I don't see city center commerce and leisure hubs as being particularly able to dominate neighborhood and suburban equivalents. I need a car to get out to work anyway (8 miles away from the city center), so once all the fixed costs of the car are covered, it's incredibly cheaper and more convenient for us to shop and eat in the suburbs.
I don't see government incentives changing that in a meaningful way.
What I'd advocate for is governments to tax the hell out of companies who want to buy offices in city cores without a good reason. All a lot of these companies do is contribute to congestion and unaffordable property prices through increased urbanisation which forces people into the city or to deal with the congestion. A few years ago my girlfriend use to have to travel an hour every day to get to the city centre to work in a call centre. What's the point in that?
If instead governments allocated certain areas of cities which have low congestion and offered companies tax breaks for opening offices there you probably would see many moving out of the cities to the suburbs, reducing congestion and making properties more affordable.
I honestly think one of the main factors contributing to depress and mental-illness today, and why people don't have kids like they used to is because of the way we're living. Who the hell is going to raise a kid on £35,000 in 10m x 10m one-bed "flat" in a city like London? However, if on that money living in the suburbs of a city like Birmingham you'd be able to afford a reasonable two-bed home with a driveway and garden. The problem is uncontrolled urbanisation is driving businesses to city centres, and often to the major cities, then forcing anyone who wants to decent job to follow along whether they can afford to or not.
I bet most well paid developers living in the UK here live in London. And that's by no accident. It's not that they all just love London so much that they're happy to live in tiny apartments with no hope of raising a family or affording a mortgage. They do it because that's where all the decent tech jobs are. And why? Who is benefiting from this? A few very rich people and large businesses who can afford offices in city centres?
Not sure whether you made a mistake in conversion, but 100 sqm is actually a fairly decent living space here in a city like London (Tokyo).
My 90-odd sqm house has been plenty large enough to raise a family. Small garden, no driveway. But who needs car ownersip when there's three well-connected rail lines within a 7-minute walk?
Density need not be the problem you imagine.
The problem always seemed to me to be less about road capacity, and more about city density and poor planning. I think we need to rethink the central urban hub model for cities. I suspect small hubs throughout the city would dramatically reduce congestion. We face similar scalability problems in tech. Typically if you have too much traffic going to your server you won't upgrade the server, but spin up more nodes. We distribute the traffic instead of spending larges amounts of money on infrastructure to send it all to a single node.
And another problem of this is that it causes feedback loops. I'm now in a position where I either have to continue to find working outside my city or relocate closer to the city centre contributing more to the urbanisation and population density problem.
With the right government incentives I see no reason why we could reestablish the city centre as a consumer hub. A place for shopping and leisure, etc. Then outside the city centre we could have tech hubs, financial hubs, industrial hubs, etc, all with good (perhaps even free) transportation between them. The time and money this would save seems like a no brainer to me. But then again, I don't really know anything. Perhaps there is a good reason to continue densely packing people into small 2-3 mile radiuses, where space is so limited most people can't afford a car, a decent size home, or even a decent sized office to work out of.