> It would incentivize building a comparatively more expensive building that maximizes the developers profit. Whether that means shoeboxes or livable space depends on how much those things cost to build and how much people are willing to pay for them.

Yes, exactly. And my point is that a city shouldn't optimize along one direction like this, because families work in urban centres too. There should be a mix of housing for single people and families in the same urban areas, or you drive the families out of the city and encourage commuting and urban sprawl.