[frenchy]

> I think building materials, labor, and land is increasing prices

Denser housing provides more functional housing for a given amount of material, labor, and land. For example, if you're building a townhouse, you just need a 10 inch wall instead of two 8 inch walls. That's less material and labor.

> the demand for housing has crashed, due to the market

The demand for housing that can be supplied within the context of the given regulations has crashed. If you allow people to build more efficient housing, then it could be financially viable again.

[adamredwoods]

Near my house (Seattle) they recently built 12 townhomes, just as you describe and the prices for them is US$900k. While they are slightly less than a single family home, affordability is not a key word I would use.

These townhomes, are still available and not selling quickly.

[Izikiel43]

> These townhomes, are still available and not selling quickly.

Then price will have to drop until they sell