I don't agree. If someone wants to do that they should be allowed to without extra government interference because if they are doing that because it's profit maximizing then we screwed up in our zoning already. Our problem isn't the one off (probably rich people) going against the profit maximizing trend on development (probably because it's their own home and they are willing to forgo profit for other benefits like a bigger yard). Our problem is that we have a cascading scarcity of dense land zoning so at every level above single family it almost always make sense to renovate or tear down to be able to charge luxury prices instead of doing basic maintenance to maintain habitability while charging lower and lower rent as the building degrades over several decades before finally being renovated or rebuilt decades later than they are now.

So what you need is for the city to ensure there's always a decent supply of excess land zoned for each density level owned broadly enough that oligopoly BS doesn't come into play so that the profit maximizing choice is to always buy a plot of land with less density or with an actually uninhabitable building on it and build more density and they need to do this at every density level in their code. That's the big picture problem with North American cities. There are sub problems to this (like how we are providing parking wrong, suboptimal public service design, especially transport infrastructure) but the above is the big picture biggest problem