Food does not accumulate; this is intended. It's also not even remotely unrealistic, since the people aren't suddenly going to stop eating just because you've built a house for them. Allowing food to accumulate would basically lead to infinite city spam, which would be highly undesirable. The idea is that you're supposed to settle near fertile land, and build farms since they're more efficient. Beyond that, the higher housing levels permit larger population increases with only a modest increase in food production required.
