This sounds like what I found among teardowns in Naperville, Illinois: some desirable lots that used to contain starter homes now are home to McMansions.
In each of these places (that last one is Austin), modest entry-level housing has been replaced over time by far larger and more expensive homes out of reach of most first-time home buyers. Neighbors sometimes sneer at such new additions as “McMansions” (but note the regional variation in McMansion architecture). I often hear from readers and residents during my reporting that it’s a shame the developers who built them tore down “perfectly good houses.”
This has consequences:
There is nothing inherently bad about small 100-year-old houses getting replaced by larger, modern ones (indeed, many planners, historians and economists would say there is something bad about insisting that communities must remain exactly the same forever). Tastes change. Consumer demands and demographics shift. Americans, on average, have become wealthier over time, capable of affording more housing than the typical family could three generations ago.
But the reality is that most communities effectively ensure that the only viable replacement for a starter home on expensive land is a new home that’s much larger and more expensive. That stance contributes to the affordable housing crisis. If communities struggling with it want to rebuild the entry-level end of the housing market over time, that will almost certainly require allowing a new generation of starter homes that look more like duplexes or condos, or small homes on subdivided lots.
Over time, the number of smaller homes in desirable communities or neighborhoods dwindle as property owners and new buyers want homes that reflect more current trends. Another way to think about this: the supply of starter homes or smaller homes is reduced in particular places (if it is already not that affordable because of the demand in desirable places) and it is not necessarily being replaced nearby, if at all within a region.
It may be worth noting that this teardown pattern does not happen everywhere in cities and suburbs or even in most places. While I have not looked at the issue systematically in the Chicago region, the evidence I have seen is that teardowns are taking place in larger numbers only in certain locations.