(if your answer is going to include some form of 'but housing is an essential requirement to live', be aware that my next question will be how to differentiate housing from food, or some other essential requirements to living, which are also left to the market to the chagrin of only the most hardcore communist)
There could be a lot of reasons 'why' but the biggest reason for me is that land/location value usually has nothing to do with the actions of the individual owners. There exists cheap/marginal land that can be had for almost nothing because it either has nothing or is near nothing while there also exists land which is rich in minerals, fertile virgin* cropland or forest, or other natural resources or is is valuable urban land which happens to be located near well paying jobs, good schools, good food, entertainment, accessible open space, or has really good weather or views. As the physical space of varying quality along all these different dimensions is in fixed in supply its price is determined by demand. Oxygen in the air is another "essential requirement to live" but fortunately it cannot be enclosed as easily as land can. Water is already somewhere in between. Land is differentiated from housing, food, and other essentials because there is no work required to produce and distribute it. It just exists and those who happen to own valuable locations are unjustly able to take the economic rent which is the common right of everyone. For a lot of things, you're right, it's often best to leave the production and allocation up to market forces and we end up with an abundance of food and other goods. But there is no real market for land and other natural opportunities because it's not something that can even be produced in the first place.**
Questions to consider:
- When someone claims a house costs more because the weather is mild and temperate (like coastal California), who should be paid for the good weather? Why pay the previous owner?
- When someone claims a house costs more because the local schools are really good, why not pay the municipality more for the schools? Aren't you paying twice by first paying local taxes that fund the schools and then paying the previous owner?
- When someone claims a house costs more because it is on a hillside with a panoramic view of mountains, bridges, bodies of water, and city skylines, who should you pay for the natural topography and shining lights? Why pay the previous owner?
- When someone claims a house costs more because it is near a lot of high paying jobs or is close to shopping, doesn't it seem like a significant amount of profits and wages of the businesses and employees (particularly the least profitable businesses and least paid employees) are being siphoned off to land owners?
- When someone claims a house costs more because it is close to a quality transit station/stop (and other public services) doesn't it seem like you are paying twice to access those services? Once as a fare or usage fee and again as rent or payment to the previous owner?
* land that has never been farmed before or forest that hasn't been logged before as sustainable soil management and forestry do in fact carry a long-term cost for production. Still, there is location value as it relates to climate conditions, access to water, and access to markets for labor, processing, and distribution.
** even landfill (common in parts of the sf bay area, manhattan, and boston) are only done because the /location/ is so valuable that it is worth the cost of filling in with soil moved in from elsewhere. It's less common today not only because of higher costs of dredging and filling but because we also tend to be more aware of the cost of environmental externalities.
(if your answer is going to include some form of 'but housing is an essential requirement to live', be aware that my next question will be how to differentiate housing from food, or some other essential requirements to living, which are also left to the market to the chagrin of only the most hardcore communist)