Profitable means we get more and more houses being built.
Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. It seems like the market is currently a game of chicken of who’s willing to sign away more of their life. An interest only loan is literally admitting you can’t afford this house and the only hope you ever have of paying it off is if it increases in value without you doing anything.
These interest only are the reason my parents lived in a house 2x what they could afford - they took out an interest only mortgage in 2002, paid less on the mortgage than I was paying in rent for a room in an apartment last year, and sold at a 2.5x gain (to someone in my generation who is now mortgaged to the hilt), and bought a smaller home in cash from the proceeds after retirement. It's insanely unfair that the solution to irresponsible lending to my parents generation is to protect their investments and make sure I can pay back what they won't be able to repay.
Europe, by the 1500s, was running out of land and resources. So they found a whole new continent, genocided the native inhabitants, and suddenly there's plenty of land & resources to support anyone who comes over to the New World. America by about 1880 was about out of land for westward expansion, so invented steel, concrete, elevators, skyscrapers, trains, and urbanized, making land irrelevant. The industrial revolution had largely run its course by 1914, but then we had 2 world wars that devastated Europe and made America the engine of rebuilding. We got to keep our exponential growth, but a lot of folks just...died.
Single-family homes are likely to become a luxury good. Not everyone is going to have them, and prices will keep increasing as they move up the income spectrum. What happens to everyone else depends on whether you believe the world will end in fire (war) or ice (dystopia).
Most countries birth rate falls off as they become more developed. There’s estimates that the world population will stabilise around 11 billion. I don’t think there’s any theoretical reason why high quality affordable high density housing is impossible.
A condo/apartment future is actually pretty likely, and achievable. NYC and most of the non-US world went that way in the 50s, and a lot of Silicon Valley cities (which were previously all suburban sprawl) have been constructing those 4-over-1 condos like crazy over the last 10 years. Even notoriously anti-development SF Peninsula cities have gotten in on it.
But that's largely not where the real estate feeding frenzy is - condo prices are up, but nowhere near as much as SFHs. Turns out a large proportion of Millennials still want a detached house with a yard in a good school district, the same thing that the past several generations wanted, but that dream is increasingly unrealistic.
You probably still need some tweaks to disincentivise use of property as a financial vehicle, but you're 70% there just by building more.
That's not really how it works. Developers can make a profit when building new housing on vacant land, or on improving existing housing. That does not preclude the resulting housing from being affordable, though.
This is an unfortunate overloading of terms, but "profitable" in this sense doesn't mean just the usual "get more money out than you put in". It refers to the practice of land/housing speculation, and buying housing with the intent to hold and then sell at a profit without doing anything meaningful with it.