Ok, now that I knew what to look for I guess I found it.

#1 Workaround (other than installing cockpit) for now can be a commandline call 
like:
$ virsh pool-create-as --name home --type dir --target /home

#2 testing without virt-manager
$ virsh pool-define-as --name home --type dir --target /home --print-xml > 
home.xml
$ virsh pool-define home.xml
$ virsh pool-build home
error: Failed to build pool home
error: unable to control COW flag on '/home', not btrfs: Function not 
implemented
$ virsh pool-start home

This is upstream issue:
https://bugzilla.redhat.com/show_bug.cgi?id=1866157

Which has a fix at:
https://gitlab.com/libvirt/libvirt/-/commit/2edd63a0dbd445112db23596ee0128521e8f1ff5

This is fixed in libvirt >=6.7

I'll need Ubuntu 21.04 be "fully open" for development first, then fix it in 
21.04 (libvirt changed to meson, that can be a bit of work).
Once fixed in 21.04 we can consider an SRU of the change for 20.10 (Groovy).

Thanks @ Mauro for the report!

** Bug watch added: Red Hat Bugzilla #1866157
   https://bugzilla.redhat.com/show_bug.cgi?id=1866157

** Tags added: libvirt-21.04

** Also affects: libvirt (Ubuntu Groovy)
   Importance: Undecided
       Status: New

** Also affects: virt-manager (Ubuntu Groovy)
   Importance: Undecided
       Status: New

** No longer affects: virt-manager (Ubuntu Groovy)

** Changed in: libvirt (Ubuntu Groovy)
       Status: New => Triaged

** Changed in: libvirt (Ubuntu)
       Status: Confirmed => Triaged

** Changed in: libvirt (Ubuntu)
   Importance: Undecided => Medium

** Changed in: libvirt (Ubuntu Groovy)
   Importance: Undecided => Medium

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https://bugs.launchpad.net/bugs/1901242

Title:
  virt-manager local directory storage failing

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