What does "NIMBY" mean in these contexts, though? I think this is more handwaving.

I live in a city that is taking active steps to increase its density and affordability (https://minneapolis2040.com/). This directly affects my neighborhood. There are two kinds of construction going on around us. First is higher-density apartments/condos in the 3-5 story range, often with first level retail. These aren't replacing homes, though - they're replacing light industrial like warehouses.

Second, and this is an interesting rebuttal - some of the 100 year old houses are being torn down and replaced with new, larger (and much more expensive) houses on the same lots. So a worn-out 1200sf bungalow on 1/10 acre gets turned into a 3200sf quasi-mcmansion on the same lot. These new houses cost 50-100% more than the old houses in the neighborhood do (more like 100% for the run-down homes they replace). But they are contributing zero to the overall density - they're still single-family dwellings. Even the old two-flats in the neighborhood contribute more density.

So rather than increasing density, they're increasing cost of living. That is your #invisiblehand in play, without NIMBYism stopping anything.

I don't know about MN specifically, but the teardown+upsizing is usually a direct result of zoning restricting multifamily development. A 4500sf lot could hold 3-4 townhomes that probably cost similar to the sale price of that 1200sf bungalow, and together sell for more than your quasi-mcmansion. If you need a variance to build the townhomes but can build the McMansion by right, that changes the economics of time and certainty, so you end up with the McMansion. I just moved out of Bellevue, WA and that city is full of run down houses from the 50s getting town down for 4500sf $1.5M+ mansions. In general, the #invisiblehand has his thumb on the scales against legal, by-right development of denser housing.

I don't think a 4 unit townhome is practical on these small lots with alley garages. Townhome construction around here is a burbs thing, and done in large clumps of 2-10 city blocks or so of area (and which tend to be singularly unattractive and gross).

I don't think it's just zoning here. There have been some small multi-family units built. But they don't sell all that well or seem economically attractive to builders.

And back to my point... I think there's a lot of sort of theoretical macroeconomic handwaving going on when it comes to housing density that flatly rejects engaging with real world conditions in any way. It sounds smart, but it's dumb.

Again, not sure about that local market, but modern townhomes of 1500-1800sf on a ~1000sf lot is a very common form. Alley garages make it even easier because then the front can look nice instead of being 75% driveway and garage.

That's a very different situation from what's going on in the bay area. Out here we're building tons of new office space, a handful of luxury apartment complexes (that often replace older complexes that had more units than the new one), and virtually nothing else. This is a direct result of residents (AKA NIMBYs) voting for city councils that refuse to allow denser housing.