Honestly, I think the role of stuff like this is exaggerated... if you look at real examples. Base level building cost per sqm at the low end is pretty low but..
1 - IRL, especially in urban markets... rental markets tend to have a pattern where not far below median prices, quality falls off a cliff. For every dollar you save, you lose a lot: sqm, finish, location, etc. By about 0.5X median prices, there is often nothing. Conversely, in suburban & rural markets, quality per dollar tends to explode somewhere not far above median.
2 - This is usually less true for owner-occupied or other types of housing.
I think the end of tenement-type housing has as much to do with culture as it has to do with pure economics or building norms. Most of those, originally, had live in owner-operators. It was a way to make housewifing into a business. Apartments didn't really exist yet.