In the case of San Diego – and many cities in North America – it is the third explanation I find most compelling. Developers can be induced to do many dumb things, but they will not repeatedly overbuild on cheap land. The land has tremendous value. The reason the one- and two-story buildings aren’t redeveloping isn’t demand; it is due to the way the properties are regulated. There are a unique set of incentives that is inducing cities like San Diego to evolve in ways different than Milan, to end up with random jumps of intensity instead of smoother increments of change.
This is key. The market won't create 20 story buildings near single family homes in the absence of zoning distortions.
