The problem with all property value has nothing to do with the mortgages and solely to do with supply and demand never able to balance out because of mortgages being allowed to compete with income property management as an industry. It's basically monopolistic behavior to buy up all the property that comes available and drive up rent unnaturally.
It's easier for monopolies to form when barriers of entry are unnaturally high and the production rates are naturally low. Both of these things are true of home production and real estate in general. That's why land is considered the best investment. But the problem is that home ownership is considered the most important investment for a family and not building equity is a double whammy on income potential for any individual without a home.
So when you see that zoning laws, construction practices, NIMBY mentality, and only the most profitable (not most useful) buildings being built are all compounding the housing shortage you know that people will be priced out.
It's no coincidence that the housing bubble made the rich richer than ever and the mortgages went through the roof. All the capital chased the houses and now home ownership is extremely low, while the number of people with dozens of rentals properties are at all time highs.
The solutions that we have used to combat these problems in the past have always been to lower the barrier of entry with federal assistance programs. The problem is those will no longer work.
Local governments have far too much power over construction practices and that's unlikely to change.
The best solution is to employee Nash style economic incentives to prevent investors from getting in the way of home ownership for the purposes of living and as a primary investment. The only fair way to do this is quite simple. Taxes.
Sin tax the investment value of home ownership in a progressive manner.
Own a home or two and you are taxed at normal property taxes. This allows to own a home and even a vacation property without any additional tax burden. Rent out properties and it's an investment and you can own a certain amount of those with a small tax increase with each home, or even with total square footage of all property owned.
Use economics to determine the best rate increases to correspondence to the intended effect. This allows people to own a home, a vacation property, and even investment properties and live off of rent alone… But never get truly wealthy off of it. People could still purchase and rehab homes in small numbers for real estate investment income and either take on the risk of added taxes or do it in smaller scale.
You can make allotments for certain types of larger scale dwellings such as apartment complexes so someone could choose to sell off several houses and upgrade to owning a complex instead at the same normal tax rate. This still encouraging building high density residential in order to accomplish more income and encourage better landlords to service the most people possible.
The trick is it has to scale quickly and nearly exponentially after a certain point to completely discourage the tax rate to be passed along to renters and force people to sell their property on the open market.
Do this correctly and overnight you would see people who own millions of dollars in rental properties have to sell their houses at the same time. The artificially inflated cost of the houses and rent would crash overnight while simultaneously generating more tax revenue which could be used in countless positive ways to stimulate the economy to balance out the vanishing inflationary capital created by the bloated industry.
With houses falling in value st record rates you lower interest rates back down to an economically feasible level and the houses will be bought by all the people who desperately were looking to own but can't afford it due to low pay and inflation.
In a few months all of a sudden you would see a spending boom unlike the world has ever seen as people who were poor are now spending money fixing up homes and buying furniture and such. This will cause inflation in those markets and some more short term instability in the economy but at this point banking would recover.
Obviously home equity would also nosedive but the market would find new equilibrium and with it all investment spending would eventuality return to an adjusted normal with healthier competition. The policy would prevent any future capital accumulation based bubbles from forming and the goal would be to fix the other problems in the meantime.
10 years on and people who never could afford a new car or a trip would be able to take a home equity loan out and then the economy would once again reach new highs.
A necessity of life would have inflation reduced dramatically and the knock on effects would allow more people than ever to reach the middle class. It would be like 50s America again.
As for the real estate tycoons, they would have to take their money from selling their properties and put it back into other investments such as stocks and bonds and encourage growth in productivity.
It's a win for everyone except those who contribute nothing to society but threatening families with evictions from the houses, they are paying for indirectly.
You can even make a program where the home renters can choose to assume the mortgage directly if both parties agree to cushion the blow to the market.
This is absolutely the best thing any government could possibly do. The federal government can 100% create a federal tax based on this and compound all property taxes in the same way they taxed not having health insurance. It would likely be challenged but it would potentially solve all the real estate issues.
You could leave industrial and commercial rental out of it, but I wouldn't as all the empty strip malls could stand rate adjustments as well.
You have to make it economically more reasonable to lower rent rather than leave a place empty and survive on rate hikes. Otherwise homeless rates will only skyrocket.