Such a thing has never happened before.
I do not believe that is the case. Sadly, I do not have data handy but recall reading about studies showing that's exactly what happens.
So why would you keep expecting it to work that way?
Because that's how every other market works? Because of the chain of reasoning I put in my post (if you build more luxury houses, rich people move to them and that reduces demand for the houses they used to live in, which reduces the price for those houses)?
It should be obvious that building luxury housing during an affordability crisis does not directly address the immediate problem.
Absolutely. It's an indirect solution. And yes, of course there is a lag. It takes time to build houses, for people to move, and for prices to adjust. You might even have to build a lot of houses before you see measurable results. We've constrained construction for over 50 years so there's a lot of pent-up demand.
Solutions such as deregulating land-use zoning invites developers into middle and working-class neighborhoods where the land is cheaper. These developments tend to remove old businesses or lower value housing to make way for the development. Then to maximize their profit, a developer will try to bring in as many luxury units as possible. This tends to squeeze the rental markets in those neighborhoods with fewer affordable options and fewer local businesses. Pushing people out of the community, and moving somewhere else is typically a huge financial hit (reset your tax base on your house, higher commute costs, etc).
Absolutely. There's a flip side: as developers rush to hoover up the now-available properties, that bids up the prices for them. Guess who benefits? Oh, that's right, the lower income people currently residing there. They sell their knock-and-go shack for an unreasonably high price and run giggling.
Yes, there's a cost: moves are disruptive and unsettling for the individuals and the community. Traffic patterns and neighborhood character change. I don't see a way around that. The only thing that is constant is change. We used to be a much more mobile society than we are now and we may need to revert to older behavior.
There is demand for housing and there is demand for real estate investment. The demand for real estate investment pushes the market upward. People who actually live in a house or apartment buy what they can afford. The market economics for both types of buyers are incompatible.
I don't follow your logic. Virtually everyone wants a place to live, either renting or buying. As there are more of them relative to supply, prices go up. As prices go up, people compromise on what sort of house they'll accept. Maybe it's smaller, less well built, or has roomates. Kind of a bummer but again, that's how markets work. At the same time, there are people who want to invest in real estate. As the demand to invest grows relative to supply, that will also bid up prices but as prices go up, the amount of demanded investment will tend down. At some point, it's no longer a good investment to buy a rental house, you don't make enough on the rents to pay the mortgage.
You notice what is the same there? Raise the quantity of houses and both prices go down. More houses? Sellers have to accept lower prices to clear the market. More houses? Investors aren't willing to pay as much to buy a rental. It's all about supply and demand, just like every other market in the world.