2. When I (to become) his neighbour, he..........(to live) in that house all his life.

В этом предложении первая часть относится к Past Simple, а вторая к Past Perfect Continuous. Past Perfect Continuous указывает на действие, которое началось в прошлом и продолжалось до определенного момента в прошлом.

Правильный ответ:

When I became his neighbour, he had been living in that house all his life.