I'd just like to point out that these bigtime developers moving into the huge tower and six-stick apartment markets (like Lennar) are likely getting similar returns to the rest of their business. In 2013 and 14, net profits after income & taxes at Lennar were 9%. 2012 was a bit higher because they wrote down a boatload of losses. But most large developers, ones either responsible to Wall Street (the horror!) or private owners, aren't getting much better than 6-9% returns on an average project.
These are the same companies who build modest to McMansion-y houses out on whatever land is the latest fringe of the metro. It would stand to reason, then, that smaller developers or individuals might be willing to accept slightly smaller returns (in the 5-6% range) for much cheaper, smaller infill projects
. Maybe mid-sized, local developers would re-learn to churn out modest-sized apartments at reasonable rents (not those terrible super wealthy folks). But, since we zone it all out (yes also in existing 'burbs), the big firms build cookie cutter homes and apartments on fallow land at modest ROIs, and have recently realized the shift in urban preference and build towers on select sites.
I don't really think the notion of induced demand from development having nearly (or more) upward effect on area prices as new supply does downward has much to it. None of the research I've read supports that. And yeah, supply isn't *everything* when considering all the other things we need to consider. But that's like saying that since the CPP will likely only prevent 0.1 deg C warming that it's bad policy.
We need to get comfortable with the notion that in desirable neighborhoods (based on centrality, proximity to natural features, transit, etc), new market-rate construction may not ever filter as much as we'd like (though it still does!). And that housing affordable to middle- and modest-income families may have to be further away (from transit, from shops, from the core, whatever). That's fine if we have a strong vision to build public housing and provide vouchers (while requiring all landlords to accept them!) in the hot areas as well and make sure to allocate it to people who need it most.
Bringing this back to Nyes, the tower would have fit in well with the neighborhood but ultimately I agree it wasn't worth the fight with the church nor the risk to a true historic structure. A six story building is better than a parking lot by far, and the net difference in total supply to the neighborhood (when factoring how pro-development NIEBNA has been for other sites and likely will continue to be) is marginal.