We then concocted a lot of policies to sustain demand, and hamper supply, the keep this scheme afloat.
Housing cannot be both affordable and a good investment.
You make it sound like a nefarious plan or some backroom deal. It seems more like real estate became our de facto retirement scheme due to everything else paling in comparison.
Pensions? Gone.
Savings? Nope, no interest (ha ha) in that.
Stock market? Sure, but its volatility prevents sane people from putting their entire nest egg into it....
If housing prices drop, the middle-class homeowner gets vocally angry at the presiding administration.
It's easy to blame Wall Street, corporations, immigrants, but the reality is much simpler: these policies are wildly popular with the first few generations of voters who saw their property prices go up, so governments are deathly afraid to touch them.
The next generations are the ones who suffer, but they don't vote (yet). Politically safer to kick the can down the road and make it someone else's problem in 10 to 20 years' time.
It wasn't turned into a scheme by anyone, it's the nature of land. See Ricardo's Law of Rent; owners of land are able to extract rent from the tenants, and in desirable locations they can extract larger amounts of rent. If you want to make money without doing any work, buy land in desirable, growing locations and rent it out.
The solution is a land value tax, accompanied with a citizen's dividend or a reduction in other taxes such as income taxes.
What's new is that it is harder to build housing than it used to be. The escape valve for an overpressured market used to be building new housing -- and if the new housing meets demand it does not cause the prices of existing housing to tank. The market simply reaches an equilibrium. That's what is not functioning today.
We don't need land value taxes or weird rules about rentals or discouraging investment or any of that -- we need to make it easier to supply new housing. Any solution that does not involve making it easier to build new housing is just not going to work.
No, a good investment is something that increases in value over time. Not "quickly." That's a get-rich-quick expectation, not an investment expectation.
You also seem to be assuming that housing prices increase but incomes do not. That is not the case in a healthy economy. (And growth in an economy is normal and expected and good, not unsustainable.)
This is not a theoretical situation. We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time. And we also know what changed -- barriers to building new housing have increased.
Since housing is a large and increasing portion of CPI, this is mathematically impossible. As housing increasingly dominated the inflation calculation it determines inflation. QED.
You could make the same argument to say that bonds are a bad investment. It's not true, depending on what the investor expects. Raw performance is not the only criteria by which investments are evaluated.
Another aspect of investment vehicles is the risk:reward ratio. Bonds are low-risk and thus expected to have lower returns than a higher-risk investment like stocks. That does not mean that bonds are a bad investment. It simply means they have a risk:reward ratio suitable for some investment purposes but not others.
Before the current supply crunch, housing was a reasonably safe investment that resulted in a reasonable return over the lifetime of a homeowner -- and it did tend to keep up with inflation. It was not a "bad" investment. It was not growing over 10% a year like it is today, but that's a recent phenomenon caused by shortages.
This is truly semantics and is quite pedantic. I’d highly recommend avoiding these types of arguments.
You’re digging in for a very specific and weird reason - I’d suggest not.
So far, we have not seen economic growth without proportional growth in material inputs, including energy.
https://en.wikipedia.org/wiki/Dematerialization_(economics)
"We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time."
You are referring to a period (the 20th century) that saw tremendous urbanization due to one-time advances in technology. Those will not be repeated. For details, see "Rise and Fall of American Growth" (Gordon).
Housing rose with inflation for 400 years. This bullshit is a 21st century thing when housing became a bitcoin-like financial scam.