This isn’t quite true. My understanding of the process is that applicants who’ve picked a college are all put into one group and ordered randomly within that group. The Durham sorting hat goes through the list starting at number one and working it’s way down. For each person, it looks at the college they have chosen and if there are any unfilled positions, allocated them. Note that “any unfilled positions” really means any positions left for people taking that particular course since the sorting hat specifically ensures that there is a spread of subjects. So it could be that person 1000 on the list who wants to study Maths doesn’t get allocated his chosen college because they have “enough” maths applicants already, while person 1001 who wants to study English Literature does get allocated to that exact same college because they haven’t yet filled up their English Literature quota. All the people who don’t get their choice (ie who end up not getting their choice in the first pass through) are then added to the second list, which also contains all the people who made an open allocation.
Once the first list has been completed, the second list is gone through by the sorting hat. This list is also ordered randomly and if I remember correctly the first person is then assigned a college at random - if there is not a space for them, then one of the remaining colleges is picked, and so on, until they are ultimately allocated.
What this means is that if you choose a less popular college you do have a relatively high chance of being allocated as normally that college would be filled mostly from the second list.
But I agree it’s very different from Oxbridge where you apply to a specific college even though you may end up being pooled. Furthermore at Durham, you are likely to spend your second and third years not living in college. So overall I don’t think it’s worth getting too invested in aiming for a particular college - it doesn’t matter as much. I have a child at Durham who made an open application and ended up being allocated to one of the less popular hill colleges - and was very happy indeed there.