The fact that he spent more money is extremely relevant because that's what he was seeking. It would have been totally reasonable for him to pay for home repairs on the existing foundation and structure.

While the $5,000 the city gave him certainly wouldn't accomplish that, he took it too far. He destroyed all remaining value left in the structure, built a new (and more expensive) house on his land, and expects the public to pay for that upgrade. He had a right to compensation for repairs, not to have the taxpayer fund the construction of his dream home.