High density doesn't mean only building housing. You can build housing around a large park that gives children a safe place to play and explore. Shops within walking distance allow them to experience some responsibility running an errand or to buy themselves a treat with pocket money. At least in my opinion urban living with a sensible balance of retail/nature/housing offers children much more independence than they'd get in the suburbs where they rely entirely on their parents to get anywhere.

Dense cities usually have nice communal spaces that kids can use to play and socialize.

Thst's just begging the question. We'll need to see some studies on the impact of living "crammed" into an apartment.

there already exists cities like that - see hong kong for example. Or tokyo.

Their kids turned out normal - as far as i can tell anyway.