The standard view of housing markets holds that differences in the flexibility of local housing supply—shaped by factors like geography and regulation—explain differences in how house price and quantity growth 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 quantity, and population regardless of a city’s estimated housing supply elasticity.
“Supply Constraints Do Not Explain House Price and Quantity Growth Across U.S. Cities”
By Johannes Wieland, Senior Research Advisor at the Federal Reserve Bank of San Francisco and Professor of Economics and Endowed Chair in Macroeconomics and Public Finance at the University of California, San Diego, with Schuyler Louie (UC Irvine) and John Mondragon (FRB San Francisco).
SUMMARY
The standard view of housing markets holds that differences in the flexibility of local housing supply—shaped by factors like geography and regulation—explain differences in how house price and quantity growth 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 quantity, and population regardless of a city’s estimated housing supply elasticity. We find the same results when we examine rents, expand the sample to 1980 to 2020, use different elasticity measures, use per capita income or population growth instead of total income growth, and when exploiting a variety of plausibly exogenous variation in local housing demand. Using a general demand-and-supply framework, we show that these results imply that estimated housing supply constraints are unimportant in explaining differences in rising house prices among U.S. cities. Our conclusions challenge the prevailing view of local housing and labor markets and suggest that relaxing regulatory housing supply constraints may not materially affect housing affordability.
PARTICIPANTS
Johannes Wieland, John Cochrane, Valerie Ramey, John Taylor, Ruxandra Boul, Erica Bucchieri, Sami Diaf, Alexander Downer, Darrell Duffie, Elizabeth Elder, Robert Fluegge, Scott Frame, Siddharth Gundapaneni, Jonathan Hartley, Ken Judd, Augustus Kmetz, David Laidler, Megan Liu, Schuyler Louie, Joseph McCormack, Axel Merk, Roger Mertz, John Mondragon,
David Papell, Alvin Rabushka, Jian Ren, JR Scott, Krishna Sharma, Lucian Staiano-Daniels, Kharis Templeman, Yevgeniy Teryoshin, Araha Uday, Emily Wang, Alexander Zentefis
To read the slides, click the following link
https://www.hoover.org/sites/default/files/2025-09/housing_affordability-17.pdf
To read the paper, click the following link
https://johanneswieland.github.io/Papers/housing_affordability.pdf
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