Land Regulation to blame for soaring house prices, says government report

A report published yesterday suggests that land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland.

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

The report’s author, Kirden Lees, Sense Partners, dismisses upward price pressures on materials, equipment and labour resulting from a prolonged demand spike triggered by natural disasters and population increase, as primary contributing factors to inflated house prices. Instead, Mr Lees argues that land regulation is the key factor hampering the supply of new houses, consequently driving up housing costs across New Zealand.

The report’s findings 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.

Finance Minister Steven Joyce said: “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.”

Read the full report and summary here.