I think you are reading the situation backwards. Capsule hotels and tiny apartments are not a reflection of low housing supply, they are a reflection of not hav

I think you are reading the situation backwards. Capsule hotels and tiny apartments are not a reflection of low housing supply, they are a reflection of not having much space -- and there is not much space because so many people want to be in a certain area, basically the very dense urban centers. There is really nothing the market can do, to make more big houses and big hotel rooms available in downtown Tokyo, but the market in Japan is actually getting a huge number of people fairly cheap stays in very dense areas and doing so much more successfully than in the USA. I don't think there are any capsule apartments, with multiple people living together in tubes in the wall, but there are very small apartments.