I doubt homeless shelters produce this effect on existing home prices.
And yes, telling a hard working middle class family with kids to just declare bankruptcy and move on is a big deal and worth examining the impact before you create policies that make that a real possibility.
Would I feel bad for someone who bought a sfh and went underwater. You betcha. That's life though. Most car loans are underwater from day 1. Should be artificially restrict the number of cars on the road so car owners can sell their worn and breaking down clunker for a profit too? Should we continue to limit this dynamic to scalable profit generating schemes that disproportionately benefit millionaires and billionaires?