Think about it - that works just as well if you take it to the extreme as "rebuild the entire city denser" - once you knock down the entire city, that land is gonna be worth a lot less.
And the demolition approach has the advantage of costing less than rebuilding everything after you demo it!
It's also a good way to force demand to move around, right?! Hell, if you demolished Manhattan and everyone there moved to other cities in the US, I wonder if the average rent and/or mortgage payments of the displaced people would go down...
> Hell, if you demolished Manhattan and everyone there moved to other cities in the US, I wonder if the average rent and/or mortgage payments of the displaced people would go down...
Is that a rhetorical question?
You've asked the wrong question. It should be whether the sum that everyone in the world spends on housing will increase or decrease, not only the displaced Manhattanites.
The solution to high housing prices, obviously, is to demolish whole blocks of housing.