Here in the 1905 LDS edition, the preposition in was accidentally added, giving “the covenant people of the Lord who are in the house of Israel”. (The grammatical emendation of the original which to who and is to are was made earlier in the editing for the 1837 edition.) The 1907 and 1911 LDS editions followed this bizarre reading with in, but the 1920 LDS edition restored the correct phraseology without the in. There are no instances elsewhere in the text of the prepositional phrase “in the house of Israel”, although there is nothing inherently wrong with such phraseology, depending on the context (there is one instance of it in the King James Bible, in Hosea 6:10).
Lyle Fletcher (personal communication, 15 February 2007) suggests another possibility here— that the original text here may have read “which is of the house of Israel”. He notes that elsewhere the text refers to being “of the house of Israel” (27 times). There is also one case where scribe 2 of 𝓟 initially omitted the of in this expression:
On the other hand, here in Mormon 8:21 both 𝓟 and the 1830 edition agree, so 𝓞 itself likely read without the of (for this part of the text, 𝓟 and the 1830 edition are both firsthand copies of 𝓞, which is no longer extant for Mormon).
Nonetheless, there appears to be a difference here in Mormon 8:21. Moroni is simply declaring that the house of Israel is the covenant people of the Lord; thus there is no need for the of. Consider, for instance, the same idea expressed earlier in this book:
The critical text will therefore refrain from adding an of before “the house of Israel” here in Mormon 8:21.
Summary: Maintain in Mormon 8:21 the lack of an of before the house in the relative clause “which is the house of Israel”; the Book of Mormon text can refer to the house of Israel and the Jews as the covenant people of the Lord.