For many decades, California has had extremely restrictive building regulations, especially in the most desirable areas. That is slowly changing, but the actual building has always been straightforward. It is getting the permission to do so that is complicated, expensive, and often just impossible.
Agreed on all counts, but that doesn't make the problem of politics any less real. People problems are always the hardest to solve, especially when deeply problematic policies like Prop 13 are written into the state constitution.
That's a permissions problem, not a demand problem. If the free market would be let loose there, we'd have skyscrapers on every block. The issue is nibmy-oriented citizens who are actively resisting that.