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If there is no guarantee that they can recover their investment, people will not invest to build homes anymore and their will be less or worse homes to live in.
I don't see that as a bad thing. The thing you get for building a house is a house to live in. Even in our nightmarish housing paradigm, people volunteer for things like habitat for humanity to help their neighbors have a place to live. In a world where housing is not a financial investment and people can't be unwillingly displaced, I would expect only more desire to build homes that people actually want to live in.
My primary financial security lies in my home equity and I would happily end evictions even if it cost me all of it.
Some people don't have the capital or don't want to spend the capital to build a house and need places to rent. How do we get those houses built? Massive state intervention? Not sure it will do better than a regulated market, but why not. Now where is the law for it that should be accompanying this potential collapse of private offering?