But if you put a billion houses on Manhattan their value will be zero. There's almost an unlimited amount you can build up. The problem is we're currently putting houses on Jupiter instead of Manhattan through arbitrary restrictions on density.

If you put a billion houses on Manhattan, MOST of those billion houses would be worth nothing, and the ones where people wanted to be (which is probably not Manhattan if a billion houses were blocking out the light - but I digress) would still be expensive.