> A developer in our example would still profit by offering a luxury unit with 3 bathrooms instead of 4.

Would they though? Having one fewer bathroom would lower costs but also lower the value of the unit. Meanwhile it doesn't actually cost $400,000 to build one bathroom.

> Your dorm-style kitchen layout is creative, but the problem with this idea is that there is very little demand for dorm-style housing.

There is very little supply of dorm-style housing, because building it is banned. And it's banned because there is demand for it, especially when rents are high. Why would they bother to ban something nobody was going to do? If nobody wants it then there is no harm in getting rid of the ban because nobody will build it anyway, right?

> Developers are able to charge higher prices for more conventional layouts - where the demand is - which is what they will build even in the absence of regulation.

Let's suppose that's true in some cases. There is currently a lot of demand in some area for 4000 square foot units so that they're more profitable to build than four 1000 square foot units.

Then if you let them build 4000 square foot units, they do, and satisfy the demand for those units. At which point the price of those units comes down because the supply has increased. Which makes it more profitable to build smaller units going forward, because now that's where the unsatisfied demand remains -- in your example, the increase in supply of 4000 square foot units causes their price to fall from $2.2M to $1.9M while the four 1000 square foot units are still going for $2.4M and are now the more profitable alternative even if they cost more to build.

> Markets can handle some things well but the inability to provide merit goods (like housing) is one of their shortcomings. Unfortunately we need policies with more scope and ambition than YIMBYism if we want to tackle society’s larger problems.

The thing that I find suspicious is that if you actually want some specific thing, like more smaller units, there are obvious ways to make that happen. Just provide a tax credit for building smaller units, or a credit per-unit so that one 4000 sq ft unit gets you one credit and four 1000 sq ft units get you four credits each in the same amount. The result is going to be more smaller units than the market would otherwise demand, which is what you wanted, right?

But meanwhile people start proposing things like having the government not just build but actually operate rental properties, or constrain who is allowed to live in them, which tend to create nasty problems like "sorry, you make $1000/year more than the threshold for affordable housing so now there's a cliff where your rent goes up by $1000/month", or create a handful of housing projects that turn into an area of concentrated poverty while not actually providing enough housing for everyone who needs it and in particular not getting housing costs down for middle-income people.

And those policies strike me as attempts to disguise a desire to not solve the problem. They're token efforts to be able to claim that something is being done on paper so that housing costs can remain high in practice.

So I guess what I'm asking is, what are you actually proposing? And how is it better than some combination of "remove policies that inhibit construction" and "provide tax incentives to build more housing"?