Catacombs were natural geographical features that had existed for millions of years. Some palazzi were evidently built over catacombs, but it would be a mistake to suppose that "catacombs were located in most homes." Because Venice is at sea level and keeps sinking, corpses cannot be buried underground. The graves would fill up with water. The same situation exists in New Orleans, Louisiana, where bodies are customarily cremated or entombed in mausoleums, crypts, and vaults of various kinds above the ground. Some of the catacombs in Europe are filled with bones because bodies were not buried in the ground but left to decay in the catacombs.
Montresor's name suggests that his ancestors were relative newcomers to Venice and that most of the bones described in the story belonged to ancestors of the original owner. Montresor is a poor man and is probably only renting his palazzo to make an impression on men with whom he does business. His servants have no respect for him because he cannot always pay them. The short story "The Aspern Papers" by Henry James, published in 1880, only thirty-four years after Poe's story was published, gives a thorough picture of what the old decaying Venetian palazzi were like by that time. Here is an extract:
"If she didn't live in a big house how could it be a question of her having rooms to spare? If she were not amply lodged herself you would lack ground to approach her. Besides, a big house here, and especially in this quartier perdu, proves nothing at all: it is perfectly compatible with a state of penury. Dilapidated old palazzi, if you will go out of the way for them, are to be had for five shillings a year. And as for the people who live in them--no, until you have explored Venice socially as much as I have you can form no idea of their domestic desolation. They live on nothing, for they have nothing to live on."