Why do you think building new houses is bad for the environment? In the short term you're paying for materials, but that'll be made up pretty quickly by better insulation and, if you get multi-family dwellings, a lower surface area to volume ratio. And shorter commutes also tend to strongly decrease transpiration energy use. Clearly you would be losing historical character if you did what the article suggests, but from what I can see all the environmental arguments are on the other side, unless you think that restricting the housing supply will reduce the number of people.