In that case, wouldn't the reasonable response to desire for higher density be, you know, demolishing single units to build high density housing?
Often, that isn't possible due to zoning in these 'unrestricted' cities. Zoning tends to be really restrictive, up to the point of placing tight limits on the density of dwellings.
Zoning or not, leveling housing to make room for high density is expensive, slow and difficulty-prone.
It's slow because you need to wait for many individuals in a market to act. They'll usually need to act in cooperation, piecing together smaller parcels. It's expensive because you are destroying housing to make housing.
Also, management of public infrastructure (even schools) is not flexible, adapting to local needs in realtime. A planner/zoner may look at an area, see that the infrastructure is insufficient and shut down population increases because they have no way to pay for more infrastructure.
Often, that isn't possible due to zoning in these 'unrestricted' cities. Zoning tends to be really restrictive, up to the point of placing tight limits on the density of dwellings.