I am not referring to building public housing. I am saying the government should build housing as if it were a for-profit company. Take those profits, and re-invest into building even _more_ housing. Don't try to sell to those in need, sell to those who are speculating on real estate and increase supply at the same time.
It’s also a good way to ensure companies can milk the government of money and then the head of those companies can lobby the government to keep things how they are so they continue to get that government money.
If there is surplus value it should stay in the enterprise and be used to improve the enterprise by improving processes or improving the lives of workers. Failing that it should be returned to the customers through lower prices.
One good thing about government services is they're more efficient because they don't have this value being extracted by uninvolved parties. That means they're able to provide better service or lower prices with the value that would've been sucked out by profit takers.
A lot of the value in government services tends to be extracted by public employee unions. Politicians make excessive commitments around wages, pensions, and job security in order to buy union votes and maintain labor peace. Then the politicians move on and future taxpayers are left holding the bag.
What grandfather is suggesting is something like an ESOP, co-op, or etc. There are a long history of these kinds of organizations, and they thrive in free-market economies--unfortunately, nobody really lives in one of those anymore.
It is telling that you say public employee unions "extract value" by demanding the pensions/job protections that should by rights belong to everyone (and often did, in the past). Conversely, private corporations "extract value" from the labor marker by struggling to provide any job security, any retirement, or even anything resembling a living wage.
Just which sector is failing to be profitable, here?
Profit is surplus value. The opposite of waste. Forcing it back into the place it originated versus letting it transport to the most-useful thing it can do is how you get sclerotic feudalism. Had we adhered to this philosophy during the Industrial Revolution, we would have just kept farming.
You're asking for people to fund the infrastructure speculators thrive on with their money, on top of that you want to depress housing prices which another large cohort of society will vote against, politically your proposal doesn't make sense.
If you cared to read the Wikipedia entry I shared the approach the Swedish government took was to pay 2/3 of the new constructions and sell those houses to people who would pay them back in 30 years, it's not "public housing" as you assumed...
This system of building houses was completely scrapped by neoliberals, letting the "market" take control of supply with the government taking a background stance of mostly zoning out where they'd incentivise building new dwellings.
I can see in a not-so-distant future talks about this kind of program being reignited in politics, the neoliberal approach has absolutely failed us.
[0] https://en.wikipedia.org/wiki/Million_Programme