At first glance, the Houyhnhnms seem to be a remarkably civilised society, and clearly superior to humans and also the Yahoos that they oppress and exploit. They represent the triumph of reason over the unpredictability of emotions and passions. However, if we think about this further, we can see that this people are just as much the target of Swift's satire as every other group that Gulliver has visited, except that this time, it is Gulliver's response to the Hoyhnhnms that makes him the target of satire himself rather than the people he visits.
The way in which Gulliver returns to his own people and finds them so lacking in comparison to the Houyhnhnms exacerbates this impact. Whilst the horses are certainly undisputed masters of rationalism and virtue, their wholehearted embracing of such qualities has resulted in a life that has had all the life stripped away from it. They are shown to live boring lives that screams out the way in which they have exchanged aspects of being human for a dull, robotic existence. The way that the act of copulation is completely carried out without any passion and the limited nature of their langauge demonstrates this.
The problem with any ideal society, dystopia or utopia, is that an idea of perfection can only be achieved through losing ingredients that are essential for living a human life. What makes us human is the strange and chaotic mix of all the different emotions and passions that dictate our actions. What is lacking therefore in the Houyhnhnms' world is everything that is human.