Building more dwellings would obviously be a profitable enterprise but local elites prevent it for racist and classist reasons

Its more complicated than that. A lot of high density development comes at the expense of historical (typically lower rent) housing. Gentrification is all about evicting low income and elderly families for access to cheap real estate, then flipping it into higher priced "luxury" space.

Alternatively, you have the Pruitt Igo model, where the high density housing is packed with low income families and then defunded to the point it becomes a slum.

Dense housing is fundamentally good and necessary, but it isn't above being systematically corrupted and abused.