I think it's a question of local optimization. New housing units increase supply and lower the clearing price. Once people move in, new amenities such as more and better cultural institutions, restaurants, hobbyist clubs, retail establishments, public transit systems, etc. become feasible. So in the long run, the city becomes more civilized and desirable. Clearing price goes up relative to regions that are less-developed. But generally speaking people tend to make short-term and selfish decisions rather than thinking about what could be if many people behave altruistically, forgoing short-term gains and temporary inconveniences in order to reap long-term benefits (global optimization).