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And permits are way higher than houses being built, it's more like market failure.

I don't know much about this area so maybe you can unpack this for me. Are you saying people are getting building permits, but not actually building? Why would that be happening? And what about the market is causing it?

They’re not building because they believe they can earn more profit by waiting for property values to go up.

… and a permit is required to hold the property? (I'm curious why people are having permits issued if they have no plan to build)

Is this like domain names?

Parent comment is incorrect. No one goes through the costs of design and permitting and planning approvals to do nothing and hope prices go up. You’d wait and land bank and then do it when you were ready to develop.

Developments have been put on hold because interest rates skyrocketed and inflation in construction costs has as well. So original business plans are no longer viable.

Developers are getting permits but then the interest rates have gone up so much, or other market conditions have shifted, such that it is no longer viable to build the building.

The problem is that the system is too rigid and the conditions of project viability are extremely narrow.

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