The free market is not what is creating sprawl. Sprawl is created by policy effectively outlawing anything but cars. Also, cars are convenient when everything is designed for them and pretty much them alone.
The idea of a free market is a bit of a fantasy, but the market does influence policy significantly, which is why there's a lot of car-centric planning around. There are also car-unfriendly places are the world that also have extremely high property values, so it's not due to policy alone.
The car-centric planning came first, though; widespread development of suburbs would not have been possible without major highways being developed, for they would've choked on their own traffic pretty quickly.
Cars enable more suburban development, but their throughput on highways sucks compared to mass transit, which also minimizes their spread in some cases.
Not explicitly outlawed. However, cars are favored over everything. An example: when it snows, giant plow trucks come and clear the roads but the snow gets pushed to the side often covering the sidewalks so nobody can walk unless they walk in the road. Jaywalking is considered a crime in many places since the road is only for cars. Spending on infrastructure meaning 98% for cars and 2% for everything else. Scooters/lighter vehicles/bikes could be a bigger way to get around but made more dangerous and less practical because all of the money for transport is spent on cars and roads are often designed just to make cars go faster at the expense of everything else.
Any place that outlaws large apartment or condominium buildings is effectively outlawing public transportation, as there simply won't be a sufficient tax base to support it, nor will the distances between places be close enough to make the public transportation effective to use.
Imagine a city where specialized roads exist for last mile mobility like electric scooters etc., Where one parking spot per block is scooter/bike. Instead there are regulations on how many shared scooters can exist in a city, how many bike shares, etc.
There is a minimal critical mass to enabling them to be effective and we're not at it because laws.