More housing will boom real estate market, and only for short term. I don't believe new housing will help average Joe to have better prices. To the contrary, it will make some real estate investors richer.
Perhaps OP thinks housing doesn't behave like a normal good or perhaps he think there are some other governing dynamics than the ones people typically learn?
Unfortunately, to some extent it doesn't. House prices go up, especially in a terminally low-interest rate environment, and lots of people with (unearned) equity from that increase pile in buying more as speculative investments. You'd hope that government would step in to break such an obvious vicious circle, but... no, it's no use, I can't keep a straight face.
(Not defending OP's specific claim. Also speaking from a London perspective; YMMV.)
If new construction was going up that was priced in a normal bracket, affordable for mere normal people who had 150k to put down for a mortgage, I would consider that a massive improvement.
The problem here isn't just that what's being built is unaffordable - although it definitely is that - but that it's not what inhabitants want. It's being built to appeal to mostly Asian investors who like shiny high-rise newbuild and will probably never even see their purchases, much less live in them, so you end up with minuscule unit sizes, poor build quality, overheating, insufficient elevators and boilers, all the obvious corners to cut.
Not sure what you mean by "mere normal people who had 150k to put down for a mortgage" - with median London incomes somewhere around £30k, needing a £150k deposit doesn't sound especially normal-friendly. If you meant total price, yes, now you're talking.
I was being facetious, $750,000 is a totally insane cost for a condo unit, but even that would be far more affordable than what's been going up in San Francisco over the last 10 years.
You are definitely affecting the price of housing by doing that
SF isn't taking full advantage of the business opportunity that greater housing density presents. It could be that more density, especially if handled well (better public transportation, proper infrastructure) would lead to even more economic activity, more high paying jobs, and so forth. Keep in mind, the cities that are more expensive than SF tend to be denser as well.
People actually do like dense neighborhoods under the right circumstances - dense parts of Brooklyn and Manhattan are more expensive than SF, and some of SF's dense neighborhoods are more expensive than the low density ones (russian or nob hill vs excelsior or outer sunset).
I figure that the desirability of higher density housing with good public transportation, combined by the increase in economic activity from greater density and a larger population... yeah, it could happen. Not saying it would, but I don't think it's all that outlandish a thesis.
Also, this is partly a trick of borders, since lower cost housing would probably be built outside SF's proper, so taken as a region, costs could drop even thought they went up in SF. Kind of like Manhattan vs New York generally.