A massive housing project that San Bruno killed in a controversial vote last month could rise from the dead. Facing possible lawsuits and state fines over its recent rejection of the 425-unit project, the City Council will meet privately in the coming weeks to consider its options for the proposed development.

Shock. Depression. Relief. Those were just some of the reactions as the year’s most controversial state housing bill met its sudden demise. But very few people—supporters, opponents, and even the author himself—can claim to have seen this coming.

In the rugged hills to the east of the Napa Valley, chainsaws and bulldozers converted a steep hillside of scrubby oak woodland and rockpiles into another vineyard. “That was an incredible rock-hopping wonderland, with frothing, amazing, waterfalling cascades every time it rained—I mean, it should have been a park,” said nearby resident Kellie Anderson of what is now a plot of grapevines at Bremer Family Winery, in the small community of Deer Park.

Over the past decade, housing costs in the United States have risen faster than incomes. While housing affordability has long been a problem for low-income families, middle-income families are increasingly facing affordability challenges, especially in urban areas with strong labor markets. How do current housing policies help – or harm – the well-being of middle-class families?...