Agreed. They will generally build as tall and as dense as they are permitted to because (within reason) it reduces unit cost. Obviously there are limits to that. No one wants to build a high rise in the middle of nowhere.

But within high CoL areas they are generally severely limited on both of those aspects. That's due to zoning laws.

Of course that's not the whole story. Infrastructure has to be upgraded to keep pace with growth. But that's on the local government to plan and execute properly. Right now they largely just say "no".

Right, and that bureaucratic red tape is one of the things that makes the cost of building higher. If the builder expects they won't be able to break ground for two or three years because dealing with the planning commission takes forever, or because they'll have to deal with environmental lawsuits before they can build, then they will need to target higher-end buyers (by building a higher-end property) in order to make a profit. And if they can't do that... right, they simply won't.