>> It's only an investment because somebody is willing to pay rent to cover the mortgage the purchaser paid and supply profit to the owner. If there are no renters willing to rent then nobody is able to profit.
Not true; if housing prices continue to increase, then even without rent it becomes a reasonable investment. But that's just it; people need a place to live, so with housing becoming harder to purchase due to higher competition, more people end up renting, becoming this negative feedback loop.
>> Moreover the reason why more housing has become investments is because capital costs of the housing market has increased. If local governments and fiscal policy try to make housing prices increase forever, then eventually house capital costs become high enough that only corporations or co-ops can own them.
So local government and zoning can be part of the issue, sure, but again, 1/4 of the homes sold in the past year were to institutional investors looking to rent them out. Those homes -could- have gone to a family; instead they became rental units. Relevant when we are talking about home ownership.
As to fiscal policy, I sort of agree with you, but not quite. It's less fiscal policy (after all, both a potential homeowner and a business can float a loan), but the scale at play. An investment company can get millions loaned out to them just by dint of being a business with cashflow, and so can pay well over appraisal. Homeowners can't; the loan there is made on the basis of the property as collateral. That innately means they're not competing on a fair footing.