The supply in question isn't land, it's housing. There's enough vertical space available, so far all intents and purposes, it's not a limiting factor.
What's limiting efficient land use is artificial constraints put on construction.
What's limiting efficient land use is artificial constraints put on construction.
It may seem paradoxical to you, but supply and demand simply doesn't function the same way when it comes to land. The supply of land is fixed. That is why rents are more like monopoly pricing.