As indicated in the manual, morale can be attained in two ways. The first is by building houses.
A single house in the area of influence of a Town Center grants all units within that same area one morale point. You can determine the area of influence of a Town Center or a Capitol by selecting the building and looking for the green and blue flashing line that forms a square some distance out. All units in this area receive the morale bonus the house gives.
Likewise placing two houses will give two morale points. A town center's area of influence will give a maximum of two morale points on tournament mode, and four morale points on standard mode. You can build more houses than the game mode supports, but the morale level will stay the same until you build a capitol, no matter how many houses you build.
A capitol can support two more houses than a town center, on tournament mode that is up to four houses and on standard mode up to six houses. These in turn distribute up to four or six morale points to all units within its area of influence. Additionally, the Capitol has a larger area of influence than the town center, and thus affects more units.
If two town centers or capitols have an area of influence that overlaps, houses will only contribute to both, but the morale of two town centers/capitols near each other is not cumulative. Nor is a warrior hero's morale cumulative on that provided by houses.