It's not a free market, though. It's not even a well-regulated market. It's a total mess of a market. This is a land zoning map of Toronto [1], one of the more pathological examples for a North American city. Toronto is a large and dense city with a housing shortage. And yet everything in red? It's only legal to construct a detached single family-home on that land.

In something at least vaguely resembling a free market, detached homeowners such as me would have to compete with other land use that generates much more utility, and thus income from rents, on the same land area, with something like a high-rise. But I am insulated from that, by laws that effectively entrench the upper middle class's preferred land-use pattern of detached suburban housing. Zoning bylaws that prohibit constructing anything else effectively subsidize the suburban lifestyle.

[1] http://www.datalabto.ca/wp-content/uploads/2019/07/toronto-0...