[frmersdog]

This is a misconception that gets perpetuated because of a conflation of a shortage of physical housing units (which does not exist) and a shortage of affordable units (which does)[1]. This shortage is highly local, as your Fannie Mae sources discuss; it is best characterized as a mismatch between local resources and opportunities. This suggests that it's not merely a matter of market failure, but additionally (if not principally) one of municipal mismanagement.

The solution is already known, as it has been executed successfully in many places, including Singapore, the UK[2], and the Soviet Union: the government builds units directly and either sells or rents them according to affordability rather than cost. This will destroy housing as an investment, which would certainly have knock-on effects, but in terms of solving the problem at hand - "Are there enough places for people to live?" - it's adequate. Chalk up any resulting difficulties as a redistribution of the externalities of letting the problem fester for so long.

>With regards to the labor market, due to structural demographics and labor shortages, it is highly unlikely in my opinion that the job market weakens to the point where housing experiences a crisis from a rapid, sustained increase in homeowners who cannot afford their mortgage payments.

Please see GP for examples of situations where just that exact scenario happened (China, relevant because of the potential for financial contagion) or almost happened (the rest). It's unwise to bet the labor market on the ability of officials to pull novel remedies out of thin air every time a systemic threat appears.

[1] https://www.tandfonline.com/doi/full/10.1080/10511482.2024.2...

[2]https://www.youtube.com/watch?v=jZpLiJdIGbs