Many economic systems around the world rely on various kinds of "demand sponges" to soak up excess spending. This keeps inflation in check b/c excess spending can be directed towards a "Better Future" nest egg as the Future has theoretically infinite storage capacity.

In the U.S. the SPY and real estate soak up most of this excess spending. In poorer countries, physical U.S. dollars. In China, real estate is the primary sink. In certain subcultures, GME/AMC/DOGE.

One of the philosophical ideals of "hard money" is that there should be a way of transporting spending power into the future without loss that is primarily useless. The issue with using real estate and the stock market to transport wealth is that they have real use cases. People need to live in houses, stock prices need to be rooted in fundamentals otherwise everything is built on pillars of sand, etc...

Gold and art are the most traditional ways of transporting wealth across time while bitcoin is one that is very techno but also very volatile. However, even for the very wealthy, a diversified stock portfolio is likely still the most pragmatic.

Most normal people rely on real estate (to a fault, e.g. w/ 2008) b/c investing in the stock market has operational risk & psychological risk ("investors" end up gamblers). The FIRE movement tries to get around this via SPY dollar cost averaging but the end result is using the SPY as a hopefully-too-big-to-fail pension plan replacement.

Through this lens, "just increase the supply of housing" is naive because it fails to account for the existing web of incentives. It's the engineering equivalent of re-routing entire rivers of cashflow. China's supply of ghost cities for e.g hasn't helped with housing b/c it's only certain locations where the traits of being a massive demand sponge are satisfied.

Governments need to prop up the asset prices of these stores of value b/c so much is already invested in them. They need to prevent a "bank run" on these de-facto inflation-adjusted savings.

Gold and bitcoin "solve" this problem because the withdrawals are theoretically distributed across infinite time as they are immortal systems. However most people do not think like vampires & instead want to solve problems like "how do we buy a house in a good neighborhood before we are past child-bearing age?" The assets become a carrier to play high volatility (but low expected return) games that are perceived as the only way to "win" (rational application of hail mary strategies)

To summarize, real estate price appreciation is due to it absorbing the "inflation" that would otherwise be distributed across other assets and commodities. This river of inflow has a lot of cultural momentum and pragmatism behind it. (the demand is real) Redirecting this river requires an alternative sink of money that 1. Has enough volume and low barrier to entry to constantly absorb this flow. 2. Has non-homogenous motivations for entering/exiting to prevent bank runs 3. Preserves spending power across both short, medium, and long time horizons.

Like the CAP theorem, it's unlikely one asset can satisfy everything b/c it's market value would be infinite. However it's interesting to think about the housing problem through the lens of demand sponges and all the layers of historical solutions and new solutions towards incentivizing/manipulating demand.