Housing in higher-density areas currently has a higher cost per square foot than it does in the suburbs, implying that unmet demand for it is currently higher than demand for suburban real estate. You'd have to build enough to make that not the case before anyone who doesn't want to live in a condo would have any reason to choose it over a similarly-sized house. And if you actually managed that then it would be from building enough condos to make them more affordable, which would start attracting some people with only a weak preference for a house and still make them better off because they'd get lower housing costs. Meanwhile the people with a strong preference for a house would just pay the extra money for a house, which in the long term would still be less than they're paying now because there wouldn't be so much housing scarcity.

> less than they're paying now because there wouldn't be so much housing scarcity

And now we’ve circled back to where the owner of a big house looking to downside isn’t made better off.

Housing policy is complex and tied up in economics and emotions. Arguing (as you seem to be) that all users of housing are made better off by a policy change that’s so simple and obvious that no one has tried it is going to leave many people more skeptical of your idea, not less. Arguing “these users are made better off at the expense of these other users is probably more accurate and more persuasive”; if you can’t find anyone made worse off, it’s possible you’ve cracked a problem facing society for well over a century, but it’s more likely that you just have thought/looked hard enough.