I think we agree on 99% of the issue; we do need non-market housing and we need a diverse range of sizes; we do need to reduce the attractiveness of housing as an investment class.

But I disagree that we have excess 1bd units directly because of housing is seen as an investment. Small time investors bought these like hot cake because those investors, in large part having no idea about what they're doing, were hyped about just getting into the market purely due to speculation, and of course the lowest entry into the marked is the smallest unit possible. Pre-sale marketing treated these people like a Ponzi scheme: let's sell as many as possible while it's still profitable, these suckers will eat the price drop when it inevitably lands.

The reason why I'm nitpicking the root cause is that the main problem is not the investing, but that this investment is a badly regulated market, with a lot of silly myths going around (housing will never be a bad investment, rent is throwing money away etc). Basically Millennial's covered call ETFs but for boomers. Or Gen Z's shitcoints, but for boomers. A properly regulated market should mandate diversity of unit sizes, land use, non-market housing etc. Even if we spend zero energy on de-incentivizing buying homes for investment, at least a regulated market would prevent a bunch of idiots betting their retirement on "housing only go up" to cause the market to get distorted. Of course I do also agree we should work to not treat housing as investment, count me in for a 5000% increase on property taxes for non-primary residences.