Is there a limit to how many people there are on a server? And what would you need to do when there is not enough room to expand? would you have to start stacking homes? (apartments) and what about food? you'd need to manage farms but now there is less space and after that if it was a big server, farming would have to be more compact and in the worst circumstances, live/ work underground. and eventually, when the population has settled, houses will need to be demolished for smaller, compacter homes, and because of that big population, there is no way it will be able to keep up with the environment.
I don't see this happening, but let's say that in the future this does happen,
yes, this is the issue we are facing in the real world, this is why we built apartments, and have come up with smarter ways to use our resources