The government is not a monolith - it's made up of people who follow incentives. Proposition 13 is basically the third rail of California politics, and there's very strong NIMBY tendencies in voters.
Fixing the housing issues in the Bay Area would be worth billions to the larger economy, but the people who make and influence the decisions are largely concerned with other matters (specifically, house prices and doing things that voters approve of).
The end will come when people cease to reap the benefits-- Prop 13 delivered a lot of value to homeowners from 1978 on, but home prices now incorporate the "savings" one gets from the absence of Prop 13-- the only people who benefit are those who are locked in.
The amount of California residents that are forced to be renters makes the continued existence of Prop 13 less and less tenable every year.
The State of California has the power to fix this and, presumably, the motivation to lift this albatross from the neck of the economy.