We may be looking at the housing affordability crisis all wrong. Higher earners are driving home prices, not lack of supply, researchers say

Economists, lawmakers, and Wall Street have long preached the need to increase housing supply to improve affordability, but it may not be that straightforward.

According to a recent note written by UC Irvine PhD student Schuyler Louie along with San Francisco Fed researchers John Mondragon, Rami Najjar, and Johannes Wieland, average income growth “relates strongly” to house price growth.

“However, there is almost no connection between average income growth and growth in housing supply,” they added. “Instead, housing supply growth has a strong positive relationship with population growth. In fact, almost all metro areas saw housing units grow faster than their population—even in expensive residential markets like Los Angeles or San Francisco.”

That challenges deeply ingrained notions that NIMBYism, red tape, and politicians who favor rent controls over new construction are worsening the housing affordability crisis.

Meanwhile, California’s pricey housing markets have been held up as a prime example of these trends and often contrasted with those in Texas,...