Although it may be true from a short-term fiscal interpretation, what about the long-term? Sure, a huge development comes up, then, what next? You have to tunnel deep underground for any sort of rapid transit to exist. The line becomes so expensive, it doesn't get built and everyone is forced onto cars, surface transit, etc, and all hell breaks loose.
This is what's happening in Liberty Village, the Humber bay shores, etc. They built a crap ton of buildings without any means of transporting people around the city. Had they built a cut-and-cover subway line before all the buildings went up, these issues wouldn't be hurting the city. It's also not just Humber, but also the East Bayfront, the entirety of the DRL corridor, etc. Since downtown Toronto is running out of room for high rise buildings, condo builders, investors, institutional and commercial developers, and city dwellers are turning to areas like Downtown Mississauga, Vaughan City Centre, Sheppard-Yonge/North York Centre, Scarborough City Centre, Eglinton Avenue, Richmond Hill, etc to live and develop. There was an opportunity to build in an area that would see development (Sheppard) and they built there. Was it the right decision at the time? Probably not, but crowding issues weren't insane back then.
To your point about Toronto stopping building subways in high-density urban areas, that is because back then, the subway downtown had plenty of capacity to be utilized, and the only way to bring people to use the downtown subways was to expand in the suburbs. This is what they did, development ensued, ridership grew, hubs were established, the city was working fine. The great system was so great, people neglected it. One day, the system fell apart, ridership grew to a point where the downtown subways became inadequate, infrastructure was falling apart, and people were sad. There were only a limited number of construction workers to fix things, but with all the development in Toronto occurring, they became even more scarce, and, therefore, more expensive. Labour laws came in, development got in the way of expansion, and prices skyrocket to a point where it becomes infeasible to do much with the system.
The same thing is happening with the SSE. They built the ICTS that had enough capacity for the usage at the time, it was fast and efficient, people were kind of happy, the end. Then, it was neglected, people in Scarborough got no transit expansion for 40 years, the infrastructure failed, ridership was sky high because of all the development in and around the line, etc. To fix it, you have to pay a lot of money to do so, and the nature of the project limits it to either running underground or in a corridor that people are trying to use to build RER. It's an extremely complicated process that's not solely based on a capital figure. Just like Downtown, Scarborough has a transit problem. It may not be as severe as d0wntown's, but it shouldn't be neglected.
