Consider what constitutes a "multi-family home" in the loosest sense and you'll find that zoning/regulation is what is prohibiting its construction. Otherwise, if there is demand, it will be built. 10 people will not buy a multi-million dollar mansion together, but they would buy a piece (or rent) of medium-density housing.

Those mansions also tend to be built far away from city cores, with large lots to maintain (with paid labor), more taxes to be spent for infrastructure cost, requiring a vehicle, etc. It would still be too expensive and unhelpful for average people.

WE don't build enough. Look at what zoning reform has done for Minneapolis.