not balanced for them) as you will have acces to way more powerful cards than people with a lower level.
Leveling in ESO requires the XP mod. Usually you will need a friend who has the same mod to level up (sometimes I can create homecities with high level in ESO. No idea why it is sometimes). Take note that ESO limits the number of homecities you can have (at least, I think they do).
Another thing: you posted this in the wrong channel. Town Hall/War Academy would've been better.