Or higher prices in Y, because X will be both more crowded and with on average poorer people than before the supply increase, and people who prefer a less crowded area and less poor people (either directly because they are poor, or because of other demographic traits that correlate with wealth in the broader society, like race in the USA) around them will have an even higher relative preference for living in Y than before.

> The interests of people from region Y are valid.

They exist, validity is...at best, not a case you have made. Existence of a material interest does not imply validitym

As an extreme example, I can say that hurricane victims have an interest in butterfly wing flaps across the world because there is some indirect causation.

Housing expansion advocates consistently describe the simplest of supply-demand mechanisms, whereas housing demand is heavily driven by local and national economic conditions as well. Gary IN doesn't have a housing shortage.

And my point is that there are limits on the impact region X has on region Y based on their proximity. Should someone in downtown LA be able to compel someone in Palo Alto to upzone based on this "impact"? What about someone in Kansas or Florida?