I don't think this is actually quite the case when you look historically. What seems to be the case is that cities have a sort of S-shaped demand curve, where a fraction of people are willing pay a huge premium to be near their job and their entertainment, and many others need housing to be dirt cheap to live in the metaphorical pod. In other words, it's not that the demand curve is just higher than the suburbs: the demand curve is more sloped. Cities then constrain their housing supply so that landlords end up only serving high-premium customers, ensuring that the surplus here goes to landlords and not to renters.