Land regulation drives Auckland house prices

Land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland according to a new research report quantifying the impact of land use regulations, Finance Minister Steven Joyce says.

“This is a comprehensive report that underlines the importance of the changes central and local government have been making to land use regulations to boost housing supply. Urban planning, council regulations, and our local infrastructure funding system, have all been driving up the cost of housing in our major cities,” Mr Joyce says.

The research report, Quantifying the impact of land use regulations: Evidence from New Zealand was commissioned from the Social Policy Evaluation and Research Unit (Superu) in 2016 and has been released today.

Superu looked at house prices in seven New Zealand cities (Auckland, Hamilton, Tauranga, Palmerston North, Wellington, Christchurch and Queenstown) and apartment prices in Auckland and Wellington between 2012 and 2016.

Findings in the report include:

• Land use regulation is hampering the flexibility of housing supply to respond to demand pressures from population growth.
• Local geography is likely to play a role, but even in New Zealand cities with plenty of flat land, prices are higher than might be expected in a well-functioning market.
• The report finds land use regulation could be responsible for 15 to 56 per cent of the cost of an average dwelling across a range of New Zealand cities. In Auckland, land use regulation could be responsible for up to 56 per cent or $530,000 of the cost of an average home.

“The results in the report are consistent with the findings of the recently released Productivity Commission report on Better Urban Planning and the National Policy Statement on Urban Development Capacity,” Mr Joyce says.

“The construction sector tends to be singled out for raising costs but house prices in many areas are far in excess of construction costs. We must keep a strong focus on land supply so that section prices become much more reasonable.

“The new Auckland Unitary Plan, the latest RMA reforms, the National Policy Statement on Urban Development Capacity, the Crown Building Project, the Housing Infrastructure Fund, SHAs and increasing the availability of Crown land for housing, are all helping to increase land supply for housing. The Government will continue to work hard to ensure councils in rapidly growing urban areas are able to provide enough land for new housing and business development.

“New Zealand’s strong economy and high job growth means more Kiwis are choosing to work and bring up their families here. As our population grows we need to keep investing to support that growth and provide capacity to grow further.”

The report and summary are available here.