Yes, supply side restrictions should be reduced.

However, artificial demand must be dealt with as well, or we overbuild resulting in a bunch of empty homes. Another disadvantage to only dealing with the supply side is the prices of building materials will be unnecessarily high due to additional artificial demand from investors building homes as stores of value.

Finally, supply side only solution creates a potential nonlinear event where investors dump once the homes start to depreciate. A seesawing which the Fed has bolstered with artificially low rates across many asset classes. Not necessarily a bad thing altogether for the housing asset class, but it seems inefficient from a resource standpoint.

I believe in most cases the structure value does go down (or at most stay constant), it is the value of the land that is going up.

Land should also go down (generally) in price though if the supply of buildable land goes up along with reduced supply restrictions. Of course, this only works in areas where there is abundance of buildable land near the desirable locations or nearby buildable areas that provide a decent substitute. Obviously, areas like the San Francisco peninsula and Manhattan where there is limited land due to surrounding water, land prices are likely to continue to go upward.

Manhattan is surrounded by water, but guess what, there are subways that go to Brooklyn, Queens, the Bronx, Jersey City and Hoboken. If your office is in downtown Manhattan, you can get there faster if you live in Brooklyn than if you live in Haarlem (which is part of Manhattan).

In principle the supply side has natural constraints, but they are easily 2 times above what has been built until now.

You can think of it this way: the population density of Manhattan is about 27000/km2. The entire NYC has a density of about 10000/km2, while Jersey city has 7000/km2.

We agree. Those would be “nearby buildable areas that provide a decent substitute”.