Uh, the state. It's strange to me that someone can honestly ask this question. The free market has failed as is its wont in these matters, this failure always needs to be addressed by the state. Where were you for the last global economic collapse?
And in many major cities, things like zoning are preventing developers from building nearly as much housing as they’d like.
I guess I’m just kind of baffled as to how you’ve reached the conclusions you have. I’d love some clarification.
In a free market, all those who poured billions into the bubble would have gone bankrupt and all of their real assets would have been sold off in bankruptcy proceedings to responsible players who are less likely to over leverage themselves and exacerbate the speculatory frenzy in the next bubble.
The only reason the market hasn't solved the housing problem is government interventions like rent control. In places without these interventions and with strong enforcement of private property and contract rights, the market does an absolutely excellent job of providing housing.
The effects of rent control have been observed for a hundred years. In city after city rent control has been observed to cause more harm than good for the population at large.
Kevin Erdmann agrees with you. Here is his blog post about the housing shortage associated with the 2008 bust
This is Berlin, which actually used the slogan "arm aber sexy" (roughly: impovershed, but sexy).
They don´t have the cash to start building flats with no ROI.