I don't actually think new housing developments are a really high RoR and building your own house has a high barrier of being able to support and house yourself while floating the full value of the house you're trying to build - for that reason new home owners almost never buy their own house. Additionally arguably the most valuable part of owning a home is the appreciating value of land - and land most steadily appreciates in stable communities (where a plant closure won't suddenly tank the market) and the best of these are urban centers where the market is extremely stable. All that is a long way to say that investors specifically want to buy that condo that's right next to your office and they're much less interested in investing in some development out in the boonies that will only gradually accrue value (and be impossible to exit for the year or so that the units are actually under construction).

Lastly, we've got NIMBY - this is the source of nearly all our housing woes because if you could buy up all those single homes in SF and convert them to condo towers we'd solve the housing crisis overnight - but that would "ruin the neighborhood" and, more importantly, depreciate the value of all those inflated house prices - and that's why all the neighborhood councils will continuously vote to perpetuate the shortage of housing.

People do want to build more housing - but people who own the land are stubborn assholes. When it happens that an investor manages to secure a full block of single family homes in a downtown core they'll almost always try and convert it to condos - but then they've got to fight against the NIMBYism and they'll usually lose because as every 80's movie ever taught us: "The evil developer is trying to tear down the community center - we've got to stick up for the neighborhood and win that tournament!"

Ironically the inventory would have been higher if more rich people invested in real estate projects, instead of stocks and bonds.