A growing body of literature has shown that innumerable discretionary choices of home buyers and sellers spread the effects of housing supply conditions throughout a metropolitan area. New units draw residents with higher incomes from the existing stock of housing, which leaves existing homes available for residents with lower incomes. Where the production of new units is constrained, the existing stock of homes is instead claimed by residents with higher incomes, leaving residents with lower incomes to either accept higher rents on the housing that remains or move away to more affordable metropolitan areas. Inelastic housing supply causes price/income ratios to rise more in ZIP codes where incomes are low, and this pattern can be used as a real-time estimate of regional supply constraints.

Where the existing housing stock is filtering upward to residents with higher incomes, the mechanism through which homes filter is price. Home prices rise until the incomes and willingness to pay high housing costs of the households that have not migrated away from the metropolitan area become the dominant force mediating the distribution of the available stock of housing. Households are sometimes directly displaced, but frequently they self-select to move within or between metropolitan areas, depending on their willingness to accept higher housing costs.