In the heart of YIMBY-land, the empty-walled arguments are falling apart. The new San Francisco Fed Economic Letter (Feb 2, 2026) argues that housing affordability differences across U.S. metro areas stem more from variations in housing demand—driven by income and population growth—than from supply constraints or local regulations.
Analyzing 321 metros from 2000–2020, the researchers find average income growth tracks house price growth almost one-for-one, reflecting stronger demand (especially for higher-quality housing from high-earners). Population growth, meanwhile, strongly drives housing supply increases—often outpacing population even in pricey places like Los Angeles and San Francisco.
In high-income-growth areas like the Bay Area, prices soar because economic gains concentrate among skilled workers bidding up quality, not quantity—while supply grows modestly with slower population influx. Places like Houston see balanced price and supply growth tied to broader job creation.
This downplays supply-side restrictions as the main culprit for affordability gaps, pointing instead to labor market dynamics and income inequality. For residents fighting to preserve local zoning control, this bolsters the case: our area’s high prices reflect real demand pressures from tech-driven wealth concentration (and other high-paying jobs), not just “underbuilding” that statewide overrides could magically fix. Local planning enables communities to manage growth thoughtfully, protecting neighborhood character without overlooking economic considerations.
Conclusion
“Much of the intense interest in addressing the housing affordability crisis has focused on limitations to the housing supply. In this Letter, we argue that differences in the type of underlying labor market growth and subsequent implications for housing demand may offer a better explanation for important housing market dynamics. This suggests that the housing affordability crisis may be best addressed by understanding changes to the labor market, especially the relative distribution of economic growth across income levels and jobs in different areas.”
Read the article directly from the Federal Reserve Bank of San Francisco
