Case in point: The John Hancock Center in Chicago. 700 units of luxury living since 1969.
Apartments may depreciate, but in a good number of cases condos don't get any cheaper.
There's only two things I see that make sense as answers here.
One is regulation/zoning. Let's assume we could fix that.
The second would be if the sale price dropped below the nominal cost of constructing new units, with some wiggle room in there for opportunity cost to builders who might make more money by choosing to build elsewhere. Do you believe that's the case currently in NYC, Chicago, etc? Is the price so low that it's not even worth it for builders to bother creating new units, because they couldn't recoup their costs?
You also have to factor in the opportunity cost of the land/unit too which is where the argument starts to fall apart. Why build a unit that rents for $X when you can increase your build costs by Y% and charge a rent higher than $X + Y%. That is why new construction generally comes in at or near the top of the market. Construction costs generally don't make up most of the costs of new homes in places like San Francisco, Chicago, or Los Angeles.
But sure, if you want to create a world with no zoning laws and with 10000% increase in housing supply, I am sure it will solve all the problems with pure brute force.
Fixing zoning laws doesn't necessarily mean having no zoning laws.
Ok, building more housing is "brute force." The other option on the table seems to be a tiny sliver of poor people win the artificially low priced housing lottery. I understand why that might feel good, but I don't see how it actually solves the problem in the long run.
People aren't water. They don't flow to any available crevice. They go where the stuff they need and want is.
This effect cascades all the way down the price curve. In macroeconomic terms, increasing supply shifts the whole curve below that point.
This is true so long as the new supply isn’t itself causing new demand, e.g. foreign investors leaving the unit empty.
Which is where your argument falls apart. Cities aren't closed systems. The price reductions won't trickle down to the bottom of the market because at some point there is always going to be people who are willing to move in from neighboring neighborhoods, cities, or regions. It isn't like the only people who live in San Francisco are the only people who can afford it. There are plenty of people who could afford the worst possible home in San Francisco but decide not to move their because they can't afford a home they want. Once those middle of the market prices come down, people will move in to fill that new supply.
That isn't necessarily true. It is most obvious when a neighborhood is experiencing gentrification. For example, imagine a SRO hotel in which the rooms are no more than one or two hundred square feet. Buildings like this used to be incredibly common in the Skid Row neighborhood of Los Angeles and multiple neighborhoods in San Fransisco. Many of those buildings are being knocked down in order to replace them with high-rise luxury condos. Since the new buildings are high-rises replacing much smaller structures, the new units can have several times more space per unit and still increase the density of the lot. The problem is that a 1000 sqft unit with amenities like an in unit washer and dryer is never going to drop to the price of a 200 sqft SRO room that doesn't even have an in unit toilet and shower. The new and old homes are so far apart that they don't behave like they are part of the same market.