Yes it blew my mind when I read about it too. Here is an article by Strong Towns describing some of the competing interests.

Type 1 and Type 2 developers are thus not reliable supporters of changes that would make the process of getting permission to build something simpler and more straightforward. Many of them prize their ability to be “big fish.”…

Whom do heavy regulatory burdens—high fees, strict parking and setback requirements, a long permitting process, or a lot of opportunity for delay or community opposition to force changes—fall upon most heavily? The smallest developers—Type 3—because these fixed costs do not scale with the size of the project.

It’s why when NIMBYs say building more supply to solve the housing crisis is a “developer talking point”, it drives me crazy.

Also, it’s why experts are advocating for Missing Middle construction. If small developers could build 3-4 story walk ups anywhere in the city at will without expensive community consultations and lobbying, we’d easily build enough supply very cheaply. Missing Middle zoning is why Montreal never had a housing crisis until the pandemic, despite being a bigger city with a growing population. Even now they have WAY more housing starts than Toronto or Vancouver.