[kspaans]

As you've alluded to, location is a factor. Specifically: the cost of land. Regardless of the price of building each square foot of housing, rising land values inflates the total cost of buying land to put that housing on. This is partially due to population growth. But it's almost entirely a self-inflicted problem. That problem is zoning.

If a slice of land can only be used to build a home for one family, and that slice of land is near things people want, it drives up the price of housing. If you were able to build a multiplex or condo tower on that land, the land would probably cost even more, but spread over more dense housing the price of land per square foot of housing would be much lower than for the single family home.

A second problem that's harder to address than waving a city planner's wand is infrastructure. Density requires transit (roads or otherwise), electricity, schools, sewers, water, etc. If municipalities don't plan for that it makes growing hard.