> It amazes me that, in wealthy countries, there are significant homelessness problems due to economic displacement. I consider it an existence-proof of the idea that a free market cannot solve all problems.
That's wrong. The vast majority of problems with capitalism are caused by wrong policies and abuse of power. The free market is a powerful tool that can solve a lot of problems within the context of an existing system. Obviously, USA isn't known for good policies. Lots of self destructive political ideas are floating around or are already implemented.
For some reason a certain group of people gets their blood pumping once there is government intervention of any kind. For them there is always too much government intervention. Except that is the wrong mode of thinking. Government intervention is not like a soup where adding too much salt makes things worse. It's not about the quantity, it's about quality. No intervention is just as bad because the free market is a machine with no human values, you have to give it human values to obtain the desired effects.
Now here is where the weird things start to happen. What human values did Americans encode in their political system? Let's take California as an example. Homeownership for old residents at all costs, even when it hurts others and themselves. California has an extremely weird desire for pain. You introduce property taxes and then take them back by freezing them. What purpose does that serve? The tax money is gone but the psychological effect is still there. People will refuse to sell their house or move unless they absolutely must. They are forced to stay in a small home even when their life circumstances change and they end up with more or less room than they actually need. Children stay at home because they cannot afford to rent or to buy property with current tax rates. You even built a legacy system that lets children inherit their parent's property tax status. It's absurd. None of this has anything to do with the free market. None of it. The free market doesn't tell you to grab a knife and stab yourself. The government can tell you to stab yourself but it can also stop you. Again, the problem is extremely poor leadership, not the fact that leadership exists.
Do you know what a free market solution to high housing prices is? The solution is to respond to market signals. If housing is expensive then just build more housing. It's highly profitable to do so. It doesn't matter what housing you build as long as it meets demand. People hate on luxury apartments but what they don't understand is that luxury apartments are wealth traps. They aren't entirely meant to provide housing. The unoccupied luxury apartments act as a sink for excess capital to pour into. Imagine a Chinese millionaire trying to get $10 million out of China. He could spend that money on one very expensive luxury apartment and displace nobody or he could spend it on 10 apartments and displace 10 people and drive up rents. What's your pick? If you want housing for everyone then the solution is not to ban housing via rent control. That's just plain insane. The solution is for the government to enter the housing market and provide housing at cost or for a very small margin below <10%. Providing housing at cost is not the same thing as a subsidy because the profit margins in mature industries get closer and closer to 0%. Don't subsidize housing because it restricts the amount of government housing you can provide. The government as a market participant can cut out middlemen that want their own cut and thus allows easier access to housing. Serving a basic need like housing is very easy for the government to do. The demand is easy to predict. One unit of housing can provide for x people. We have y people.
Okay, so why does the government not just build more housing and let private companies build more housing? Because pain. You cannot maximize pain if you avoid harming yourself. People consider housing an investment which is just plain wrong. I'm in a 50 year old apartment and the building codes back then were just bad when it comes to electrical wiring. Why does anyone want to stay in old housing? Because it is cheap? Fine, except that goes against the idea of housing being an investment. Why would you invest into something that is losing its utility over time? If you invest into housing because of scarcity aren't you just going to create even more scarcity to further improve the value of your home? Scarce housing? Why should that even exist? Oh right. It's because commercial real estate is the only thing that actually brings in tax money. So SF has lots of commercial construction and the commutes grow longer and longer.
When you consider that there is a national shift from low skilled work to high skilled work in the US this is absolutely disgusting. People have the skills to work at a good job, but they are prevented to do so by the selfish desire of a few individuals. When times are bad and people's hometown declines they are forced to move and for a lot of them their best bet is the bay area or the rest of California. All the new good jobs are in California. When you put a brake on success in urban centers you just end up with even more pain in rural places. Everyone cries gentrification when things are good but when things are truly bad nobody gives a crap except that angry billionaire with blonde hair who got his twitter account banned.