I'm sure it appealed to central planners, especially in the old Soviet system where everyone shares in the common plan, and there may have been no better alternative.
But it certainly causes problems when the system breaks, as we can see.
In googling "district heat", I find a mixture of modern companies selling it (very European) and discussions on teh failure of district heating. The more northerly the city, the more likely to use it.
The main criticism of district heating was in the lack of maintenance, which led to even greater ineffiency. Because the Soviets (and most governments) subsidized district heating, when communism collapsed the citizens suddenly had to pay market rates for power. It was only then that people looked at ways to provide greater residential heating at lower cost per home.
Somewhere in the saga of how people keep warm in cold climes is a thesis to be written. If approached from a capitalist vs. socialist basis, the results could be very illuminating.