OP, how long has your DH been living in your house? And a room set aside for your DSD?
I think it's at least several years.
That's long enough for your DDs, whose only home it is, to share a room.
DD1 is upset at how long she has had to wait to get her own room.
DSD says she will be upset if she has to spend a couple of nights every few months in a room that used to be hers but no longer is.
Well, that's just tough.
Her being upset doesn't trump your DD1 being upset.
DSD had to cope with her parents divorcing, and spending time in 2 houses.
DDs had to cope with the illness and death of their father, and then their mum moving in another man and his daughter.
None of these things were the girls' choice.
It would have been much better not to put your DH on to the tenancy, but you did, so not point crying over that.
But it was originally your and your daughters' house.
Tell your DH that things will be changing, your DD will finally get their own rooms, and will share again on the few occasions that DSD visits, or she can share with DD2, whichever she prefers.
Stand up for your DDs!!