1. Become infested by gnome scum
2. Satisfy conditions for other races
3. Gather the goons (Get rogues)
4. Remove autorepair for the hovels
5. Flag the hovels ONE AT A TIME with an attack flag (If you have a lot of royal gardens or statues this will eventually not work) 100g is fine
6. Remove the flags at around 15-20 health left on the hovel
7. Once 2/3 hovels have been downed to 15-20 health let the third one finish being destroyed. As this is happening flag the first 2 again
8. Once the hovels are destroyed build an elven bungalow or a dwarven settlement and no more hovels will spawn

If you still want to keep a few indentured servants then you can get rid of your weaker gnomes and keep a few in an outpost.