"If they sell their land, then presumably they'd receive a substantial windfall with which they could buy a new cheaper place, or rent."
Not really. You might be forcing someone out of a 2.5% mortgage into a 6% mortgage on a new property, incurring property transfer taxes, moving costs, loan underwriting, and other fees. You very well could lose money in some situations. Your argument also assumes they are not in the cheapest homes already. If they are, they could be forced out of the geographic area altogether if there are no cheaper homes (and inherently rents will be more expensive than the cheapest mortgages under that system).
Not really. You might be forcing someone out of a 2.5% mortgage into a 6% mortgage on a new property, incurring property transfer taxes, moving costs, loan underwriting, and other fees. You very well could lose money in some situations. Your argument also assumes they are not in the cheapest homes already. If they are, they could be forced out of the geographic area altogether if there are no cheaper homes (and inherently rents will be more expensive than the cheapest mortgages under that system).