They could also grow by saving and reinvesting surpluses/profits
Just because someone gives it a formal name doesn't mean it's true.
>One person's savings is another person's debt.
Only if you treat fiat currency (or bank deposits in general, the paradox you mention was formulated long before we got off the gold standard) as the only possible form of savings.
Would you rather have 90% of $1M or 100% of $800k?
That single word is doing all of the heavy lifting for you. "If" the housing market will never crash, then it's a surefire safe investment! Better buy tons of houses to flip on credit. There's no guarantee that your debt/investment will succeed, which is why banks try (and often enough, fail) to price in risk with things like varying interest rates, collateral, etc.
in scenarios where your expected value discounted to present value is greater than the alternative, you make the investment. it's really finance 101... it's just NPV