i think you are maybe a bit too pessimistic! housing isn’t fungible, every house is different, but different houses are often pretty good substitutes for one another, limiting (though not eliminating) homeowner market power. 1/

there might be some demand induced by new building as e.g. it becomes more affordable for the wealthy to buy second homes and enjoy the option value of vacant housing rather than housing services directly. 2/

but demand for services delivered via actual occupancy are limited by time itself, and households can’t divide less than one, and policy can favor occupancy and target household size. 3/

all this is to say that despite the far-from-commodity, market-power-riddled nature of housing that you very aptly (and humorously) describe, it may in fact be possible to make useful progress! /fin