I used to live on a road with ~660 houses. The road, the houses, and the yards combined took up ca. 40,000 m^2. Near the local well-connected train station, a few new-builds in the 20~ floor range added more homes than that entire road took up in ~2,000 m^2.
On top of that, because of its location, the strain added on transport was far less - most people would be a short walking distance from both shops and commuter trains to the centre.
There are hundreds of major transit hubs like that in the UK where you could easily add do relatively modest hubs of higher-density housing and add a massive amount of capacity.
What's lacking is the political will to solve the massive problem of house owners who have been trained to see rising house prices as financially beneficial to them.
When most of those house owners are in an older demographic more likely to vote, it's a huge challenge to fix.
WFH was an opportunity to escape from geographical concentration which is the main cause of the high cost of housing.
Then there is the question of wasted resources. We spent all of these resources to build up Detroit. Now what?
500 square feet for a couple is standard (that would be seen as a small appartment in the USA) and living in 300 square feet or less is fairly common for someone single.
Same thing with New York I guess. I had a cousin move from Paris to Manhattan, and it didn't really feel like an upgrade.
And thankfully, because of that our suicide rates are lower than in East Asia.
People aren't chicken and hell even poultry will show signs of aggression, depression and other mental health conditions when cramped in too tight conditions.