[wongarsu]

The classic solution to high prices is to increase supply. But in this instance the supply for long-term dwellings is used up by another sector (vacation stays), and that would happen to most new supply too. Eventually the profits of the two home uses would converge if you increase supply enough, but many tourist hotspots might run out of space to build long before that.

I think segmenting the space, as mentioned by matsemann, is a good solution here. If you allocate half the town (including half the areas for future development) to long-term housing and the other to short-term stays, you prevent the markets from sharing a single supply. In the first years it will still be much more profitable to invest and build in the short-term half of town, but as long as there's profit to be made in building in either half of town this will sort itself out.

[bradleyjg]

It’s pretty hard to run out of room given the technology we have for building up.

[doublespanner]

This tends to solve the problem by making the destination less desirable, more than it increases supply.

[bradleyjg]

“Nobody goes there anymore. It’s too crowded.”