Yes, that's exactly it!
> or because every individual is getting less and less of an overburdened commons?
No, it's not that at all. Why would common services be overburdened? Everyone still gets their water, sewage, electricity, internet, etc., but it's far cheaper to provide per-person.
And with the density you get to build public transit, so people aren't burdened by having to necessarily own a car.
Water restrictions? Fatbergs? Brownouts? Congestion? Traffic? Breathing room? Not to mention increasing demand on any inelastic local supply will drive up prices. To my initial point, the upscaling of utilities and infrastructure is often magically handwaved alongside the up-zoning demands. There are real negatives to cramming more and more people into one place!
You need to keep less $ invested in infrastructure per person if everyone lives on top of one another in a condo.
If everyone lives in a white picket fence SFH then you have to build miles of extra roads, pipes, cables. Every trip for every bus, truck, and car is a bit further.
There's a lot to be said for both rural and city life but cities can be much cheaper if there's unrestrained development.