The parent comment is complaining about the specific amount, $500, and indeed, raising the rent by a large amount (defined percentagewise) is illegal in many jurisdictions. So it seems difficult to come the idea that it is somehow absurd.
However, the issue in congested areas is a matter of physics and people unwilling to relocate. Its not from renters simply fulfilling the pricing demand. I mean what exactly is the long term play in areas like this? Just keep stacking people on top of each other into infinity? Its obviously not realistic.
Rental increase caps are not something designed to make the overall housing prices more affordable. That’s just not the goal in the first place. The goal is to provide additional stability to renters. That additional stability will, of course, get priced in.