The standard view of housing markets is that differences in the flexibility of local housing supply—shaped by factors like geography and regulation—explain differences in how house prices and quantities respond to rising demand across U.S. cities. However, from 2000 to 2020, we find that higher income growth predicts the same growth in house prices, housing quantities, and population regardless of the estimated housing supply elasticity. We find the same results when we examine rents, expand the sample to 1980, use different elasticity measures, use per capita income or population instead of total income growth, and when using plausibly exogenous variation in housing demand. Using a general demand-and supply framework, we show that these results imply that measured housing supply constraints do not explain differences in housing dynamics across U.S. cities. We suggest that allowing for multiple margins of adjustment in housing—quantity and quality—and differential shifts in the demand along these margins helps explain the data. Our conclusions challenge the prevailing view of housing markets and suggest that relaxing regulatory housing supply constraints may not affect housing affordability.
Suggested citation:
Louie, Schuyler, John Mondragon, and Johannes Wieland. 2026. “Supply Constraints Do Not Explain House Price and Quantity Growth Across U.S. Cities.” Federal Reserve Bank of San Francisco Working Paper 2025-06. https://doi.org/10.24148/wp2025-06