This is a long standing feature request, so probably not very high on the priority list for mastodon. Meanwhile there are forks. Fedibird has implemented a feature called "domain subscription" which allows adding one or more instances to the usual lists. Qoto has also incorporated those changes. However because of how activity pub protocol works you will not get full local timelines of selected instances this way (you don't get them on global/federated timeline either).
Some clients (Subway Tooter, Fedilab) allow you you directly request the timeline from specific instances (not through activity pub but mastodon specific API) if that feature is enabled on that instance (it is by default), and that is the only way to get the the full local timeline.
@namark thank you for the detailed answer! Will look into your suggestions