That’ll likely have unintended effects. Because, as far as I read, the issue isn’t only developers that went bust, but also that they built too much, or at least too much in the wrong places. Add to that, a declining population, and an aging population, and you have less natural demand to begin with. If the government takes over and starts renting places, presumably the government will rent with a subsidy of some sort, then some people who are renting privately elsewhere will choose to take the less costly apartments instead … leaving vacancies in the private rental market … leading to lower prices in the private rental market … leading to slower business in the private rental market. Make that effect big enough, and what you’ve accomplished is to move your “crisis” from one place (overdevelopment) to another (diminishing the private rental market).
Of course, it could be intended, and they want the housing market to, by and large, be government controlled. But I doubt it. Deep in their communist hearts, they know that their miracle of continued high economic growth depends on private sector growth, and stifling one of the main drivers of private sector growth will cast a pall on any other private sector growth, and the behavior of the people will almost immediately follow. The China miracle will rapidly be over.