The problem is retrofitting density.
Toronto is trying to quickly deal with it's increase in demand for housing. It can either try to build 1000 5-story buildings, or 100 50-story buildings. Which do you think is easier to do (financially, politically, everything else...).
It's all well and good to say "neighbourhoods with thousands of medium density buildings would be better", but we have to deal with what we currently have.
Now, long term I'm 100% in agreement with you. We need to modify regulations to say that new things must be of a certain density minimum, to gradually increase density everywhere. Consider taxing property in part based on density maybe? But in the short-term, towers have to go up or no one will be able to afford to live here next year.
As for comparing Montreal prices to Toronto prices: again that goes back to supply and demand. If Montreal had the immigration rates Toronto does (5,000 new people per month is the estimate I heard, and that's just from abroad), you wouldn't have cheap rentals. If Toronto hadn't worked hard to build towers, prices would look like the Bay Area.