Because of opportunity cost relative to other housing options. Right now you're only allowed to build SFHs, and the market will only bear a price of 2-3M before

Because of opportunity cost relative to other housing options. Right now you're only allowed to build SFHs, and the market will only bear a price of 2-3M before most people are priced out, so that's what they cost. If instead of one SFH with a large yard you build 5 row houses in the same plot, and sell each one for 1M, the SFH is only 50% efficient compared to the row houses, so its price needs to increase for it to be worth building. It's obviously more complicated than that, but that's the underlying idea. It's the same reason you don't see SFHs in Manhattan, because the opportunity cost is too high.