It's a complex problem. Supply and demand works in some housing markets and not others. Some markets are non-competitive so supply and demand doesn't quite work. This is not because land is a limited resource, but travel times to work are a limited resource. Land use is limited to a number of minutes from where jobs are. Before cars became common commute times were the same length as they are today, but people lived much closer to where they worked.
In housing markets where there is a lack of competition this allows land lords to raise prices as much as they want, up to a point, as long as tenants can pay. Because it's an inelastic good, people have to pay or be homeless, so they'll pay up to how much they make.
China is a good example of this. It has some of the highest rent prices in the world with people crammed into these coffin sized living conditions, so China has strongly stimulated building development. This has let to handfuls of ghost cities with no one living in them, and yet rent prices continue to increase beyond just about anywhere else in the world.
Singapore is a good example as well. It's a country with limited land and a high population. The government there builds condos with a locked rate, so the average citizen can afford it. The government effectively becomes their land lord. "Buying" land there is renting, and the condos are quite nice. They have the resources to do this, it limits land prices, the people benefit from it, the government benefits from it. I'm not saying this is how other countries should do this, just that it makes a good use case to show an example of what reduces land prices and an example of what increases it.
One such solution I am unfamiliar if any country in the world does, is build more Ivy / high end business universities. The largest reason someone chooses to start a business in an area is because their social network is there. They get this network at a university. By building education up in a better way, more cities will form around those universities. We could get more cities with businesses, instead of people fighting over the few options in the US, despite all of the land we have.
Another such solution is limiting business in an area. If the number of workers in an area are limited, around those businesses house and rent prices become competitive and supply and demand starts working. Business that want to expand or new businesses would have to move to another area. (Of course, this solution is not without its faults.)
The European solution is two fold: 1) mixed zoning, so businesses are more inner-twinned with residential reducing commute times increasing the ability for supply and demand to work. 2) limit building size to regulate the residential to business employee ratio, which allows supply and demand to start working. We can see today that this works and works well.