>What's best for society is if everyone who's wealth is tied up in property takes a hit to their wealth so that housing becomes affordable and loses it's status as primary wealth store, but that would be devastating in the short term to the middle class and therefore completely politically untenable.

This is true if the "hit" on wealth is linearly distributed. But since income growth is not linearly distributed (it goes up with wealth), it's reasonable that the tax (or whatever form it takes) should also be progressive, perhaps to the point where it excludes properties under $1M, for instance, thus sparing the bulk of the middle class.