I'm not talking about a nice neighborhood vs a bad neighborhood, I'm talking about living in a general area or not. I work from home (telecommute) so proximity to work is not an issue for me at all, but even if it was, I'm just talking about living in the general area, not about living in the best neighborhood in that area. I'm also not talking about having a big or nice house; just having anything that belongs to me, anywhere in the general area. I have finally reached a point where that is just within my reach. About half of the people who live in the general area are below that point. So half the people who live here shouldn't live here, is that your opinion?
Let's look at the Santa Barbara area because that's a great example of insane housing prices. The median home price in the general Santa Barbara area -- not the price of the homes in the nicest neighborhoods, just an average home, somewhere around there -- is over a million dollars. But the average income for someone living in the Santa Barbara area is nowhere near enough to even begin to buy a house in that range. It's not even enough to begin to buy a house in the low-end range for the area, which is still in the high hundreds of thousands. So the only hope for all those people who work there, but can't afford to buy there, if they actually want to stop having to run uphill against the threat of homelessness their entire lives, is to move out of the area -- like, to a distance that they can't work in the area any more.
If everyone moved to somewhere that they could afford to buy, as you advise, then the bulk of the working population would be fleeing the city. And now all those people who are rich enough to live there... either have to wait their own tables, or start paying waiters enough that they can afford to buy some kind of housing there, or start selling their now-empty rental properties (now that everyone's moved out) on terms that waiters can afford. Or some combination of all of those things, to the effect that the empty formerly-rental properties get traded for people's labor, and in the end a portion of the home-owning population there is waiting the tables. Which would be great, and which is what should happen -- and if everyone took your advice, it's what would happen. So why doesn't it?
Because they invented a loophole. "They" being the class of people wealthy enough to live there, collectively. They need someone to wait their tables, but they don't want to pay waiters what they would want to charge for their unused property -- they don't want to trade their capital for labor, they want to keep their capital and also get labor. They want a way to leverage their capital to get labor, without actually losing the capital in the process. So they say to the poor, "you can live in my unused property, if you work for me and give me most of the product of your labor". Just like a feudal lord: "you can live on my land, if you work my fields and give me most of what they yield". Of course I'm speaking there of the wealthy class collectively as one entity -- when broken down into individuals, the wage-serf gets to live in one lord's property, work for another lord, and split the product of his labor between the two (briefly holding possession of the landlord's share as he carries it to him from his employer), so it's not quite feudalism. But the dependency of the poor on the rich and the intentional inability of them to escape that cycle is the same.
If we closed that loophole, eliminated rent, then people would have to do as you advise -- move somewhere they can buy, because there's no such thing as rent -- and then the consequent responses to that as outlined above would follow, leaving far more equitable arrangements than there were before.