Upside Down House

The Upside Down House is the name given to the facility located in the real world which acts as a host to the Kumon-mi and the physical location of the bodies of the residents of the simulation.

Creation
The Upside Down House was created by Sensei Prime at some point after Maya Prime fell into a coma. After an extended period of mourning, guilt and loneliness, Sensei became obsessed with the idea to create a virtual world that escapes the misery of the real one. It's unknown if he created the Upside Down House completely on his own, if he created it as a medical treatment facility or if he had private backing from wealthy individuals (such as Touka's family), but the conditions inside certainly made it appear to be a ramshackle and highly unethical affair.

Conditions
The brief descriptions of the inside of the House present it as an underground, illegal facility practicing highly dangerous medical procedures. It appears that whatever the specific requirements are to properly insert a living person into Kumon-mi, it is very risky, potentially involving the removal of limbs, live support equipment that regulates the ability to breathe, anesthetic gas, etc. Some girls don't survive the procedure and their bodies are dumped in the boiler room. Kaori may be an example of an early test subject whose procedure was partially successful.

The girls who have not yet had their procedure are kept in poor conditions, fed cheap food like garlic bread and are not informed of the fates of other girls who disappear. It appears that they are given strict rules to keep them from misbehaving, with Sensei Prime acting as "Papa" who must not be misobeyed. Where the girls actually come from is currently unknown, they may have been provided as severely mentally ill patients who had otherwise failed every alternate treatment, they may have been girls from Sensei Prime's school job who were taking (possibly by force), or they may have been victims of human trafficking.

There is also so implication that Kumon-mi (and by extension the Upside Down House) exist at the end of the world and as a result it may be that at some point after the creation of the resets that allowed the system to operate totally autonomously, the Upside Down House continued to perform it's function while some sort of apocalypse ravaged the outside world. As a result "the only living thing is Kumon-mi" may be meant literally.