Cities recieve one point of unhappiness for every point of population, which is listed as "It's too crowded". This is there to restrict the growth of cities, and has to be compensated by the construction of happiness boosting buildings such as theatres and temples, acquisition of happiness resources such as dyes and gems, and various civic effects. There is no way to reduce the actual "It's too crowded" effect itself without reducing your cities population, since it is merely a catergory to ensure that cities are harder to keep happy as they beecome larger. Reducing your cities' population deliberately is damaging to your civilization and should never be done. The actual name given to this effect doesn't mean anything so they cannot in any sense be 'uncrowded'. One of the fundamental points of the game is to keep the happiness bonuses outweighing the happiness penalties from the city size, and other effects.