I don't see how that could be the case. The property value of a plot of land on which a 50, or even 5 story building can be built is much higher than the property value of a single-family home.
It's sorta like when labor unions go away. The company that hires non-unionized labor at half the price and double the productivity reaps an enormous windfall. So do the employees, who were presumably in other, less well-paying jobs. Everyone else who chooses not to play the new game ends up out of a job.
Or is this correct: As housing prices rise, it becomes cost effective to replace simplexes with duplexes, threeplexes, etc., causing the value of all simplexes to rise.
That's not completely accurate. Yes, demand might fall, but even so price and value will still rise regardless.
If you build a 50 unit complex next door, as long as some of those 50 units sell, then everyone elses 1/4th acre will become more valuable, even if no one ever actually buys them, because land value in the US has very little to do with buyers or demand, and is exclusively valued by whatever property transactions happen to occur nearby it.
land value in the US has very little to do with buyers or demand, and is exclusively valued by whatever property transactions happen to occur nearby it
Most residential properties here could have been snapped up in 2009 for about 60% of current costs... because demand was lower. (Probably several hundred percent in areas like Mission Bay.)
Land value in the US obviously has to do with buyers and demand.
So yes the price of land would go up, but the price of livable space would fall. And the cost of livable space is what we care about with regards to affordable housing.