Less Crowded Houses: NZ’s housing policy success and implications for Australia | Stuart Donovan

Less Crowded Houses. NZ’s housing policy success and implications for Australia by Stuart Donovan. Audio produced by Randall Evans. 

To read the paper: https://www.cis.org.au/publication/less-crowded-houses-the-success-of-nzs-housing-policy-reforms-and-implications-for-australia/

To become a member: https://www.cis.org.au/membership-2-step-1/ 

 

Introduction to the Paper:

Many Australians are increasingly concerned by deteriorating housing affordability and its implications for socio-economic outcomes. In a recent survey, 62% of respondents agreed that “continued increases in house prices is bad for the economy and is exacerbating wealth inequality”.[1] In another survey, around two-thirds of respondents agreed that the federal government was not doing enough to address Australia’s housing problems.[2] Analysis by the Australian Bureau of Statistics finds genuine cause for concern, with rates of home ownership for those aged 25-39 years falling from 66% to 55% in the period from 1991 to 2021.[3]

Such concerns are increasingly reflected in policy, with a recent federal government report observing that “rising housing costs” pose “challenges for many young Australians”.[4] The same report pointed to a need for housing supply to be “responsive to demand”, especially in locations that are accessible to jobs. There is indeed growing evidence that housing policy reforms can increase supply and support affordability. Perhaps most notably, rates of housing supply in New Zealand have — after a decade of reform — surged past Australia. For these reasons, this paper reviews New Zealand’s reforms and considers potential lessons for Australia.

First, the paper summarises the context to housing policy reforms in New Zealand, which have sought to streamline planning processes and enable housing in desirable locations, a process known as ‘upzoning’. The term is used here to describe changes to planning policies that enable more housing to be built, such as increased building height limits. A recurring theme in New Zealand’s housing policy reforms has been the potential distributional effects of upzoning — that is, who ‘wins’ and ‘loses’. Growing awareness of the distributional benefits of housing appears to have fostered broad-based support for reforms in New Zealand.

The paper then briefly reviews empirical evidence on the impacts of New Zealand’s housing reforms. These effects are apparent from even a cursory comparison of housing outcomes in councils that have upzoned versus those that have not. In 2023, for example, upzoned councils in Auckland, Canterbury, and Lower Hutt have accounted for around two-thirds of all the dwelling consents issued in New Zealand, which is much more than their share of the population. Several credible economic studies find upzoning supported large and rapid improvements in housing affordability as well as a rapid expansion in social housing.

Thirdly, the paper presents some preliminary analyses of New Zealand’s housing policy reforms. Whereas