alt Hacker NewsYes, developers are incentivized to build whatever units are most profitable, but the price per square foot is much higher for small units than for large units, so without regulations prohibiting high-density projects, you'll end up with far more units for a given amount of resources. Instead of building 20 units of 2,000 sq ft, if allowed a developer could instead build 40 units of 1,000 sq ft, for a similar cost, and sell them for less per unit but more per square foot. Without using any more land, foundation, or roofing, and only needing extra fixtures and interior walls, it would reduce the labor and materials needed per unit, while increasing the income.
It’s more than just extra fixtures and interior walls but bathrooms, kitchens, plumbing, and HVAC - some of the most expensive parts of a build. For example if a developer has 4,000 square foot of land, and it costs $1.6 million to build 4 units selling at $2.4 million total - vs costing $1.2 million to build a luxury unit selling at $2.2 million, they will build the single luxury unit. The overall price for the construction is lower, the price per square foot is lower, but they make more profit.