Incentives are not well-aligned when cities don’t benefit from accommodating growth. Each new inhabitant brings more congestion, more demand for services, and places a burden on the city. Inhabitants bring much more value than they take out of the city, but without the ability to take a share of this, the city is burdened, on net, by them.
Cities do not necessarily act rationally—in fact, their governance is stupid and broken for many other reasons—incentives, however, are a powerful force shaping culture and behavior, especially in the long run.
The structure of taxation in the US is very backwards. In most cities, the order of taxation is Federal, then State, then the City, with each level of government taking less and less. Ironically, political effort is often invested in the same order. This is backwards, because the jurisdiction which matters most to your daily life is that of the City, then that of the State, and so on.
Cities need to take their governance more seriously, but also have skin in the game to drive economic activity in their city. Or, more accurately, just stop being a barrier in the way of it.