The driving factor for the ISS altitude is cheaper maintenance, and orbital debris mitigation. There is an optimal altitude for maintenance, which would actually be a bit higher than it is, because the ISS has to actively maintain its altitude by thrusting on a regular basis, while if it was higher that wouldn't be the case.
Orbital debris is the primary limiting factor to raising the altitude higher. See the below chart for the altitude of most orbital debris, from Wikipedia. Note that increasing the altitude only slightly dramatically increases the amount of debris.
Okay, so looking at the chart below, above 1600 would also be a good area. Let's take away the fact that this is harder to maintain, and would create more space debris. This, however brings one to the Van Allen belts, which start around 1000 km. The ISS doesn't really have the radiation shielding to manage that environment well, although it could be added.
Bottom line is, even if cost wasn't a factor, it still makes sense to have the ISS at or near the altitude it is currently orbiting, until the space debris can be removed, or better radiation shielding added.