That takes a long time to play out, and other factors come in to play during that time.
The fact that this didn't happen is due to regulation and other market distortions.
Increased supply, even if not available on the market means that the owner or occupant will not outbid a local on a different housing unit. Multiple additional housing units will over time enter the market and reduce competition and rent increases. A more friendly zoning situation will also spur developers to bring in more housing capacity. This will stabilize or reduce rents, as has been empirically demonstrated in the past year by Seattle.
If you could wave a magic wand and do the same thing for food and water wouldn't you do so?
Which has another cost: everyone here who owns their own property would see their most significant asset disappear as the value of their home plummeted along with all the investment properties.
If I could do the same for food, we'd soon live in a hellscape of rotten food.
Why SHOULDN'T we just let the Chinese build a bunch of empty buildings? It's their money and if they want to waste it building us cheap housing on an investment that will eventually go bust, I say we let them.
The solution is scorched earth, "LOL, you thought your investment was going to go up, but instead we built such a ridiculous amount of housing that houses are now free for everyone".