>if the price falls too much it becomes unprofitable to build and you don’t get new supply

This is saying "building is expensive because building is expensive". Why is it expensive and how do we address it to make it cheaper?

There’s not a lot of confusion about how to build cheaper.

Build less and worse per unit. Share foundations, roofs, walls, and common areas. Build less square footage per unit. Build less fancy per square foot (cheaper kitchens and baths). Use all standard materials and finishes. Install low-end appliances and HVAC. Everything cookie-cutter; no per-unit changes. Use less land per unit (and maybe less expensive land overall). Have no private outdoor space (or just a tiny balcony).

That’s not well aligned to how to maximize profits from a given unit though (fairly obviously and by intentional design).

Parts of this do align well with how to maximize profits. Shared walls, progressively smaller units over time and removing balconies have been the story of condo buildings over the last generation. The area that doesn’t line up is the low end apartment fixtures. It turns out people will pay $15k for $10k better of appliances and countertops.

All of those things probably work. Why do we have to give up so much that was considered standard 50 years ago? Recipe for social unrest.

There are 1.5 times as many people in the US competing for the same amount of land and buying houses using mortgages that are around 40% cheaper and many mortgages accept down payments that are 1/6th the size versus 1975, with underwriting that judges debt-to-income of 36% as “ideal” and some programs allowing 50% versus a limit of 25% in 1975, meaning the same amount of 1975 Americans plus the 50% extra Americans can all bid way, way more for that house you want, forcing you to pay up if you want it more than they do. In that time period, dual income households went from a minority to a majority, further heating up the competition.

Houses are also around 1.5 times the size with more bathrooms per bedroom in 2025 vs 1975, so “build less square footage and less fancy per square foot” isn’t at all “giving up so much that was standard 50 years ago”, but rather returning toward the standard of 50 years ago.

Sounds like you found a niche that market hasn't exploited then. Can I build a small house for fraction of the cost or most of my cost is going to be land?

It’s not an unknown niche.

Land cost depends on the location. You can find an acre of rural land for $1K. Or an 1/8th acre for $1M or more in a city.

For a cheap parcel of land in an unincorporated area with no building permit process, but with existing grid power, you can buy and build quite reasonably. (There are several YouTube channels covering builds like this.) In these areas, I wouldn’t overlook existing properties as well.

just subsidize it. raise taxes on people making for than, say, $3 million a year, and give that money to construction companies to build homes. (subject to strict oversight that the money actually be used to build affordable homes)

Undocumented construction workers and/or shoddy building materials are the traditional methods.