I'd say a house costs more than almost anyone has; it's why people need to take out loans to purchase them. That said, without a rental market the price of houses goes way down. As a result, the people that cannot afford houses then are mostly the same people that cannot currently afford rent. This is because the mortgage payment and insurance for a home is actually lower than the monthly rent. If the top value were lower, it would be a safer risk for a bank but because it's so high, people don't have that access to credit.

A developer still has a profit incentive; mostly the same one they have now, actually. They sell the apartments.

So you have a city like Los Angeles or NYC. You convert all housing to single family homes. Can more people of fewer people live there now?

Why would you convert all housing to single family homes? Do people not own apartments for some reason?

>That said, without a rental market the price of houses goes way down.

I see that you are saying you would simply sell the apartments instead now. What is the solution for (e.g.) new grads who do not have a down payment yet? Why aren't tenants currently pooling their money, purchasing the properties they live at and converting it to a Tenancy in Common?

I do not think prices will drop without a rental market. Prices might even increase because you are making the market much less efficient. It will also make building new units more difficult as there will almost always be a holdout in the building.