"The salesman sold all these fixed priced contracts to which the owners all paid the deposit and the money was flowing, then in the midst of covid the prices started to rise rapidly and shortage of supplies."
that's as near as dammit to a technical description of a ponzi scheme
"A system or insurance as you say would be open to more misuse especially to home owners by builders that can manage their company better."
nope, home buyers wouldn't be involved except for the cost of the home 'possibly' being slightly more - but, I suspect that if all were equal - the cost of the house building should actually be less - because the builder has build in a LOT LESS risk for his business.