I can see that this is going to be an unpopular opinion but the answer is... most people don't actually want to live in commie row houses with a bar downstairs.

I live in suburban Australia. We don't have HoA's and the police don't shoot people, but other than that I imagine that it's comparable to suburban US.

We have a front and a back yard because it's nice to have some room. My kids play in my back yard. We also have about 10m2 of raised planter boxes to grow vegetables. Lots of people also have a shed where you can store hobby equipment like bikes, trailers, camping gear, woodworking, et cetera. Some people have pool tables, sofas, beer fridge, et cetera.

There are some sensible rules about what you can do in your front or back yard but they're for everyone's benefit. For example you can't erect a BFO wall along your front yard, because if everyone does it then the neighbourhood would feel oppressive. There's also some varieties of trees you can't plant because it upsets the neighbours when it inevitably falls over on them in 100 years time.

You can't have shops in a residential street because most people don't actually want that. In most suburbs there are shops, bars, and restaurants a few minutes down the road. Far enough away that I'm not bothered by them but close enough that it's convenient.

In Australia you can choose whether you want to live in a busy city in an apartment with shops up your ass, or in the suburbs, or on a rural property with no towns within 100km. Most people live in the suburbs this guy is questioning, because it's a nice balance of cost, serenity, and convenience.