People get excited because they bought a house for $200k and it's notionally worth $800k now. In reality they haven't gained anything because every house is $800k and you still need somewhere to live so you still only own one housing unit of wealth.
Worse, people actively lobby for policies that increase housing prices.
But if this house is worth $600k more where is that money coming from? It's coming from the next generation who has to pay substantially more for the same house. It's a wealth transfer from the young to the old.
How does this relate to third places? Well, imagine a neighbourhood cafe. 20 years ago that cafe space might cost $200k and have a commercial rent yield of, say, 5% so it would cost $10k/year in rent for argument's sake. Well, all property has gone up in value so that cafe's space is now valued at $800k. It still demands a 5% yield so that's now $40k/year. All the cafe's customers have to pay for that with increased prices.
So with increases in housing costs, people have less money to spend and that money doesn't go as far. At a certain point, volume goes down and the business has to either close or raise prices, further exacerbating the problem.
Rising housing costs are strangling every aspect of society.