Prices have to decrease, period. We can put some makeup on this and trick homeowners into satisfaction by having some nominal increase without accounting for inflation

It's about policy to not completely screw over home owners. Policy to pretend to do something is motivated by protecting home owners while concern troll gaslighting. An explicit bargain to give "fair gains" to home owners while solving housing affordability is an honest one. Federal government doesn't need to be involved at all other than perhaps providing cheap credit to "city owned housing development and construction company".

From city perspective, more housing is more property taxes. There is a ROI to it for all residents if city spending is efficient and valuable. Denser housing means more commercial revenue and tax potential.

Decreasing home values can get banks in trouble, and they rule, which is why nothing ever gets done. Limiting price increases to fair amounts is only practical political possibility.