>is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as m

>is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before This is a description of supply and demand, not some kind of trump card against it. Notice that more people are getting their preferences satisfied. That's the point.