The first is that this is good material for the wiki.

The second is that the problem may be harder to solve than you think. As you note, a house is a large fraction of the average owner's wealth. Changing building regulations to allow lots of new development tends to drop the value of nearby existing housing. This immediately makes those home-owners rather highly motivated enemies, who likely have some standing in the community.

Now you might think that they stand to make lots of money. After all if you own a 3 million dollar home, you can break it up into 10 lots of a million per at current prices. But if that starts happening then everyone else on the block gets all upset, plus if this starts happening to any large extent then the 3 million dollar home can be split up into 10 lots of, say, $180K per, at 30K of profit. Which means that, erm, you make $300K on what was an initial $3M house. And in the event of a major legal shift, this price change would happen pretty fast.

And my third comment? I don't think that their pinning the hidden costs on government is necessarily accurate. For instance I would bet that the influence of organized crime on NYC's housing costs should not be underestimated...

Cheers,
Ben

PS That is organized crime as opposed to the rather less organized crime of government. duck