New Zealand Law Society - Report quantifies impact of land use regulations

Report quantifies impact of land use regulations

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The Government has released a report on the impact of land use regulation on house prices in seven New Zealand cities and apartments prices in two cities between 2012 and 2016.

Commissioned from the Social Policy Evaluation and Research Unit, Quantifying the impact of land use regulations: Evidence from New Zealand, notes that there are also broader costs of house price increases, relating to productivity and labour market mobility, that it does not examine. Nor does it examine any potential benefits of land use regulation.

The report defines land use regulation as the rules that determine what can be built where, and says it is hampering the flexibility of housing supply to respond to demand pressures from population growth.

Among the findings are 2015 estimates of the cost of land use regulation, which is found to be responsible for between 15% and 56% of the cost of an average dwelling in the seven cities examined.

2015 estimate of cost of land use regulation on cost of average dwelling

Centre Estimate
Auckland 56%
Wellington 48%
Queenstown 39%
Christchurch 32%
Tauranga 28%
Hamilton 28%
Palmerston North 15%

The report says land use regulation is restricting high-demand areas from accommodating many more people.

"When land use regulation is sufficiently flexible to accommodate demand, highly sought-after areas accommodate population demand and increase in density. Some demand will be captured by prices," it says.

"But there is no clear relationship between density and house prices - most areas in the cities we study have failed to accommodate more people."