No, the serious question is why aren't more people living in SF, instead of the sprawl of low-density suburbs and pseudo-suburbs that surround the Bay Area?
The tiny area that makes up the City and County of San Francisco is relatively high density for its size, but the fall off in density once you leave the county (which occupies only the tip of the San Francisco peninsula) is precipitous.
> People act like it is, the reality is different.
No, people act like it is, because it really is... When you're talking about building high-density housing in the actual city (or medium-density in the suburbs with reasonable transit options)... Which is literally always what they are actually talking about. No one is talking about there being problems building low-density housing in the middle of nowhere.
> San Francisco is fairly dystopian.
If it is dystopian, it is not because of density. There are numerous higher density parts of the world that do not struggle with the issues San Francisco does. It has nothing to do with people's inability to see cows. It has to do with the US' refusal to support the things that facilitate living in cities.
> This would help wealth inequality (spreading the wealth) and improve mental / societal health.
The idea that increased suburbanization would have any positive effect on wealth inequality is completely absurd.