I mean, yes to all of that. There are so many things that make housing costs artificially high as you describe. It’s ridiculous.
But also, this is by far the smallest lot and cheapest house in the neighborhood. That pretty much always means its price is being inflated by the price of the houses around it, which is a matter of land value, not house value. People who buy it are buying it to own a house in that neighborhood.
The cost to build this size house, brand new, would be <$200k, by quite a bit. That would be basically an upper bound on how much of this price could, in principle, be the value of the house vs the land. Obviously given the condition it’s even more skewed - the house has depreciated a lot. There’s also lots of value in the fact that it’s probably much easier to get permitted to fix it up than it would be to build or renovate otherwise. That’s part of the land value, too.
TBH I suspect that if, tomorrow, a bulldozer accidentally flatted the remaining structure, the market price would go up. The people who buy seriously damaged houses are either investors, or people with enough money and time to build who like the location.
So yes, I do think it’s important to recognize that most of those things artificially inflating home prices? They’re driving up land prices, not house prices. Without them, someone who owned a house on a 1 acre lot could, in many cases, build several ADUs and create cheaper housing while raising the total value of the community, but they’re not allowed to. That makes the price of every home higher because of artificial scarcity limiting the number of lots/units. There are some rules making actual house prices (construction costs, for example) artificially high as well, but these are (IIUC) a much smaller part of the problem in the most expensive markets.
This helps us think a lot more clearly about which kinds of rule changes and interventions are actually likely to be effective at making housing more affordable. Also, about the value of things like remote work letting more people live in places with cheaper land.
