The issue is that building new “non-luxury” homes is either explicitly prohibited or not economically viable because of the overhead cost of just breaking groun

The issue is that building new “non-luxury” homes is either explicitly prohibited or not economically viable because of the overhead cost of just breaking ground. At least in my area, developers spend over half of the expense of the home on land (including the legal/political costs of getting it up zoned) and “horizontal development” (utilities, impact fees, permit costs, roads, environmental mitigation, drainage, etc.) If just breaking ground costs you $400k per lot, then it doesn’t make a ton of sense to build 1500 square foot starter homes that will sell for $600k instead of 3500 square foot McMansions that will go for $1.2mn