I've been fortunate to have a personal house we rented out, and also have insight into a larger organisation that has multiple properties to rent.
The difference between the two is the risk of a bad tenant.
With my personal property we were fortunate to never have a really bad tenant. We had high ish turnover (it's a starter home, indeed was our starter home, so typically people grow out of it.) we'd lose a month or so if rent between tenants, there would be some money spent on maintainence and so on. Our time was uncoated.
We have strong tenant laws here, so if you geg a bad tenant, who literally just stops paying, it can take months of lost rent, and significant legal fees to get an eviction. Bizarre as it sounds its cheaper to _pay_ a bad tenant to leave than drag it out in the courts.
For institutions this is a cost of doing business, and is factored into overall rent.
If a private owner encounters such a situation it basically causes them to sell out - one more private property goes into institutional hands.
In other words private owners don't understand the risks and "hidden costs". As long as they only gave good tenants things are rosy. First bad one, and they exit the supply chain (and have lots of good horror stories for their mates.)
So I think your cause/effect is backwards. Good tenant laws (which I think are generally a good thing for good tenants) can make house-rental unattractive to individuals. Resulting in mostly "for profit" housing supply. Plus good tenants subsidise bad ones.
Ironically strong tenant laws also make it a _very_ tough market for new, or risky, tenants. Landlords understand the high costs involved, and do become very risk-adverse with applicants. Which is bad if you have high risk factors (like self-employment).
It's a very delicate balance to get tight. We need strong tenant protections, but we also need some landlord protections to keep the market in balance.