As per installation guide they mentioned IIS Features - Performance - Static Content Compression only but it is required also Dynamic Content Compression.
On Windows Server 2019 it is mentioned in guide
Application Development:
l NET Extensibility 4.8
l ASP.NET 4.8
It appears that there was an update for both dotnet hosting (from 6.0.5 to 6.0.7) and dotnet sdk (from 6.0.300 to 6.0.302). I uninstalled the old versions of both and then installed the SDK followed by the the hosting bundle and now it works. FWIW I don’t believe it was necessary to change versions since I have the older version working on a different server so it seems the reinstallation fixed it.