Researchers Challenge Housing Shortage as Cause of Affordability Crisis

New analysis suggests rising incomes, not lack of supply, may be driving up home prices

Mar. 3, 2026 at 7:07am

Got story updates? Submit your updates here. ›

A new paper from researchers at the Federal Reserve Bank of San Francisco challenges the common assumption that homes have gotten more expensive because too few have been built. The analysis found that cities across the country have built housing faster than their populations have grown, while home prices tend to rise alongside incomes. This suggests the housing affordability crisis may be more directly linked to income inequality than a housing shortage.

Why it matters

The research could reframe the debate over what's causing the housing affordability crisis and how to fix it. If income inequality, not a housing shortage, is the primary driver of high home prices, then efforts to increase housing supply may not be the most effective solution.

The details

The analysis by a team led by Schuyler Louie, a doctoral student at the University of California, Irvine, showed that the housing supply grew faster than the population, even in expensive markets like San Francisco. This casts doubt on the common assumption that homes have gotten more expensive because too few have been built. Instead, the researchers found that home prices tend to rise alongside incomes, suggesting the issue may be more about differences in income growth at the top of the distribution relative to the middle.

  • The analysis was published earlier this month.

The players

Schuyler Louie

A doctoral student at the University of California, Irvine who led the research team that produced the analysis.

Federal Reserve Bank of San Francisco

The institution that published the research paper challenging the housing shortage as the cause of the affordability crisis.

Got photos? Submit your photos here. ›

What they’re saying

“House price growth may simply reflect growth in housing demand, driven in part by growth in average income, such that questions of housing affordability may primarily be about differences in income growth at the top of the distribution relative to the middle.”

— Schuyler Louie, Doctoral student, University of California, Irvine

What’s next

The research implies that addressing income inequality, rather than just increasing housing supply, may be a more effective approach to improving housing affordability. Policymakers may need to shift their focus from bills aimed at clearing the way for new construction to policies targeting the labor market and the growing gap between high earners and everyone else.

The takeaway

This analysis challenges the widely held belief that the housing affordability crisis is primarily driven by a shortage of homes. Instead, it suggests the issue may be more closely tied to rising incomes and income inequality, with high-earners bidding up prices beyond the reach of middle- and low-income Americans. This could have significant implications for how policymakers approach the problem of housing affordability.