And so was mine, and so was everyone else's. /usr was the standard place for users' home directories back then. /home didn't appear until some later version of Unix.
Fascinating, i never realized. I guess sysadmins took other precautions to ensure nobody had a username of 'bin' or 'lib'? There's a man page for hier(7) in V7 but it doesn't mention home directories at all.
In V7, creating a new user was a manual process - there was no program to do it automatically like there is today. You had to do su, mkdir /usr/dmr, ed /etc/passwd (creating an ID with initially no password), chown dmr /usr/dmr, etc. Whoever had the root password would have definitely known that /usr/bin was an existing directory and not tried to create a user called "bin". Of course, you could create user directories on separately mounted file systems as well if you didn't have a lot of space on /usr.