Growing upward as opposed to outward helps in numerous ways. It pollutes less, costs less in services, takes up less land and the list goes on. The issue isn't apartment buildings, the issue is badly built, uninsulated in every way and overpriced apartment buildings.
There should be some sort of regulation as to how soundproof each apartment must be. Soundproof enough to not her casual sex and whatnot, but not too quiet as to never hear someone screaming for help. Add in filters into the hallways or whatever to manage smells and it would be pretty great.