I don't think this is right. Highways induce demand in a much more immediate way. It takes time for cities to outgrow themselves. And even a very dense city like New York just simply hasn't kept up.

Rents haven't always been as high in NYC as they are now. It's not as though the city's history is one of inducing demand that it can't meet with adequate supply.

The city has always been expensive, but not in the ridiculous way it is today. I'll leave the inflation calculations to you, but this demonstrates my point:

http://www.millersamuel.com/change-is-constant-100-years-of-...