Housing in higher-density areas currently has a higher cost per square foot than it does in the suburbs, implying that unmet demand for it is currently higher than demand for suburban real estate. You'd have to build enough to make that not the case before anyone who doesn't want to live in a condo would have any reason to choose it over a similarly-sized house. And if you actually managed that then it would be from building enough condos to make them more affordable, which would start attracting some people with only a weak preference for a house and still make them better off because they'd get lower housing costs. Meanwhile the people with a strong preference for a house would just pay the extra money for a house, which in the long term would still be less than they're paying now because there wouldn't be so much housing scarcity.
> less than they're paying now because there wouldn't be so much housing scarcity
And now we’ve circled back to where the owner of a big house looking to downside isn’t made better off.
Housing policy is complex and tied up in economics and emotions. Arguing (as you seem to be) that all users of housing are made better off by a policy change that’s so simple and obvious that no one has tried it is going to leave many people more skeptical of your idea, not less. Arguing “these users are made better off at the expense of these other users is probably more accurate and more persuasive”; if you can’t find anyone made worse off, it’s possible you’ve cracked a problem facing society for well over a century, but it’s more likely that you just have thought/looked hard enough.
> And now we’ve circled back to where the owner of a big house looking to downside isn’t made better off.
Except that by then they've already sold it. There is a time delay between when the area is rezoned and when the new construction the rezoning allows has been able to bring sufficient new supply into the market. This is long enough for the existing homeowner to unload their house onto a developer at the premium that exists while the scarcity is still high.
> Arguing (as you seem to be) that all users of housing are made better off by a policy change
It isn't all users. For example, if you already own a 50 story building then the units in that building might get less expensive once more supply comes online, but a developer isn't going to pay you for that land so they can knock it down and build a taller one because it's already a tall building and there is no sense in that when they could do the same to a 1-story building. And then those will be the ones lobbying most strongly against zoning reform -- and they have a lot of money, which is why we hardly ever get to try this.
Banks also like high housing prices because that means bigger mortgages and more interest, and their marketing materials to customers are likely significantly responsible for the impression among homeowners that it's the homeowner rather than the bank who is receiving the benefit of that.
