While I agree with a PP that about control and very different outlooks on life, it seems to me that the two adults in the household are not pulling together, indeed as PP says,
@trashcanjunkie says My philosophy is do the minimum possible to keep things running smoothly. Be efficient basically While makes me wonder who is deciding what is required for smooth running
As for the children, its a bit disingenuous to say on one hand Dh believes the children should be punished if they don’t do their chores - I don’t agree and so it doesn’t happen and then to ask And why is it my fault? about something the DC have done that he would not countenance.
Although in the title , you are asking 'am i too harsh', throughout the text you are very clear that he is wrong, just wrong on everything, your kids are great, just need firm handling and you, you are the ultimate arbiter.
It's not obvious to me what he is getting from this set up, I would not want to live like that. It is a truth universally acknowledged that living with children is not easy, living with step children is a minefield. It can only work if the adults involved have each other's backs. I read nothing that suggests that you do have each other's backs. That you can decide between you what will happen on each point of contention and then absolutely go with it, not undermine each other, him by inspecting their rooms and telling tales, you by saying if you don't agree with him, it doesn't happen.
Who would want to live like that?
Have you ever talked about who does what around the house, how the chores are split? He tries to do everything and gives up, you are happy to do it at your own pace. Where is the sense of talking about it, first privately and then including the DC, about how things are going to run around here? If it smacks of a flat share, then, yes, it is one way for a group of adults to agree, then either stick to it or move out.
And for the DC to learn to take a bit of responsibility too and not rely on being cajoled to do their share.