New Zealand's YIMBY Success - And How We Can Learn From it

New Zealand alleviated a severe housing shortage by liberalizing regulations that had previously blocked most new construction.

 

New Zealand flag. (NA)

 

The United States is far from the only country that has experienced serious housing shortages in recent years. Canada, Britain, and several continental European nations also have similar problems. But one country, New Zealand, has managed to significantly mitigate theirs through the simple expedient of cutting back on zoning regulations that previously severely restricted the construction of new housing.

Economic policy commentator Joseph Politano describes how they did it:

New Zealand has a horrendous, long-standing housing shortage—roughly a quarter of Kiwis are cost-burdened (defined as spending more than 40% of their income on rent or mortgage payments), the highest rate among all OECD countries. The vast majority of the archipelago's housing stock is low-density—more than 80% of residents live in detached single-family homes, 20 percentage points higher than even in the highly suburbanized United States. Auckland, New Zealand's largest city, has been consistently rated as one of the most expensive places on earth, with home prices significantly outpacing household incomes….

This story should sound familiar to most Americans, and indeed to people across the world who face increasingly dire housing affordability crises in their countries and cities. Many will blame those housing shortages on zoning restrictions and exclusionary planning rules that prevent sufficient housing construction—in the US, most residential areas are designated exclusively for large, sprawling single-family homes, even within major cities,…. Theoretically, if rules were changed to allow taller and denser developments on desirable land—a process known as upzoning—housing production would increase and affordability would improve….

The difference is that Auckland has actually put that theory to practice—the 2016 Auckland Unitary Plan (AUP) upzoned 3/4 of the city's residential land to legalize townhouses, terraced homes, or multi-story apartments in areas that previously only allowed detached single-family homes,…. This makes Auckland perhaps the largest real-life experiment of what broad-based upzoning can achieve in an expensive, supply-constrained city—and in the 7 years since the implementation of the AUP, residential construction has skyrocketed. The total number of housing permits issued smashed previous records, while permits for the multi-unit attached housing projects legalized in the AUP went from only a small percentage of overall construction activity to the city's dominant source of new housing….

In fact, upzonings in Auckland and elsewhere in New Zealand have set off a massive construction boom throughout the entire archipelago. In 2023, New Zealand (population: 5.2M) permitted 37k housing units, more than the San Francisco and Los Angeles metro areas combined (population: 17.3M). Auckland, a city of only 1.7M, permitted 15k units last year—while preliminary data shows the 5 boroughs of New York City (population: 8.3M) permitted a meager 9.2k units by comparison. In total, New Zealand permitted 9.7 new housing units per 1000 residents in 2022, a 45-year-high that was nearly double the rates seen in the US.

Politano points out studies find that upzoning is indeed the main cause of the Kiwi housing construction boom:

So over the last decade-plus, what has been the economic effect of these upzonings in Auckland and other parts of New Zealand? The best evidence comes from a series of academic papers by Professor Ryan Greenaway-McGrevy at the University of Auckland and comprehensive data tracking done by Matthew Maltman at Australia's E61 Institute. Despite some early back-and-forth academic quibbles, the evidence is overwhelmingly clear that upzonings have significantly increased housing production—the AUP is estimated to have created more than 43k extra housing units from 2016-2022, while the Lower Hutt upzonings increased total Wellington region housing starts by 12-17%. That, in turn, has significantly improved housing affordability—rent-to-income ratios in Auckland have significantly declined even as they have steadily risen elsewhere in New Zealand.

The New Zealand experience reinforces already extensive evidence that zoning reform can increase construction, lower housing prices and enable more people to "move to opportunity." As Politano suggests, the US and other countries can learn from New Zealand's success.

The mechanisms of reform, however, might be different here. New Zealand is a unitary state, not a federal one. Reform there was, in part, spurred by central government's ability to override local authorities, resulting in crucial national legislation. In addition, as Politano notes, Auckland, by itself, contains some one third of New Zealand's population, and a large fraction of the nation's most important real estate, for purposes of housing and job opportunities.

The US, obviously, is a federal system, with relevant authority spread out over many state and local governments. We also have many more jurisdictions where reform is necessary.

That said, we can give nation-wide impetus to reform by promoting stronger judicial review of exclusionary zoning. Josh Braver and I explain how and why this can be done in a forthcoming Texas Law Review article. In addition, state legislative reforms can help curtail local NIMBYism. The United States has stronger judicial review than New Zealand, and it can be used to root out exclusionary zoning,  because such restrictions violate constitutional property rights.

Finally, as in New Zealand, YIMBY zoning reform can be a cross-ideological movement that cuts across conventional partisan and ideological divides. The collaboration between Braver (a progressive) and me (a libertarian) is just one small example of this dynamic.