It's fine to be an investment. It can climb in value. But it doesn't need to be such a need to force the liquidity. Your example of "under utilized asset" and downsizing must then translate down to some metric of square-footage per resident. How exactly to you propose to regulate the housing market with this in mind, in a reasonable manner. Because, to me I think of the 2 sides. Growing households and shrinking ones. On the shrinking side, we want the government enforcing laws requiring homes get sold as each child moves out to adult hood? Then again as each spouse dies? On the growing family side, they get to move into a bigger house only as each child is born? This is just insane right?
I personally do not think 10 years is that long in housing. Sure a lot can change in housing over that time but at any given moment, If I'm in need of housing and supply doesn't exist, I can build a custom home in less than 2 years. I can buy in a development basically immediately. This might not be a global truth but it's the state of things in Texas specifically, and has been for a long time. Affordability is the limiting factor, not time.
I think the property taxes in Texas make sense if RE grows at rate of inflation. For a long time, we had affordable housing and now that's not necessarily the case. So the rules/laws need to change to protect people from getting priced out due to taxes is all. It's an issue that didn't bother anyone before because they were assuming their raise in income would cover the raise in taxes. But wages don't increase 10% annually like our taxes do (whole other topic LOL!) so they get put in a hole. Anyone coming into the market now knows the prices, it's all available information, and they can decided if they want to move here or not. It could all be a bubble that pops and corrects one day, but not until inbound population growth slows down.