the article has some nice graphs, but doesn't really string it's central tenet together very well: that high construction costs is the #1 reason we don't have starter homes being built.
> "That sums it up."
i'm sure one of a bunch of secondary reasons is that construction cost is high (while also sub-linear relative to sales price), so it's more profitable to build larger homes, as the quote alludes to and you pinpoint here. (regulatory distortions, e.g., mortgage interest deduction and zoning laws, are other secondary issues exacerbating the problem, which i'd suggest have more direct culpability than higher construction cost.)
and the other side of that circular argument (or vicious/virtuous cycle, if you prefer) is that construction cost is high because sales prices are high, and general contractors see an opportunity to take more of the profit pie. combine that with construction labor being tight, and you get a seller's market (for contractors). thus leading developers to seek out more profitable, higher-end homes to overcome the higher construction cost.
but because development costs (e.g., construction cost and cost to acquire) are relatively predictable parts of real estate development, i don't buy the argument that it's the driver of the shift to higher-priced homes. my back-of-the-napkin intuition tells me that develoeprs are simply taking bigger risks, probably because money is cheap and plentiful. so they're going after the big fish and ignoring the small fry, especially since tight housing markets mean that higher prices are more likely to get choked down the throats of buyers who have no better alternatives. that seems much more likely as the "#1 reason why it's so hard to find an affordable home", rather than construction costs.