I tire of whiny people, like most in this thread, who want more for little contribution to SL the creativity, the variety, and yes the economy.
Collapse- no, but hurt those vested in it and reduce the resident contributions - yes. Not just talking about those with land - what of house builders, and skyboxes, for example now with less populace able to buy due to LL covenants. I am sure there are other businesses negatively impact but its 2 am here.
Economically why would LL do it then? Bottom line - money. It's clear that for existing residents with water side land , and businesses reliant upon people owning their own lands to express their creativity that having LL as a competitor and reducing that pool of customers isn't good for the economics of the residents but obviously good for LL to gain more premium accounts and increase their bottom line.
IMHO, keep LL homes as a starting point for residents, as a nest, but not so nice that they don't want to push people out to explore and live in the mysteries of the wild weird world of SL rather than coddling them as stepford wives in Wrinkle in Time suburbs.
Peace.