One idea to consider would be to make essence cost a secondary concern.

I think Essence is shaping up to be the general Mana supply stat. Restoring land costs Essence.  But building cities shouldn't take essence, but city spam should be avoided. This seems to be what people want?

How about in addition to a material cost (100 does sound about right), cities incur significant administrative costs. Currently there is little downside to just building as many cities as possible, casting spells is nice but more cities = more everything else.

Just like massive elite armies will require research and careful playing to not break the treasury. Having many cities should also be a play style, not a no-brainer. This also fits into the fantasy stylings of the game, a few large cities and some scattered outposts, but not towns covering every square hectare of land.

As for the actual implementation of administrative costs, I think a gold drain, ala earlier beta, is a bad (not to mention overly simplistic and overly 1-resource focused) system alone. One option, Unrest, (either in the form of increased chance of "unrest" related random events or in the form of an actual numerical unrest production/tax penalty) would give a reason to use Vassal States, which were hinted at in past discussions.

Another option Corruption/Efficiency would give penalties to wide ranging empires who did not invest in the technology or city improvements necessary to keep the machinery or empire running smoothly.

A great emphasis on Governors could also act to limit city spam, by increasing the governing skill required to manage distant and numerous cities. Riffing off this, Disloyal Offspring might be a way to punish wild expansion.

With any or all of these limitations, I think city building can safely be material based instead of Essence based. What I would like to propose however instead of lots of penalties to expanding is long term Benefits for keeping a small kingdom:

An easy would be to give a loyalty bonus to children based on how few cities you have (doesn't that sound nicer than a loyalty penalty for each city?).

How about a line of Diplomacy research that provides a resource based on the number of foreign cities divided by that player's controlled cities? Something like Spy Network or Cosmopolitan Culture, providing research and prestige production respectively.

From the Civilization line you could research Guild Specialization which would provide a bonus to Material and Metal production in cities which build a Guild Chapterhouse, but the more Cities with Chapterhouses you have the more likely the Guilds will make demands as a random event "The Metallurgy Guild requires 35 metal to use to train a new generation of apprentices. You have 5 turns to purchase or produce this amount. If you refuse, Guild Chapterhouses in your empire will cease to operate for 15 turns).