Until last year DW and I lived on the CA Central Coast (Monterey Bay area), born and raised there. So I get what you're describing. We owned our home outright and yet it was still stupidly expensive after taxes, utilities, insurance, etc. Renting or carrying a mortgage makes for an even tougher nut to crack each month. I don't think there are any great options. Moving to a location you don't really want, other than for cheaper housing, isn't ideal and adds to your commute (time and higher expenses). An $800k falling apart house will wreck your finances. Yet if you keep renting long term it's highly probable that your rent will keep increasing.
That said, all things considered, my vote is to keep renting. Although I don't know specifically what market you're in, if the "affordable" houses are $800k then you're getting a steal at $2500/month including some utilities. Just know that you may eventually be priced out. However, jumping ship as a renter is far better than taking a beating on a money pit.
I'll also suggest getting involved in your local YIMBY group. The best thing for you long-term is if the community builds a LOT more housing.