> More housing in region X will result in lower housing prices in region Y.

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