Do you know this or is this your opinion?
I know for a fact that in Melbourne the areas that experience the highest capital gains and are most 'in demand' as places to live also have the highest vacancy rates. 15% and higher vacancy rates in some inner city suburbs (as determined by water usage). Not intuitive if you think in terms of 'supply and demand 101'.
Think about it in these terms. It used to cost you money to have a second home but since interest rates started a steady decline around 30 years ago the supply of new money that has gone into property means having a second home now makes you money via capital gains (even without generating income via long term rental). The advent of AirBnB and the like also mean owning a second home can be profitable where it once wasn't. Now, given that, surely more people will be doing this now, right?
A suburb near me has around 2000 dwellings. About 50 are listed on AirBnB as 'entire homes'. That's 2.5%. A typical vacancy rate is 3% (not as measured above, but provided by real estate agents - i.e. that are available for rent). 2.5% starts looking very significant. And this is just AirBnB. There are other platforms involved. Not to mention land banked properties, second homes not listed for short term rental, etc. In short, the number of underutilised properties is significant and made worse in a booming market.
Edit: Further evidence of the existence of underutilised properties. In NZ, when interest rates shot up at the start of 2022, the number of listings for both purchase and rental rose significantly (close to 50%). Where did these properties come from? A similar example could be seen in Ireland post GFC. There was a 'shortage', then financing became difficult and suddenly a surplus of rentals and homes for sale appeared. It was accepted that there was an oversupply and the preceding boom had led to overbuilding. As the market slowly improved over 15 years the surplus disappeared again to the point where rentals are very scarce in Ireland (but short term rentals are now abundant).
Ireland has never had an oversupply of houses in its history. A simple way to tell this is that the population of Ireland is still lower than it was in the 1800s; that's because all young Irish people move to America/Canada because they can't afford to live in Ireland.
But that's still not the best metric to look at. The right thing to look at is price; if it's too high you don't have enough units. That is the only thing you need to know. Anything else is obfustication.
A family member I spoke with a couple of weeks ago is planning to purchase an apartment in the city to make it easier to visit their grandchildren. They won't be selling their primary residence to do this (but will be using equity from that residence). They will also subsidise the purchase via AirBnB.
This is an example of a home being removed from the stock of housing available to be used as a primary residence. I don't believe that this situation is all that unique - though thirty years ago this would have been as people in their circumstance would not have been able to do this (due to low capital appreciation and lack of a large short term rental market).
Also, they may plan to do this, but investments involve risk and they may go out of business (sell the apartment) if it doesn't actually go like they expect it to.
What you've done is a very common mistake: the conflation of property buying with property renting. The two markets have very different dynamics, and rent is much easier to address by simply increasing supply of housing.
High rents are the most urgent problem to address. It's harder to make everyone a property owner but at least don't crush them under the weight of rent. We're lucky that it's easy to address rents by increasing supply.