I don’t think its a binary choice. Building more market rate housing will probably slow the growth of housing prices/rents in the region (though if prices actually start to fall, development activity will probably drop, too — developers tend to not build in falling markets). At the same time, the Berkeley report notes that while more supply can be helpful at the regional level, at the neighborhood level it can change the character of a neighborhood and actually induce more high-end demand. Its not a question of supply or no supply, its a question of balanced supply. Building only, or primarily, high end market rate housing is not an effective way to solve the housing problems of low wage workers who are paying 50% of their incomes for housing.
Advocates for inclusionary housing do talk about “capturing windfall profits” but also understand that if you make the inclusionary requirements too high, nothing gets built and you don’t get affordable or market rate housing. But the appropriate inclusionary requirement depends on local market conditions; SF may be able to support a higher percentage, while some other locations can only support a lower percentage. In the long run, the cost isn’t borne so much by developers or buyers as land owners. If development costs go up relative to rents people are willing to pay, developers will pay less for land.