It doesn't need to be an authoritarian government or an evil government as such.
It would just need to be a govermt that doesn't prioritize fairness and egalitarianism above all.
If the people dishing out the housing have biases and they're not favourable to you, you're stuck.
At least in the existing system you have the ability to progress and determine your quality of living to some degree.
I don't think our current system is good by the way. I just don't think state owned housing is the right medicine. Not unless we can find a way to instate benevolent dictators.

I make this all the time. An absolute staple of our weeknights.