Im not sure I follow your point. What does demand have to do with zoning?

I agree that if you remove zoning, many areas of single family homes would be built up if they are in and around urban cores. That isnt new demand, but existing demand, not able to be expressed by current law.

However, my point is that if your [random small town] job paid the same as NY or SF, you would see a flux out of those cities to the small towns.

WE are describing two different situations.

You appear to be asserting that the demand for suburban-style low-density housing is naturally quite high, and that many people who live in cities are merely settling for less-desirable dense urban housing, as a sacrifice they must make for a higher income. I counter that if this were the case there would be no need for single-family zoning, because people would naturally choose such housing whenever possible, and the market would respond.

> you would see a flux out of those cities to the small towns

Having actually tried this, hated it, and moved back, I am skeptical.

>I counter that if this were the case there would be no need for single-family zoning, because people would naturally choose such housing whenever possible, and the market would respond.

This mistakes the price one person can pay for a piece of land with the price many people can pay to to use the same land. A single family home does rent for more money than a condo if they are on the same block in the city.

> I counter that if this were the case there would be no need for single-family zoning, because people would naturally choose such housing whenever possible, and the market would respond.

A major reason zoning exists is because with out it you'd have developers and investors out-bidding the homeowners to redevelop plots of land as they became available.

It's a collective response to the power of $$$ in a free market.

Even if all of those condo purchaser who would buy a unit in the building that replaced a single home would've preferred a single home, they didn't have a direct say in that lot being turned into condos. The person with the most money did.

And of course, they couldn't have all fit there. But I am skeptical of "enough people with money want to live in your area now" as being a sufficient justification to say that local control has to be eliminated. Why favor the future richer potential-resident over the current resident? (I would extend this broadly, for incumbency protections for renters and owners alike - why is it an inherent good for an existing area to get denser forever? Why not encourage less centralized development? Why would "the people with the most money should get to decide how this area is developed?" the best plan?)