Our oldest unis are generally "downtown" or similar - Harvard, Princeton, UVA (sort of - Charlottesville is a really small city), etc. Though most do still have their own dormitory housing, at least for underclassmen.

The large campus-style uni is fairly recent creation - many came out of the land grant system during/after the Civil War. And even as newer unis have been created, they've followed that general design (even though they aren't land grant institutions).