“Cutting regulations” implies the current rules are intended to produce good outcomes, for instance, abundant large apartments for all. If that were true, I would agree with your skepticism, but I would urge you to consider that they might not be. The history of land use suggests that they were explicitly designed to exclude, and designed to raise housing costs. Early boosters in the 1920’s were not shy about saying that increasing housing costs was the goal. We should celebrate ridding ourselves of such “regulations”

Achieving this by cutting regulation would get you the other aspects of Kowloon Walled City too, the more horrifying ones.

2-3 tatami mats (95 sqf, < 9 sqm) sized apartments would be a great idea for kids who just need housing. Most people in the USA would still demand heat and bathroom in the apartment, or maybe just in the same building. There are apartments in Tokyo that lack heat and a shower in the same building, shared toilet, you go to the local bath house if you want to take a shower. This kind of housing could prevent lots of single people from falling into homelessness and probably drugs (but they can't keep a dog or cohabitate, and it doesn't really work for families).