I think the reduced density take is the correct one. It's the same mindset as parking minimums, lot size minimums, and single family zoning, multiple legal blockers against increasing density. A house is being built off of Markham in TP that had to request an exception to the minimum setback due to the lot being tiny. I'm sure it wasn't a cheap or easy process for them, but it's 1 small but important addition to the housing supply shortage.
Dave @ Building Bull City wrote
But if we are trying to thicken up our neighborhoods now, why do front setbacks still exist?
I also wanted to add to this question with my own question. How have cities throughout history been able to convert low density neighborhoods to medium and medium to high to adapt to the growing population but today it's nearly an unmovable object for local politics? Today we act like London or Paris have always been multi million population cities that didn't need to convert essentially single family homes into more dense housing to match housing demand needs.