We have vast areas here (Ljubljana, slovenia) where you're only allowed to build two-story two apartment buildings and nothing more.. and right next to those buildings are large socialist-time apartment buildings with many apartments. But nope, you're not allowed to build higher there. Even in rural areas, we have a lot of empty land, right next to the road, and nope, not allowed to build there, because people who built their houses now complain and don't want new houses there. They also complain if anyone wants to create any kind of business there, and then they complain that there are no jobs there, and that people have to drive to the capital.

Look at eg. sillicon valley for example... just building 3, 4, 5 story apartment buildings in areas where there are single-family houses would multiply the usable area for apartments by 5 times, making the buildings larger (combining multiple plots) even a lot more, and since the number of apartments goes up, there is much more potential for investors to offer above-market rates for those plots of land where they could build bigger and higher.