A recent study by economists at the Federal Reserve Bank of San Francisco finds that development constraints, such as zoning and environmental regulations, do not significantly impact housing prices in the United States. This research challenges the conventional view linking limited housing supply to high prices. The study reveals that from 2000 to 2020, income growth was the primary factor driving house price increases, independent of local housing supply constraints. The findings suggest that easing these constraints may not lead to greater housing affordability, prompting a reevaluation of current housing policies.
The standard view of housing markets holds that the flexibility of local housing supply- shaped by factors like geography and regulation-strongly affects the response of house prices, house quantities and population to rising housing demand.
Our findings imply that constrained housing supply is relatively unimportant in explaining differences in rising house prices among U.S. cities.
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