It's not entirely that it's illegal to build cheaper stuff, it's also that there is no incentive when zoning artificially limits the amount of the market you ca

It's not entirely that it's illegal to build cheaper stuff, it's also that there is no incentive when zoning artificially limits the amount of the market you can serve. Zoning laws like single family zoning, requiring parking spots for every unit or even every bedroom, disallowing zero lot lines on lots that allow multiple units. All of these things add cost that may not pass along any value to people in the market. Aside from the engineering complexities of modern buildings, we've also limited ourselves to building either single family or 200 unit apartments when most cities have a ton of space for 3/4 unit homes which are considerably cheaper to construct. We built our zoning laws on the idea that we could just always expand outward into suburbs forever. But that approach is broken as people start to move back into cities.