If you ask for the "Why" often enough, it always comes down to Antisemitism.
Israel wouldn't exist if not for the unhinged antisemitism of German Nazis in the 1930/40s.
In the last 20 years, Israel found itself to need new settlements, with all the accompanying political changes and pressures. Why? - because many Jews from all over the world migrated there. Why? - Antisemitism in their home countries makes those a less habitable place than an Israel, even though it is continuously on the brink of a war.
And this doesn't even touch the rampant antisemitism in the Muslim world that wants to drive the Jews into the ocean and doesn't accept a state Israel under any circumstances.
There's another explanation: there is a religiously zealous segment of israeli society that is the main driver of many illegal settlements. Additionally the state of Israel sometimes wields its institutional force against palestinians, especially in east Jerusalem. Citing 'demographic concerns' as a reason for giving building permits to israelis and not to palestinians should probably not happen in a non ethno state.