Probably not much higher without some significant changes.
But the main idea of a septic tank is to have the bacteria eat everything objectionable, give off CO2 and methane,
leave a little sludge (after 20+ years, I've never had the septic tank cleaned), and those are also the main ideas for sewage treatment if have big sewer pipes, bring all that stuff to a central location, and treat it there.
As far as I can tell, what runs into the drain field in my backyard is just harmless. It doesn't even make the grass grow faster than elsewhere. The back boundary of my backyard is a small stream; it only has water flow from melted snow or heavy rains; and I've never seen any evidence that my drain field or those of any of the neighbors generates any flow in the stream.
All the houses in my area, at least 25 square miles, have such septic tanks, and I nearly never get any whiffs of methane or anything else.
So, for your question, sure, with somewhat higher population density, just do a little more with septic tanks. Even with the population density of NYC, in the end the crucial step is some bacteria eating the rest just as in my septic tank.
The NYS building codes for houses are careful to specify what is needed for a septic system, especially about what has to be in the drain field. In some cases, suitable soil has to be trucked in as part of building a suitable drain field.
As far as I can tell, the water from my septic tank just goes into the soil just like melted snow or rain water. Maybe the best view of what, besides just pure water, my septic tank is adding to the soil is, in a word, more soil!