If we were to do an instant change, the best way to do that is to give everyone a tax credit equal to the value of their existing land, with retirees and others who need public support having a few more options to convert those tax credits to cash.
The basic issue is the current US property market is estimated at $33.6 trillion. If you assume 80% of that is land value you end up needing to compensate 26.88 trillion. On the other side of the market you have mortgages you put under water that people will walk away from. The mortgage market in the US is $17.6 trillion. If you assume 80% of mortgages are walked away from and the mortgages end up 70% underwater you end up having to compensate $9.856 trillion dollars. So solving the residential portion of compensation potentially costs $36.736 trillion dollars. If you have compensation in the commercial and industrial land markets as well that makes things even more expensive.
A tax credit that gets subtracted when the homeowner defaults equal to the value of the default would resolve the walk-away problem.
I agree you can modify how the tax credits work to potentially transfer the mortgage loss credits from the homeowner to the mortgage holder when the homeowner walks away. If you do this effectively you can reduce the cost by nearly $10 trillion but still have around $25 trillion in residential costs.
You've outlined very clearly one of those errors - housing. We know that housing values can not both be an investment and affordable long-term - those things are inherently at opposition. Therefore the best price for land is zero. The way to do that is to increase the tax on the market value of a house until the market value of the house is equal to the cost of the parts and labor needed to build that house. When you do this, you have what we call a 100% land value tax. It fixes all sorts of incentives, turns NIMBY's into YIMBY's, incentivizes the best use for the land. A land value tax is not just increasing the equivalent of PI from 3.14 to 3.14159, it's setting the correct value for land exactly equal to PI.
One of the amazing side effects of the land value tax is that now that you don't need a continually increasing housing values, the amount of debt in the world is going to start growing less quickly, as a large percentage of debt comes from mortgages. When you zoom in on how that works, and why it works, what you find out is that you want debt to only increase when real productivity increases. The flipside of that is also true - you want the currency to increase equal to productivity, this is why Bitcoin is fundamentally unstable long-term and why the gold standard collapsed. The reason the land debt is bad is because land is zero-sum. It can not be created or destroyed. Any debt that is created to buy a zero-sum good will eventually turn the economy into a Ponzi scheme. So while a LVT will fix a large portion of the problem, eventually some other zero-sum asset will arrive, and that too will need to be fixed. When all zero-sum debt no longer increases the money supply, the problems that you outline will be resolved.
Once you have a money supply that increases equal to productivity, suddenly retirees will be able to save their money and retire on it without threat of inflation. We used to have this in the middle ages, but that's only because we had a flat population with no productivity increases, so a stable currency was sufficient.