This is the saddest line of thinking in transportation and the economy. Induced demand is a farce in a lot of ways. The primary way is that the capacity that no longer fits on the narrow road find a way through 3 paths. One is mass transit (this is good). Another is jamming the path (this is bad) and the final is to seek alternate routes (also bad). Right now "induced demand" completely jams up many local roads slowing down local travel and mass transit (buses/trolleys) that operate on those routes.

Developers and builders will always flock to build the easiest and most profitable projects (this is not evil or bad..this is human nature). You keep increasing the non residential buildings with relatively little increase in the residential then you get what you have today. Imbalance. Not sure how you eliminate demand or whether that's even a good idea.