Just to flesh out the post below a bit, in general terms, absent regulation, the economics would lead to developers building taller buildings where land prices are highest. Land prices are presumably highest in the center or centers, and around high quality transit locations. So absent the height restriction you'd have taller buildings in those locations, but potentially shorter buildings as you move away from peak land price locations. In other words, the building height restriction constrains the supply of real estate in prime locations, which causes land prices to be bid up further away, increasing the number of places where developers want to build the maximum height buildings.
Punchline: absent the height restriction, you'd get taller buildings in some places, but also shorter buildings in others. Incentives to knock down townhouse blocks in order to replace them with megablock 12 story projects would be lower in other parts of the city.
