Not really: Say there's one free acre of land in town. You could build one mansion on it, or a highrise with 100 apartments.
Building the mansion isn't going to move the needle on any existing housing at all, as it's just one unit.
Locally, when I see people complain about luxury housing being built, it's because the developer is building high-spec townhomes and selling them for $800k+. Instead of lower-spec townhomes at $500k. The developer can't fit appreciably more homes in the same footprint (they're all 3-4 stories tall here - reducing size likely means one fewer stories). And the market will bear $800k+, so that's what we get.
The real answer is build even more homes. Or allow high-rises on the same lots.
In theory, the family that buys the $800k townhome came from somewhere. The smaller house they vacated is now open for somebody else (who in turn moved out of a studio flat that's now open, and on down).
Or, they didn’t sell it and are just seeking rent on it, now. For this effect to really work, the number of home-owners should equal the number of homes.
Right now, there are many, many fewer home-owners than homes.
That's fine, it still provides housing for someone. And there are people who actually prefer to rent, so it's good to have rental units available.
Problematic is when they hold on to it and keep it empty, thus occupying space but providing housing for no one.
(Slightly higher because it is mathematically impossible for anyone to move if there are no empty homes, and they sometimes have to sit vacant while being renovated or are in the process of being sold)
A developer will, indeed. More profit. But an acre is small enough that it could just as well be a rich individual buyer, in which case they'll build what they like.
There's a half-acre plot for sale nearby for nearly $2M, I'm curious if it ends up being bought by an IPO millionaire to build a small mansion or by some developer to put up two-story apartments. Could go either way.
And do they want to live in that mansion surrounded by multi-unit buildings built by developers buying the nearby acres? Also seems unlikely.
Local to me, redevelopment of a lot with an existing SFH tends to be another SFH because of zoning (unfortunately - many of the lots would be perfect for a nice duplex or very small apartment block).
Larger lots tend to be bought by corporate developers, both because they have the resources to develop it fully and also because they frequently have to battle NIMBYs for a while to get re-zoning approved (I tend to side with the developers, except when they buy parkland to develop, but that’s a whole other discussion).
(I say this sitting in the middle of the LA metropolis between two almost undeveloped hillsides of ~10 acres each, haha; and a thousand more people in this neighborhood would be significant for us (maybe? dunno the actual pop count) but nothing to LA as a whole, AFAIK)