Thanks to a lack of zoning, construction proceeds at about cost. Existing houses go up in price, new homes are cheap, everyone is happy.
To see an extreme of the opposite situation, consider Boston. Boston has many big houses whose owners could make a lot of money if they tore the house down, built several on the lot, and sold them separately. However this won't happen due to zoning restrictions. The result is that there are fewer homes available, and lots of houses are worth less than they otherwise would be.