Yeah, Tropico's combat is always pretty silly, but I'll deal with it as it's not the main mechanism of the game.

When you try to eliminate shacks & get everyone into cheap housing, this actually makes the communists super happy, so instead, try to focus on higher end housing and make sure higher paid citizens don't have to share housing types with the plebs.

Balancing housing out was always a difficult mechanism in the game. It needs to be close to their work, but it also needs to be cheap enough for them to live. I always kinda over-build housing because some people just don't want to pay (slightly) more money and live in a cheap nice place, and will instead demand to sleep in squalor. Making people not live in shacks is a real hassle.