Sigh... stupid politics... caps (or equivalent) are a mathematical necessity in NYC: the city streets can only handle a very limited number of vehicles. After that, congestion becomes a classic tragedy of the commons.
Looked at another way, smaller buildings are a necessity. From that point of view, the NYC politicians allowed people to cram too many buildings in too small of a space.
Or, maybe there are not enough roads. NYC could go double or triple-deck roads. It would be ugly as heck, but would ease the problem.
Not disagreeing with you, just pointing out that the root cause of the tragedy of the commons is that each person is fine with such a small space. If we made a minimum amount of space that people could own/rent/live in, then the problem would never exist. (for instance, Kansas doesn’t have this issue)