Assuming you are actually interested, there are three different things that happen here in housing. Keep in mind you're describing how any commodity continues to have a growing market; you'd just never ask this about consumer goods since you're not used to thinking about how LG or Kohler or Fisher-Price stay in business.

1) Developers want to continue in their business, so they cut costs. This means factory built components, vertical integration, the same things that cut costs in every other industry. Today they have no incentive to actually compete.

2) Without zoning, any privately held land becomes available for housing, so you see completely new business models. A developer builds an entire neighborhood from scratch, for instance - this is how many of our late 1800s / early 1900s neighborhoods happened, before zoning, and they're often some of the best walkable urban centers now.

3) New entrants bring innovative solutions at scale. Modular buildings explode. People come up with shit you cannot possibly think of today.

> you'd just never ask this about consumer goods since you're not used to thinking about how LG or Kohler or Fisher-Price stay in business.

This is actually entirely backwards -- it's much more common for me to hear examples in informal conversation that show some understanding of how producers of household goods might want to avoid oversupply because it drives prices down and volume on smaller margins is a tough game, sometimes well worth the rewards, sometimes with its own undesirable consequences.

I literally never hear this from anyone who talks about housing supply, to the point where I'd be willing to bet the majority of people talking about it online are only tangentially familiar with the concept of diminishing marginal returns at all and the other 90% it just never occurred to them it relates.

> Today they have no incentive to actually compete.

As long as you've got competition you have incentive to compete. Along with the incentive that cutting production costs in the world we have produces greater margins as surely as in some imagined counterfactual world where there's no zoning or something.

> Without zoning

Without zoning you might get out of having to account to a municipality, but nothing changes about the demand for different kinds of use in a given area or the economics of providing it.

> Modular buildings explode. People come up with shit you cannot possibly think of today.

because markets, right?

Modular design and prefab have been a thing for decades. Where they have advantages, they should (and in some cases are) already thriving.