If you, for example, nationalized all inner-city land, you could easily find plots to build high density housing. At which point, you're stuck there wondering why you should bother with the capsules: it's cheaper to just prefab the building in concrete then assemble at site. That's what the kruschevkas are: you leverage economies of scale to produce millions of units of housing for peanuts.
Obviously, nationalizing inner-city land is hard in the current political makeup of most nations today: real estate is a favoured investment for very rich people, and they have a lot of political power. So the question of housing becomes less one about houses, and more about what kind of finessed regulation you need to avoid offending the small number of very wealthy people that own inner city land, while actually allowing the state to build on it.
There's a long history of national building projects in many countries that have created problems like these.
This was generally instituted after WW2, which left the EU housing stock in a far worse condition than the US's today, and left the EU totally impoverished.
So, you can come up with hypothetical problems, but practical experience shows it can absolutely work.