>I agree that the sort of investment you are describing makes sense - but in practice those kinds of investments are out-competed by ones with better yields.
I think that is a an advantage, not a disadvantage. There is no need for housing investments to have competitive yields. If you can make a profit building houses which have more value to buyers than your cost of inputs, someone will make them. It just won't be a speculative investment good.
I don't worry that people will stop making socks, shoes, or food because the profit margin in that business is lower than the market yield. If there is on opportunity for profit, someone will want do it. They just might not be funded by some massive financial hedge fund, which again, I think is an advantage.
Historically, home ownership has been a vehicle for intergeneration wealth building because it means taking on more responsibility, work, and risk instead of paying a 3rd party to do so.
I would argue that most people renting would not result in the lowest cost, because it turns responsibilities that a homeowner can do for free into 3rd party services which must be paid for. It is like saying that city run food kitchens would be more efficient than people cooking at home. Maybe it is "more efficient" if you count the homeowners implicit labor, but the dollar cost to the cooker is still going up.
I think most people would agree the goal is higher ownership and lower costs than now. I think this is actually reasonable if we fix some of the conditions that lead to house exorbitant growth in house value