In both these stories, the setting and state of mind of the characters is vital, and indeed, integral to the plot. They also help establish the mood.
The settings for either story are rather different in some ways. 'The Demon Lover' features an ordinary suburban house in the middle of a street while Poe's story is set in a ancient, cavernous mansion, physically cut off and isolated. The narrator arrives at the House of Usher on a dull, overcast autumn day while the house in 'The Demon Lover' is bathed in fitful summer sunshine. However, both settings share one essential quality: that of desolation. This is made much more obvious in the Poe story, which is in full gothic mode with the vast, overwhelmingly gloomy aspect of the Usher family seat. The effect upon the narrator is immediate:
There was an iciness, a sinking, sickening of the heart – an unredeemed dreariness of thought
The narrator then becomes depressed at the very sight of the place; indeed it seems to have a physical effect, causing him to ‘sicken’.
In 'The Demon Lover' the setting may not be as imposing as in the Poe story, but it too has a sinister aspect from the start. Mrs Drover is returning to her old home after the second world war, among streets that bear the signs of recent destruction, and when she unlocks the front door it is said that ‘dead air came to meet her as she went in'. The atmosphere of death and decay, while not presented on the same level as in 'Usher', is unmistakable. The old family home has been deserted for years, and it makes her uneasy. The Usher house, by contrast, is not actually deserted, but Roderick is fraught with nerves and his sister Madeline seems to be literally a walking corpse.
The settings and state of mind of the characters in both stories seem to considerable degree to reflect upon each other; the houses are grim and the characters depressed. In fact, the house in either story seems to have an actual role to play in the plot. It is in the depths of her old home in which her ‘demon lover’ seems to have been waiting for Mrs Drover to return, leaving a mysterious letter on the table and then leaving the house at the same time that she does. In 'Usher', the house actually collapses at the end, mirroring the breakdown of its inhabitants.
In both stories, then, the house appears as an active, malignant supernatural presence which helps to lead the already fearful characters to their doom. In this way setting, characters' state of mind, and plot are all directly linked.