There is a growing debate about whether upzoning is an effective policy response to housing shortages and unaffordable housing. This paper provides empirical evidence to further inform debate by examining the various impacts of recently implemented zoning reforms on housing construction in Auckland, the largest metropolitan area in New Zealand. In 2016, the city upzoned approximately three quarters of its residential land to facilitate construction of more intensive housing. We use a quasi-experimental approach to analyze the short-run impacts of the reform on construction, allowing for potential shifts in construction from non-upzoned to upzoned areas (displacement effects) that would, if unaccounted for, lead to an overestimation of treatment effects. We find strong evidence that upzoning stimulated construction. Treatment effects remain statistically significant even under implausibly large displacement effects that would necessitate more than a four-fold increase in the trend rate of construction in control areas under the counterfactual of no-upzoning. Our findings support the argument that upzoning can stimulate housing supply and suggest that further work to identify factors that mediate the efficacy of upzoning in achieving wider objectives of the policy would assist policymakers in the design of zoning reforms in the future.
There is a growing debate about whether upzoning is an effective policy response to housing shortages and unaffordable housing. This paper provides empirical evidence to further inform debate by examining the various impacts of recently implemented zoning reforms on housing construction in Auckland, the largest metropolitan area in New Zealand. In 2016, the city upzoned approximately three quarters of its inner suburban land to facilitate construction of more intensive housing. We use a quasi-experimental approach to analyze the short-run impacts of the reform on construction, allowing for potential shifts in construction from non-upzoned to upzoned areas (negative spillovers) that would, if unaccounted for, lead to an overestimation of treatment effects. We find strong evidence that upzoning stimulated construction. Treatment effects remain statistically significant even under implausibly large spillovers that would necessitate a six-fold increase in the trend rate of construction in control areas under the counterfactual of no-upzoning. Our findings support the argument that upzoning can stimulate housing supply and suggest that further work to identify factors that mediate the efficacy of upzoning in achieving wider objectives of the policy would assist policymakers in the design of zoning reforms in the future.
Using recently developed statistical methods for testing and dating exhuberant behavior in asset prices we document evidence of episodic bubbles in the New Zealand property market over the past two decades. The results show clear evidence of a broad-based New Zealand housing bubble that began in 2003 and collapsed over mid 2007 to early 2008 with the onset of the worldwide recession and the financial crisis. New methods of analyzing market contagion are also developed and are used to examine spillovers from the Auckland property market to the other metropolitan centres. Evidence from the latest data reveals that the greater Auckland metropolitan area is currently experiencing a new property bubble that began in 2013. But there is no evidence yet of any contagion effect of this bubble on the other centres, in contrast to the earlier bubble over 2003-2008 for which there is evidence of transmission of the housing bubble from Auckland to the other centres. One of our primary conclusions is that the expensive nature of New Zealand real estate relative to potential earnings in rents is partly due to the sustained market exuberance that produced the broad based bubble in house prices during the last decade and that has continued through the most recent bubble experienced in the Auckland region since 2013.