This unfortunately has been a long standing issue, although it seemed like in the few years before the pandemic it was easing up a bit. I can't help but assume that a big part of the reversal in trends back to shortages in spots is in part due to cuts for funding across the board thanks to current administration in the federal government. Over a decade ago myself and a number of PsyD and PhD students from programs across the country were part of an APA/APAGS task group/think tank that brainstormed ideas and ways to reduce , what was then, an even worse problem of too many applicants and hardly enough spots which culminated in meeting with representatives in Congress and their staff talking about the impact of an ongoing internship crisis on mental health services, training, and access. At that time the amount of applicants versus available spots was over 1,500 if not more. But looking back vs today, it feels like a different world back then.
And yes shutting down diploma mills was one of the suggestions, although over ideas including proposing moving internship to after graduation (I.e. become more about hours for licensure than part of the degree requirements), increasing funding, educating possible sites on benefits of having interns, etc. To the credit of some reputable programs, they began expanding their own "consortium" arrangements with a combination of school run sites and external sites with a contractual relationship. Some schools had issues regarding having interns "too close" to the school's students (I.e. having internships at on campus counseling centers for the same school which as you can imagine creating ethical and confidentiality concerns) and so some of them worked with other counseling centers, as well as developed outpatient testing/therapy clinics, and strengthening alliances with other sites while also offering 2nd round spots to students not from the school. Fast forward to today, and I'd imagine these arrangements are still around while stand alone sites who might have had funding for interns no longer has funding and/or as we've seen the encroachment of midlevels into all settings perhaps its cheaper to hire them.