Canada

That release valve you speak of is unsustainable due to infrastructure and transportation costs. It only works up to some level of sprawl.

housing market basically entirely in control of investors who'll keep it inflated to profit themselves

Correct, which is why it has to be public investment. We need massive multi unit buildouts funded by new public spending. All of it durable, cheap affordable housing. This will not only act on prices via increasing supply, it will also act by bidding prices down because the prices will not be maximizing profits. Whoever wants a place to live, should be able to afford one of thes units. Let the market sort out prices and availability of more premium options.

That urban sprawl mechanism getting nixed is one of the better things to occur. Since maintaining roads, electric and water lines, fire safety coverage and so on are government expenditures this densifing initiative they have going is actually pretty on point.

Problem is the government doesn't want to upset the applecart for those who invested in the family home by cratering their portfolios so they are doing everything they can to mince around homeowners so the initiative to cool the market is the softest most delicate corrections they can manage. That sort of approach is gunna take a long time to work and is going to be vulnerable as hell to NIMBY counter initiatives. It's good to see the government is getting more creative with time but until everyone recognizes that property investing was built on risks one signed on when you bought the sort of big actions needed aren't going to serve up a fix unless the bubble bursts on it's own.

Supply needs to increase, but it can literally never increase enough given its current structure of investors and profiteering. As long as houses are bought by investors (anyone with two houses), then it means that normal people will be priced out as the investors push prices up higher than they should be. If house prices drop they’ll invest in building less housing.

I'm not sure you're familiar with the way the industry works. Builders and investors are very rarely the same people. Builders don't care if the buyer is going to live there or rent the property. Your theory also doesn't account for the ~80% of housing that is owner-occupied.

This is compounded by most new housing being multi-unit buildings that a single person cannot build on their own. When we had urban sprawl, you could still buy cheap land on the outskirts and build your own house if investors stopped building new developments, but with (very necessary) greenbelt policies, it eliminates that release valve, putting the housing market basically entirely in control of investors who’ll keep it inflated to profit themselves.

This is also quite the take — it's very rare to see anyone advocate for more urban sprawl or suggest that building more housing units drives up prices. If you want to live in an urban area, density is good because it means there's more housing supply. Land is the only finite resource in the equation, so making less efficient use of it in the hope that prices will come down is... Well, I'll need you to explain how that math is supposed to work.