Basically everyone considers housing as a hedge - homes are expected to grow steadily in value or at the very least not depreciate.

This is not a good policy goal, but the fact is that the wealth of the American middle class is mostly stored in property, and tanking property values would be a disaster for a broad swath of society which otherwise only has long-term retirement accounts to rely on.

They will vote to protect their interests, no matter how badly it screws their kids or contributes to homelessness.

If the house price goes down you don't lose the house. You just end up paying more for it than you could have if the price was lower when you bought it. You are just keeping your promise to pay your mortgage. This whole "unrealized gains need to be compensated" thing is insane. Responsible policymakers would ignore such greedy, self-centered, anti-community sentiments.