>Often low-income families would live in smaller houses for less money if they had the choice, but building smaller and more dense housing has since been restricted by planning codes, often with the intent of excluding poor people.

I'm conservative-minded on regulation for exactly this reason; my parents and grandparents were allowed to live poor yet we're obligated to pay substantially more in housing because of restrictions and requirements that purportedly address safety concerns that I'm willing to risk.

You don't even need intent to squeeze out poor people. Why would a contractor build an 800 sq/ft house to sell to low income people when you can make over 2x the profit on a McMansion?

Because you can put more units on the land and make less money per unit, but more money overall. We don't have to guess about this. We used to allow developers to build and this is exactly what happened. (We already have places like Queens, for example. It's not hypothetical.) Then we made it more or less illegal to build and that's why it doesn't happen anymore.

You would theoretically use proportionally less land, so stick three 800 sqft homes on it.