Traditional desert cities used a compact urban form since it provides benefits in terms of thermal comfort both in urban and interior spaces. However, many current desert cities have shifted to a sprawling model with isolated low-rise buildings, leading to longer travel distances, increased land use, inadequate public space, and higher demand for building cooling. Our study aims to investigate how vertical urban densification can reduce residential cooling demand in hot-dry regions. To achieve this, we compared single-family houses with high-rise multi-family houses in Hermosillo, Mexico. Eight case studies of real houses were selected, representing the city’s building stock, including one- and two-story single-family houses, and high-rise multi-family houses. We use dynamic energy simulations to assess the effectiveness of changing building’s shape against improving its insulation. Our results indicate that increasing vertical density leads to a reduction in the envelope-to-volume ratio, resulting in a significant decrease in cooling demand. Moving from a one-story single-family house to a high-rise multi-family house can lead to a 72% reduction in annual cooling demand. Matching the façade material properties of single-family houses and multi-family houses reduces the cooling demands of the single-family houses by 16% to 31%. However, they still have higher cooling demands compared to high-rise multi-family houses, suggesting that building form has a greater impact on cooling than thermal insulation. Our findings highlight the substantial energy savings achievable by transitioning from detached single-family houses to high-rise multi-family developments in desert cities.