The solution is to build more housing (we need to build a heck more to make a difference), so that there’s no scarcity premium and everyone can pay market rates when renting or buying their own house.

Tenants should ideally be the short term only. Anyone who wants long term housing security should ideally own their own home: the ultimate solution.

But again, for that to be possible, we need a lot more housing supply.

You nailed the reason why we have this legacy of artificially lower cost housing: to subsidize artificially cheap labor.

Such legacy goes back in history when employers would directly provide housing to their employees, and obviously that would come with even lower wages, or even “free labor”.

In reality, the multiplicative gains of a high density economy should allow even low skilled work to be paid a lot more compared to a lowers density location. But the distortion in the housing market basically perpetuates a distortion in the labor market.