Again, this is all way too constrained and that critique suffers the same problem.
If we used that as advocacy then we should steamroll Central Park in Manhattan and replace it with apartments. That certainly would lower the prices in the same way that demolishing Stanford and putting in apartments there would.
The narrow vision of "supply and demand" ignores the obvious problems in those examples because it cannot accommodate for things outside its narrow scope.
If Central Park was steamrolled and prices dropped, then the model would be hailed as predictive of the price drop because the supply increased. It doesn't see the park and doesn't understand the reality.
It also ignores say, how the quality of public schools can affect housing prices, access to, speed and reliability of mass transit, recreational and cultural areas, cleanliness of the streets and the unhoused, perception of crime, availability of parking...
These important aspects all get ignored. Deciding policy without them is disastrous
The behavior of the market is complicated and new buildings with an increase in supply doesn't guarantee a price reduction. In practice, that should be sought through market regulation and policy - controlling of airbnb units, or units sitting idle as investments, or being withheld from the market ...
Those problems do not magically fix themselves and as you pointed out, self interested actors in a free market did not make 1,000 flowers bloom in Chattanooga or Cleveland. There's consequences for basing public policy strictly on neoclassical economics and pretending like nothing else matters.
Intentional holistic policy like they do in Amsterdam or Copenhagen is a good counterexample. Look at those places in the 1970s versus today.
We need more housing and lower prices but doing the first does not guarantee the second and the second can happen without the first. They're related but mostly independent problems that need separate attentions.