McGinn's argument, on its face, seems sound. To paraphrase: Why should we let usable spaces sit empty during a recession, when they could be turned into housing? Sure, ground-level retail is a higher and better use than private apartments, but private apartments are better than nothing.
The problem with that argument is that recessions aren't permanent, but land use often is. If we allow developers to build ground-floor housing instead of retail space now, those apartments won't magically be converted to coffee shops, hair salons, and restaurants once the economy turns around. They will be, for all intents and purposes, permanent residential spaces.
And street-level land use matters. Pedestrians gravitate toward streets that are activated by bars, shops, and restaurants; in contrast, they tend to avoid sidewalks that run alongside apartment buildings and other non-public spaces like fenced-off parking lots. Residential uses, in other words, de-activate a street, make it less of a destination for pedestrians, and create spaces that feel darker and less safe than those that are full of people, activity, and life.
It's become a cliche to talk about "eyes on the street," but it's true to say that commercial activity---particularly late-night activity, like a restaurant---is a crucial part of neighborhoods that not only feel, but are, safer than neighborhoods without commercial destinations. Giving up that critical element of neighborhood vitality is not just short-sighted, it could lead to long-term damage.