What you have seen is its corollary: Cities where building is so impossible, that a run down shack that will be extremely difficult to remodel goes for 7 figure

What you have seen is its corollary: Cities where building is so impossible, that a run down shack that will be extremely difficult to remodel goes for 7 figures, because it really is the best available choice for someone that can afford the luxury housing. Housing is a sorting and ranking problem: Everyone gets to pay the best house they can afford. The richest man in town gets the best house, the second gets the second best, and so on. When what you can afford is fixed, it doesn't really matter much which house gets built: Everyone underneath gets, for the price they can afford, a slightly superior house. The one thing that throws a wrench into it is immigration, from the same country or a different one. I am not moving to SF for the current house prices, but I would think about it really seriously if the housing I can afford, coming from far away, was good enough. But in that case, it's not as if building affordable houses is going to work either, unless you just say "Sorry, you can't buy this house, it's going to go to someone poorer, even if you really want it, and would pay more". And that's really the ultimate problem of affordable housing in a place that is extremely in demand: You either make it so unattractive that nobody wants to live in it, or your affordability is really handing a giant subsidy to a set of chosen people that get to live there, while many other people would be willing to pay more for the same dwelling, but they didn't win your lottery. You have to stop the affordable buyer from selling too, because otherwise all you did is to let someone pay, say, 200k for an apartment that in the open market would be worth 1 million, handing out 800k to a lucky winner.