Unless I'm misunderstanding, this solves for the problem in which someone wants to put a skyscraper in the middle of suburbia. In other words, based on the assumption that developers will always want to build bigger, but the locals don't want that.

Interesting to imagine what this city would look like. If it spread out evenly, you'd get a strange "bowl", with the original SFHs in the center, and high-rises on the periphery.

I guess in reality you wouldn't have such even growth; high rises would still potentially want to clump together for business districts, etc.

As buildings get torn down, you could do the recalculation; each new building can be x% above or below the local building density "slope". So over time, even the SFH areas could grow upwards, just at a slow pace.