This might be the exact same thing that recently happened to me. Is the housing rubbing against the fly-wheel when you tighten it against your back wheel?
I was able to easily remove the fly-wheel as it only has one bolt in the centre but I was not able to completely remove the spindle to get at the screw-head side of the housing screws. I found the cotter pin on the opposite end of the spindle from the fly-wheel impossible to remove as I didn't have the right tool. But I'm not even sure that removing that cotter pin would have allowed me to remove the entire spindle.
In the end, I was able to use some needle-nose pliers to turn the loose screw from the threaded side enough to tighten the housing so it didn't rub. I also tried to squeeze in a little loc-tight. A bit of a mickey-mouse fix but I've ridden it now for probably 20 rides without the housing rubbing again.
If you are having the same problem I had, give it a try.