There's not really a reason to make their islands into a square, they can't make money from the island or anything. It's just a private thing for the rich, and players will most likely make the islands into their dream estates (as it's the point of the islands). I think that players were trying to make as much money as possible, and as quickly as possible, when they did the slab of grass blocks.
And yeah, what Death said. This is only for the rich, as said in the title. It wouldn't help the "housing crisis" at all.