I suspect the answer is that there is no "the" positive feedback circuit as not only can things get messed up in many ways interactions between components can make the issue that none involved intended. A simpler comical example is medical marijuana in California.

* Federal legislature dogmatically denies a medical usage. * State approves it for medicinal use. * Federal regulators threatens to arrest any doctor perscribing it. * Intended medical gatekeeping loses power

Neither party wanted that laxer level of enforcement (regardless of outcome) but together they did so.

Besides zoning laws and building codes, dodd-frank and similar financial regulation has made speculative building of single family homes nearly impossible, if you are not 100% self-financing.

Which itself is a capital feedback loop which requires a not insignificant minimum outlay to enter the market.

can you elaborate on this? I am not familiar with how dodd-frank and other regulations impact building

Basically, the government said loans are too risky to give to builders, except to build the things the government wants.

Longer version: Many people were abusing interest-only loans and similar financing. It was blamed somewhat deservingly for the 2008 crash, as banks had incentives to sell as much financing as possible and then sell-off the loans in packages to others, offloading the risk. Repackage, resell, repeat. Eventually crash.

Without getting any deeper into the politics of that, Dodd-Frank was the regulation heavy government response, part of which redefines risk levels of loans, making financing, in general, a lot harder and more expensive to get. Simultaneously, it enacted government guaranteed loan programs for lenders and builders that meet certain criteria.

Keep in mind, there was a large army of homebuilders that besides facing a recession, suddenly couldn't sufficiently finance their main product via banks, and needed to find a way to stay in a business that's high-risk, high-capital, slow-cashflow, and low margin.

The only government loan programs that allowed similar sized financing to these builders all basically require some sort of public housing participation, the most profitable and easiest of which to qualify for is mid to large scale apartment complexes that would be contractually obligated to accept tenants receiving public assistance from HUD sponsored / affiliated programs. Some programs are available for mixed use or similar developments, usually with the involvement of local government controlled block grants.

But this has left a sizable gap between small business residential builders and the larger scale required to take on government sponsored projects.

The exceptions to this are generally contractors that have their own sources of capital, or builders that were already big enough to have existing appropriately sized collateral. But it's very applicable, in the context of barriers to business growth, especially capital.

When you pass an apartment construction site, start paying attention to how many of them have signs that include a HUD logo. It's a substantial percentage.