More housing lowers housing prices and makes the city better, which attracts more people, which raises housing prices. It's hard to separate the two effects, but if you compare a city that builds more with a city that builds less, building less has little to recommend it. And yes, Tokyo is a good example.

Price is supply/demand. More housing usually came because of a huge population causing more demand. Population is almost like a force of gravity where dense places can never build enough because more always want to come.