However, I think falling house prices may resolve much of what you describe. And I think there are certainly elements in government now that are keen for that to happen.
I think there is a mixed bag of attitudes in government. Its not just national government, but also local government that plays a significant role here. I think there will be conflict between local councillors and central government as the local government are concerned about paying the price for unwanted developments being pushed through against the will of local residents whilst the penny is starting to drop with government that few house owners has an effect on what voters do at the polls. It works in different directions whether its Labour or Conservatives at local/national level.
What the public NEEDS is the right type houses, but the competing political interests mean any action is likely to be insufficient and to be slow in coming.
For example Tory Council doesn't want to upset their NIMBY locals but the government know they need to increase ownership in middle classes to protect their vote nationally.
Or conversely, Labour Council wants to build lots of social housing, but Labour government knows that this will upset many of its educated young middle class voters who want to buy. But they don't want to increase home ownership too much, because this mean they are more likely to vote Conservative.
Political interests sadly come before the actual need of the public.
Something HAS to give at some point with this though. The status quo is unsustainable.
But I also don't see house prices falling much at all. They will drop back, but they won't collapse. Too much is invested in property. It just means property won't sell and will remain on the market for longer. With fewer people moving in general as its not worth doing so.
The people who should be worried should be estate agents.
My guess is that demand will eventually mean that developers will make more money from buying smaller properties rather than luxury ones too. A few years of recently built developments standing empty and developers not making a profit on them will focus a few minds.
You are also likely to see larger properties / plots be split into smaller ones as they will have more value as semis or flats than as detached properties.
The majority of the value of houses isn't in the house itself but the land. And I don't see the value of land dropping, because no one wants to build on green belt / spaces as that's politically damaging to all parties.