Scott Alexander argues that increasing housing density in a city may actually increase local prices due to induced demand, while lowering prices nationally.
Longer summary
Scott Alexander challenges Matt Yglesias's claim that building more houses lowers local house prices. He argues that while this may be true on a marginal level, looking at the extremes shows a different picture. The densest US cities (New York, San Francisco) are also the most expensive, while the least dense areas have the lowest prices. Scott proposes that increasing density in a city like Oakland would likely increase its prices due to induced demand, as it becomes more attractive to people seeking big city amenities. He suggests that building more houses would lower prices nationwide, but not necessarily in the specific city where construction occurs, creating a coordination problem for housing policy.
Shorter summary