Upzoning New Zealand
How a small country started building a lot of homes
Eleanor West & Marko Garlick write about New Zealand’s YIMBY movement for Issue 13. Read it online here.
Housing policy enthusiasts have been excited about New Zealand lately. Why? Because this small country at the bottom of the Pacific has recently passed some major upzoning reforms. Here’s what happened.
New Zealand faces one of the worst housing shortages in the world. As in many countries, this stems from local governments having the power to control development, but no incentive to encourage it. Since the 1970s, housebuilding in New Zealand has been tightly restricted. Consequently, in Auckland, the largest city, the house-price-to-income ratio had reached 10.8 by 2022. To put that in perspective, it was 8.7 in Greater London and 7.1 in New York.
If a central government wants local governments to enable building, it has two main options: carrot or stick. It can give local governments incentives to support development, or it can force them to zone for growth.
In recent years, New Zealand has been using some sticks. Major figures in the center-left Labour Party and the center-right National Party agree that the country desperately needs to build more houses. They’ve been united in their determination to change the system, even working together at times.
After a devastating earthquake in 2011, the National government required Christchurch to immediately zone for as much development as it had planned to permit over the next 30 years. Then, when Auckland Council wrote its zoning plan in 2016, the National government successfully pressured the local government to allow intensification across its non-historic suburbs by threatening to use their powers to overrule the council. And then in 2020, the Labour government forced the five largest cities to allow six-storey buildings within walking distance of city centers, commercial hubs, and existing and planned rapid transit stops.
But the biggest change came in 2021, when both major parties joined together to force local governments to allow three-storey townhouses in almost every neighborhood in the five largest cities – encompassing at least 57 percent of New Zealand’s population.1 But this may have been a step too far. Implementation of this most ambitious policy proved fraught, with some local governments strongly resisting the top-down directive. In the face of an upcoming election and the shifting sands of political incentives, the cross-party consensus broke down.
Perhaps the lesson is that a well-targeted stick can work on select areas. But in the absence of plentiful carrots for local government, it is too brittle a tool to use on the whole country all at once – in the end, the political consensus at the central government level was too fragile.
New Zealand’s planning laws
After the Second World War, New Zealand experienced a home-building boom. Simple, permissive planning rules made it easy to build new houses or apartments in existing suburbs with limited consultation or appeal rights.2 Central government had the final say over local plans. Although local plans did set limits on housing density and building heights, they did not significantly restrict supply. The total number of homes increased by a third in the 1950s, much faster than population growth.
Everything changed in the 1970s. Like many other Western countries, New Zealand began to give local communities more power to control development in their own areas. New district plans started prioritizing preserving amenity for existing homeowners over new development. Local governments established metropolitan urban limits – similar to green belts in the UK, and urban containment boundaries in the USA – to contain growth ‘out’, applied stricter citywide density limits to restrict growth ‘up’, and protected historic-character areas in inner-city suburbs via development controls.
This shift culminated in an update to the Town and Country Planning Act in 1977 that significantly increased consultation requirements for plan-making and made it easier to appeal planning decisions in the courts. The result: a great down-zoning, akin to what was happening in the UK and the US.3 In the center of Auckland, zoned capacity for new housing was cut in half. Home-building collapsed.
When the Town and Country Act was replaced by the Resource Management Act in 1991 – a more flexible planning system – most councils simply carried over existing development controls to their new plans, and development continued to be suppressed. Between the 1990s and the financial crisis in the late 2000s, house prices continued to climb.
In theory, local governments would be more permissive of housing if they faced better financial incentives to permit it – for instance, because it generates additional tax revenue. This financial incentive is part of the reason why, for example, Houston, Texas, permits plenty of housing, and remains cheap; and it helps explain why Washington, DC, densified over the past few decades, leading to more abundant housing than in other US cities.
Increased property tax revenues are an important carrot for local communities: reinvesting this money in infrastructure – public transport, pipes, parks, cables, and more – helps balance out some of the costs of congestion or disruption they might experience from new development. Areas without sufficient infrastructure tend to be especially reluctant to allow new housing, and New Zealand already has a significant infrastructure deficit thanks to decades of underinvestment: the Infrastructure Commission estimates the country needs to spend approximately NZ$31 billion (US$18.5 billion) per year over the next 30 years to dig itself out of this hole, unless it substantially reduces costs.
However, in New Zealand local councils don’t have access to this kind of carrot to help pay for the infrastructure that would incentivize communities to welcome housing. Unlike local governments in Denmark, France, and Australia, which tax a fixed percentage of a property’s value, New Zealand councils tax via a rating system. Councils determine the total amount of revenue to collect each year, and then each homeowner pays in proportion to their share of total property value.4 In other countries, more housing automatically brings in more revenue; in New Zealand, new housing only slightly reduces the burden on existing properties.
Reforms in 1989 made the problem worse by abolishing the special-purpose authorities that had previously been used to deliver individual infrastructure projects, akin to the UK’s turnpike trusts of the 1700s and 1800s. For example, the Auckland Harbour Bridge was built in 1959 by a special-purpose authority that issued debt to pay for the infrastructure, paid off by tolls. Similar entities paid for stormwater upgrades, new roads, and railways. This kept the debt that funded infrastructure off local government balance sheets, which are constrained by ratepayer voting incentives and voter preferences to minimize debt. Without these special-purpose authorities, and pressured by externally imposed debt limits, high-growth councils have struggled to deliver enough infrastructure. Given all this, it is not surprising that councils have sought to simply restrict new housing.5
The National Party years
The center-right National Party was elected to government in 2008, right around the time when the housing affordability crisis began to dominate the public consciousness. Building rates had collapsed due to the financial crisis. National had long understood housing to be a key economic issue for the country: they established a Productivity Commission in 2010 and the first assignment they gave the commission was an inquiry into housing affordability.
In 2011, an earthquake reduced the center of Christchurch, the largest city on the South Island, to rubble. Earthquake damages claims were filed by 167,000 buildings. Thousands of people were left homeless. The sudden loss of housing caused rents and house prices to spike. Liquefaction issues caused 7,100 plots to be ‘red-zoned’ – including huge swaths of the inner suburbs – which prevented simply rebuilding in the same places. But much of the alternative safer land either wasn’t zoned to allow for sufficient density in the suburbs or wasn’t zoned for residential development at the city fringe.
Local zoning was already restrictive before the earthquake, and the acute need for housing brought that into sharp focus. People were not allowed to build secondary flats, convert garages, or put up kitset homes, let alone start to rebuild on safer land.
Inspired by one of the Productivity Commission’s findings – that relaxing restrictive land-use regulations could induce supply, and in doing so improve productivity – the National government used emergency powers to override local plans and kick-start the rebuild. Councils in the greater Christchurch area were forced to rezone large amounts of farmland for housing – land that councils had previously planned to drip-feed into the residential zones over decades. Christchurch City itself was forced to immediately update its plan too, enabling denser townhouses in areas previously zoned for detached dwellings only. According to National, 30 years’ worth of zoned housing capacity was created overnight.
This approach may have avoided the usual politics of stick-based housing reforms for three reasons. First, the government didn’t need to maintain its resolve to use the stick every year. Second, there was so much destruction from the earthquake that fewer people than usual were benefiting from the status quo, and more people than usual would benefit from the change. And third, perhaps most importantly, the rest of the country had no reason to object, since the reforms were clearly focused on one city in exceptional circumstances.
The result was a local housing boom. Christchurch City Council estimates that 5,400 additional homes were added into existing neighborhoods between 2010 and 2018, mostly around the inner city, in addition to the huge greenfield expansion enabled. The effects are still apparent today: Christchurch continues to buck national house price trends.
After forcing Christchurch to rezone to build back from the earthquake, the government turned to nationwide housing issues. In 2013 it launched Special Housing Areas: designated areas where planning approval would be fast-tracked and public appeals limited. Consequently, with support from the courts, developers were often able to build at higher densities in Special Housing Areas, and they enabled some extra homes, especially in Auckland.
But this new approach did not make a massive difference, because councils ultimately had the power to say no, and little extra reason to say yes. Most designations they agreed to were small (sometimes a single lot), and many faced expensive conditions like ‘affordable’ housing requirements, which made development less viable. On occasion, when it appeared that the Special Housing Areas might actually be working as intended – inducing housing supply – councils got cold feet and revoked them.
The Christchurch experience demonstrated that increased housing supply really could help affordability, but the fact that it only applied to one city meant it wasn’t obvious if the politics would bear out nationally. And the failure of Special Housing Areas showed how difficult increasing housing supply could be – suggesting something big was needed.
The Auckland Unitary Plan
In 2010, the eight councils in the Auckland area were amalgamated into a ‘super city’. This unified governing structure provided the opportunity to implement a single zoning plan across the entire city: the Auckland Unitary Plan.
Auckland was, and mostly still is, a low-density, sprawling city. Building height limits restricted density in all but a few small centers, much of the suburban land area was zoned for stand-alone homes only, and a metropolitan urban limit constrained growth outward. On top of these, there are ‘viewshafts’ that stop any developments that would block views of some of the 53 volcanoes in the region, including developments in the city center. One viewshaft over the central city, E-10, which makes sure Aucklanders can see Mt Eden from a particular point on a motorway, was estimated to block NZ$1.4 billion (US$800 million) worth of buildings.
The new council wanted to plan for denser urban growth motivated by intolerable congestion (costing the country about one percent of GDP in 2015 according to the OECD), increasing anxiety about transport emissions, and spiraling house prices. As Auckland makes up a third of the country’s population, an ambitious upzoning plan had the potential to reshape house prices across the country. A fast-track process was announced in 2012, cutting down on consultation requirements and councilor involvement by appointing an Independent Hearings Panel. This panel was to hear submissions and then make recommendations to the council that, if accepted, could not easily be appealed in court.
There is an interesting precedent for densification in New Zealand, a legal loophole developed in the 1960s: a cross-lease. It allowed an owner to subdivide their plot and put another house (usually another bungalow) on the backyard. This avoided onerous subdivision rules and associated development fees, and was extremely popular until the loophole was closed by the Resource Management Act 1991. Because so many of the original plots in New Zealand were deep and narrow, this led to decades of organic small-scale intensification that was atypical for developed countries during this period. This development – houses in back gardens and slim ‘sausage flats’ oriented toward the neighbor rather than the street – is easily visible around New Zealand’s cities.
Auckland Council’s first draft in March 2013 was really quite ambitious, making significant zoning changes that would increase height and density limits across the suburbs. But this draft faced significant opposition from the Character Coalition, Auckland 2040, and other residents groups, particularly because it proposed to allow some redevelopment in historic suburbs like Ponsonby, Devonport, and Herne Bay, which feature low-rise colonial-era wooden villas on leafy streets. These suburbs are beautiful, and for a lot of locals, redeveloping them more densely was intolerable. When some councilors started getting worried about their re-election prospects, they responded by making changes to lower height limits again, and reinstate density controls in some areas – consequently the proposed plan released in September 2013 was much less ambitious.
But then the Independent Hearings Panel stepped in. Over the next three years they heard thousands of submissions, and redrafted the plan again: in their recommended plan, upzoning was back. Meanwhile, house prices in Auckland had jumped by about 20 percent between 2014 and 2015. The National government repeatedly made it clear that it would consider intervening should the council fail to accept the recommendations of the panel and pass an ambitious plan. Anti-development forces on the council might have been tempted to stonewall until the next election, hoping that Labour would be less forceful, but it became clear that Labour was equally committed to enabling more homes.
Christchurch had shown that overriding local control worked, at least if confined to a narrow area; and the disappointing performance of the Special Housing Areas had shown that just encouraging local councils did not. A consensus was building that permitting development would require more than just asking nicely.
National was not the only force pushing for more development in Auckland. Generation Zero, a youth-run climate change campaign group founded in 2011, had by 2019 managed to build cross-party support for a Zero Carbon Act, which put carbon emissions reduction targets into law. It had done this through a strategy of nonpartisanship that focused on coalition-building on both the right and the left for its climate goals, actively avoiding alienating either side. It ran lobbying campaigns that encouraged young people to ‘elbow your elders’ (talking to their older family members about climate change and encouraging them to engage with their local Members of Parliament), aiming to reframe climate change as an intergenerational issue, rather than a political or partisan one.
Generation Zero had been applying a similar approach to the Auckland Unitary Plan, initially motivated by concerns among their membership about the climate impact of urban sprawl. Partnering with existing pro-housing groups like Greater Auckland, Generation Zero launched the Coalition for More Homes, and their advocacy was cited by the former deputy mayor as critical to the passing of an ambitious plan later that year. Under this final plan, 75 percent of residentially zoned land was upzoned, mostly meaning it now allowed townhouses, with some areas also allowing apartments.
The final Auckland Unitary Plan
The 2016 Auckland Unitary Plan is widely regarded as one of the first tests of broad upzoning globally. Six years on from implementation, it has proven that widespread, comprehensive upzoning can induce new housing supply and thus improve affordability.
The upzoning stimulated construction immediately: permits for new housing approximately doubled within five years, and have continued to rise. Applying historic completion rates suggests this corresponds to around 21,000 additional completed dwellings as of 2021, roughly a four percent increase in Auckland’s total. The plan significantly shifted where new housing was being built too: away from fringe suburbs far from the city center and into existing suburbs, closer to the center and near existing transport infrastructure. In 2015, roughly 65 percent of housing permits were issued within the existing urban boundary. In 2020, this figure was 85 percent. Permits for standalone houses fell from 70 percent of permits issued to under half.
How did this affect affordability? House prices in Auckland have still gone up, but at a slower rate than in the rest of the country. Rents in Auckland have also grown more slowly than the national average since 2016.6 A 2023 paper found that six years after the Auckland Unitary Plan was enacted, rents for three-bedroom dwellings were 26–33 percent lower than they would have been, compared to rents in other urban areas in the country. These findings probably understate the effects too: all else being equal, lower rents in Auckland encourage more people to move there from other cities, relieving pressure on rents in those cities too.
In Auckland, threatening a stick appeared to work. But this unquestionable success for affordability still required compromises and carve-outs to happen. The local costs of more housing were not spread equally across the city. Many higher-income inner suburbs were barely upzoned (or even down-zoned in some cases), forcing almost all the new housing supply farther out: along busy bus corridors or to the outer suburbs. In effort to appease opponents, the leafy, low-rise historic-character areas full of 1930s wooden bungalows were barely touched. Today, these areas still cover 41 percent of the residential land within five kilometers of the city center. While their residents have managed to preserve their neighborhoods, preventing growth in the suburbs closest to jobs and transport connections presents significant wider costs to Aucklanders.
The Auckland Unitary Plan taught the central government a lesson: upzoning could work to rapidly deliver homes. So they geared up to apply this lesson across the rest of the country.
The Labour years
2017 was an election year. The Productivity Commission had just delivered a 500-plus-page report detailing the ways in which the planning system was choking development. The rebuild of Christchurch, the (disappointing) Special Housing Areas, and the new Auckland Unitary Plan were all helping somewhat, but New Zealand still faced a serious housing shortage: prices increased 63 percent between 2010 and 2017. Jacinda Ardern’s Labour Party promised to tackle the country’s housing shortage, under the slogan ‘Let’s Do This’. Labour’s flagship policy was Kiwibuild’, in which it promised to partner with developers to build 100,000 homes in a decade. Despite winning fewer seats than the National Party, Labour eked its way into leading a coalition government.
But though it started in 2018 with a bang, Kiwibuild quickly fizzled. The goal was ambitious, but the government immediately butted against the same constraints as any private developer: a lack of residential land, zoned for sufficient density, serviced by sufficient infrastructure.7 As a result, it took until 2021 to build its first 1,000 homes, two years late and 15,000 homes short of what had been promised by that point. (As of June 2023, Kiwibuild had delivered a reported 1,700 homes.)
The failure of Kiwibuild gave the Labour government an entirely new perspective on housing – that of a property developer. Armed with the many recommendations of the Productivity Commission, they set out to fix these constraints. In 2019 Labour announced its intention to comprehensively reform the Resource Management Act of 1991 – tearing up the existing zoning system to design a new one.
Redesigning the planning system from scratch would take time. Meanwhile, the government intended to get as much as possible out of the existing system. A month after announcing its plans to scrap and replace the Resource Management Act, the government opened a consultation on the National Policy Statement on Urban Development.8 National Policy Statements are directions the central government can give, enabled under the existing rules, which previously had been underused. Councils must comply with them when making their plans.
The Auckland Unitary Plan had successfully upzoned the majority of the city by area, as described above, but carve-outs still left huge swaths of the most promising land – especially in the inner-suburb character areas – largely untouched. This new National Policy Statement was intended to fix that issue, not just in Auckland, but in all the major cities in New Zealand.
The proposed National Policy Statement would require councils to allow at least six storeys of building in areas within walking distance of rapid transit stops, commercial hubs, and city centers in all major cities. It would also abolish minimum car parking requirements across New Zealand’s cities, which had required that new developments set aside large amounts of land for parking. Councils would need to justify character protections on a site-by-site basis, balanced against the need for more homes.
The consultation period was short; only seven weeks. For the most part, it flew under the radar – there were only 256 responses (as compared to the 9,400 responses received just for the Auckland Unitary Plan). The final policy was published in July 2020, less than a year later – uploaded to the internet with no fanfare, no announcement, no press release, to take effect the next month.
The government was blunt:
New Zealand has a severe housing crisis . . . constraints in the planning system have meant local authorities are not providing enough development capacity for people to build and live in the homes they want. This has led to high land prices [and] unaffordable housing.9
It was good timing for a contentious policy. The public was distracted by the onset of the global Covid-19 pandemic that had plunged New Zealanders into hard lockdowns. Meanwhile house prices were rising – they rose about 40 percent over the pandemic in total – and the pressure to do something (anything!) had never been stronger. In the wake of the political and economic success of the Auckland Unitary Plan, the popular case for upzoning was building up higher than ever (pun intended).
The National Party’s response was a rollercoaster. Its housing spokesperson initially dismissed the new policy as ‘madness’, only for the party’s infrastructure spokesperson to change tack and tell the public that National actually supported the policy.
There were obvious reasons to oppose it, as many voters still opposed upzoning. But while the Labour Party may have put its own spin on upzoning by emphasizing how it could help to address inequality and poverty, it was building on the groundwork of what the previous government had done with the Christchurch rebuild and the Auckland Unitary Plan. And if National opposed this policy now, it might become very difficult (or embarrassing) for them to propose or introduce something similar in the future.
Still, National’s eventual decision to support this first upzoning policy was brave and forward-thinking. It would have been easy, and likely politically expedient, to let the Labour government suffer all of the pushback alone. By supporting the reforms it traded short-term political gains for an improvement to New Zealand’s long-term problems.
Though the new upzoning policy avoided public scrutiny to begin with, it attracted plenty in late 2020 when the capital, Wellington – a city where historic-character areas protected 88 percent of land parcels in the inner-residential zone – began updating its zoning plan to reflect the new policy. Wellington was the first city to test the implementation of the new policy, as it was already in the process of writing a new plan when the policy was published, whereas other councils would be affected only steadily over coming years.
Generation Zero kicked off a new campaign: A City for People, to try to make sure the capital’s new plan kept with the spirit of the National Policy Statement because councils still had some discretion when applying the new rules. For instance, councils still had the power to exempt character areas from intensification, so long as they could justify them on a case-by-case basis; as well as the power to define ‘walking distance’. So volunteers went and spoke at every council meeting, organized panel events, lobbied every councilor personally, and streamlined pro-housing submissions during the plan’s consultation. Their photo competition, Wellington’s Next Top Mould-el, propelled debate over the new plan into the national media. In the end, character areas were reduced by a further 30 percent from the council’s initial proposal and upzoning was applied more widely than initially expected.
The second upzoning policy: the Medium Density Residential Standards
Labour didn’t rest on its laurels for long. After a landslide victory in October 2020, following a successful pandemic response, the party continued to push forward on housing. Early in 2021, ministers told their departments to provide advice on urgently accelerating upzoning. Officials put forward eight options, including taking the densification measures from the Auckland Unitary Plan and applying them more widely throughout the country.
Meanwhile, the National Party was working on something similar – both parties in central government were frustrated with local councils holding up growth. In January 2021, National’s new leader, Judith Collins, wrote to ministers suggesting they work together on emergency legislation to urgently address the housing crisis. It was an olive branch that the Labour government accepted.
Labour and National drafted the second upzoning policy together: the Medium Density Residential Standards. This sweeping new policy was even bolder than the first, directing councils to set a new default minimum residential zone in the five largest cities of three dwellings, up to three stories. Essentially, both major parties wanted to permit townhouses and walk-up apartments almost everywhere.10
This policy would go much further than the earlier National Policy Statement, covering nearly every suburb in the country, rather than just constrained areas in city centers and around rapid transit stops. It threatened to provoke backlash from suburban homeowners, the core supporters of both parties, who tended to oppose upzoning. Essentially, it was the opposite of the Christchurch rebuild, which had succeeded by singling out a special situation for upzoning. Instead, it encouraged every possible opponent of development across New Zealand to work together to stop it – including one developer of greenfield housing who complained that New Zealanders don’t want intensification because they need somewhere to barbecue.
Getting this sweeping upzoning of the country through Parliament depended on consensus at the central government level in the face of popular opposition. Although Labour didn’t need support from the National Party to pass the new standards into law – it held a parliamentary majority – it is doubtful whether the party would have been willing to propose such a dramatic upzoning if it would risk losing large numbers of voters to National. If they could work with National, so unhappy voters did not have a major alternative to switch to, they might be safe.
Policy statements and directives take effect slowly because they rely on local councils to implement them by changing their plans. A recalcitrant council can slow-pedal, hoping the next government will change the rules. Political unity removed that possibility, while it lasted.
Even though it had helped craft the new rules, the National Party began to face stronger electoral incentives to defect. Its 2020 election loss was an embarrassing defeat – the second worst in the history of the party. The party’s leader, Judith Collins, was unpopular and her leadership was being questioned. By defecting on upzoning, she might have been able to help drum up much-needed support, but well-liked, influential politicians in her party were pushing for upzoning, so the political calculus was not straightforward. The Medium Density Residential Standards – this second wave of upzoning – looked like an opportunity for Collins to present herself as a politician of reason and pragmatism, like a prime minister in waiting. In the short run, she might have been throwing away votes, but in the long run, perhaps she calculated, voters would see the benefits.
The announcement of the draft Medium Density Residential Standards in October 2021 was quite different to the quiet, below-the-radar publication of the first upzoning policy.11 The parties shared the stage in a show of unity. Labour’s housing minister, Megan Woods, said that ‘overly restrictive planning rules are getting in the way and making it difficult to build the right homes we need in the right places’. National’s housing spokesperson, Nicola Willis, said, ‘Labour and National are standing together to say an emphatic ‘yes’ to housing in our backyards’. Labour emphasized reducing inequality and carbon emissions, National emphasized increasing choice and the virtue of homeownership.
With both parties on board, and senior leaders whipping backbenchers into line, the Medium Density Residential Standards legislation raced through Parliament in just nine weeks, with only minor concessions and compromises made to keep both parties at the table.12 It passed into law in December 2021, requiring that councils notify the changes to their plans accordingly by August 2022.
Assuming they are fully implemented and retained – it takes time for councils to update and consult on their plans accordingly – these standards could lead to 48,200–105,000 new homes (from 2.4–5.3 percent of the existing housing stock of the country) in major cities over the next decade, significantly reducing the country’s housing shortage. The question is whether they will be.
Implementation of these new rules had not been a smooth process. Christchurch City Council point-blank refused to write a compliant new plan within the two-year deadline. Auckland Council also dragged its feet.
And very little had been done about infrastructure. Councils still face large up-front financial burdens for the infrastructure that would support development, which they often cannot afford to shoulder, even if they wanted to (which they largely do not). Labour proposed centralizing water infrastructure, to relieve the burden on councils, in the Three Waters proposals, but these reforms have been extremely fraught and slow to progress.
Implementation delays gave opponents of the upzoning policies, such as Auckland Council, time to regroup. These opponents stressed that the upzoning policies would add pressure to existing infrastructure and raised doubts that the central government could address the problem. A wave of conservative and anti-development politicians were elected to councils around the country in October 2022 amid growing dissatisfaction with the prospect of densification. These councilors promised residents groups they would vote against plans implementing the rules, despite the government’s power to replace councilors with appointees, as they had last done in 2021 when they replaced Tauranga City Council with commissioners.
Up until now, the National Party had largely refrained from fanning the flames of this local backlash, sticking to their side of the bipartisan deal. But their usual minor party ally, ACT, had made no such commitments. Though the party is ostensibly libertarian, it leapt at the chance to siphon votes from National by campaigning against upzoning – and ACT’s campaigns have been effective. The downside of using a political stick to force housing on local areas against their residents’ wishes is that if local voters are unable to control their local area through local politics, their objections can take on national significance.
This opposition turned into a crisis, as ACT leader David Seymour began beating Judith Collins in polls of ‘who would be a better prime minister’. The National Party deposed Judith Collins in a vote of no confidence at the end of November 2021, and Christopher Luxon was elected unopposed. Luxon was distant from the conception of the bipartisan agreement, and had a history of campaigning against new developments. Together this meant that withdrawing National Party support for densification could be explained as responding to voter concerns, not an embarrassing U-turn.
In May 2023 the National Party ‘changed their mind’, telling a group of concerned suburban residents that they ‘got it wrong’ on the Medium Density Residential Standards, and then announcing a withdrawal of support for the policy.
National has since proposed an alternative: gone is the prescriptive three storey default zone that legalized townhouses across New Zealand’s cities – National would give councils the final decision on where to impose this zone, effectively undermining it given their resistance to implementing the policy. Instead, councils must prove they have zoned for at least ‘30 years of housing growth’ in their plans, or central government will intervene. As of late 2023 it was unclear how National planned to define or enforce this.
This proposed target is reminiscent of the Californian ‘builder’s remedy’ system, which in principle allows developers to bypass almost all zoning laws if the area isn’t meeting housing targets. So far, legal blockers have made the policy difficult to enforce. It is also similar to the UK’s five-year land supply target, which requires local councils to allocate sufficient land to house five years of expected population growth and is the main way the UK government has forced local councils in Britain to make land available for development. This, too, has been underwhelming – many councils have refused to submit a compliant plan, but have avoided penalties, in part because the central government is worried about political backlash for imposing them. And attempts to increase the targets so that sufficient homes are delivered through this system have been politically toxic. The stage is set for such a battle in New Zealand, with some councils already claiming that their legacy zoning plans have already enabled ‘30 years of growth’, despite skyrocketing rents and prices.
Where does this leave upzoning in New Zealand?
In the October 2023 election, the National Party defeated the Labour government. Though the first wave of upzoning will likely remain in place, the much more comprehensive Medium Density Residential Standards are in a perilous position. Centralizing planning power up to a higher level of government has proved to be politically difficult to defend, even with a grand bargain between the major parties in favor, as the incentives for the opposition to defect eventually won out. The disgruntled voters got their way, one way or another.
Attempting to get both major political parties to commit to upzoning nearly every suburb in New Zealand was always ambitious. Perhaps the bipartisan agreement could have endured if the small pockets of vocal opponents had been given the option of agreeing with their immediate neighbors to opt out of broad upzoning, as was done in Texas with Houston’s highly successful upzoning, instead of stopping the entire policy nationwide as a side effect.
If broad suburban upzoning is to enjoy bipartisan support again in the future, it probably needs to happen in tandem with providing better local incentives to say yes to new housing, and addressing infrastructure concerns. Both parties are trying to do this – for instance Labour and National are both committed to introducing new revenue-raising tools like value capture and congestion charging to help pay for infrastructure. There may be scope to try broad upzoning again in the future.
Either way, not all is lost. The first upzoning policy – permitting six storeys of building within walking distance of rapid transit stops, commercial hubs, and city centers in major cities, and the removal of minimum car-parking requirements – is still supported by both parties. Here, top-down control really was able to accelerate upzoning, in part because it was targeted on a limited range of areas, meaning a majority of homeowners and voters were unaffected. Once fully implemented by councils in their plans, this first policy will be transformational for cities in New Zealand. The Medium Density Residential Standards, which went even further, were icing on the cake – or, perhaps, a sacrificial lamb that enabled compromise on a position that is still remarkably ambitious.
To get lasting change, New Zealand might need a different approach. If we can devise a system where suburban owners stand to gain from upzoning, they might actually become supporters. But regardless of what happens next, New Zealand is poised to build significantly more houses than could’ve been expected even five years ago.
Calculated on the population of each tier 1 territorial authority, as set out in the National Policy Statement on Urban Development 2020, per 2018 census data.
It is important to point out that, during this time period, the government confiscated and alienated a significant amount of Indigenous (Māori) land, which was passed on to settlers for development or farming.
This is, of course, a simplification. For example, many councils operate a differential rating system with commercial, industrial, and residential properties paying a different amount.
The Infrastructure Funding and Financing Act 2020 partially re-enabled these special-purpose vehicles, but they’ve yet to see success. Other tools like development contributions and targeted rates are useful, but are not sufficient in their current form to cover the full costs or economic life span of new infrastructure.
Rents are better for assessing housing affordability than house prices – they track changes in real time, they’re less susceptible to forward-looking expectations, and they’re less responsive to interest rate changes. What’s more, house prices can go up when properties are upzoned, because house prices include land prices, and land gains value when you get permission to do more with it.
There is a significant price differential for land at the edge of cities depending on whether it is rurally or residentially zoned. Urban-zoned land in Auckland was valued at a premium of nearly NZ$1,300 (US$790) per square meter relative to nearby rural-zoned land in 2020/2021.
There is a lot going on in the National Policy Statement on Urban Development, but the key bits are:
councils must allow for buildings up to at least six-storeys within walkable catchments of the city center, commercial hubs, and all existing and planned rapid transit stops;
councils in urban areas with populations >10,000 may no longer impose minimum car parking requirements;
it is now more difficult for councils to justify density exemptions on the basis of heritage and character;
councils that fail to implement these requirements properly will be referred to an Independent Hearings Panel – a process with limited appeals;
and, if the council then disagrees with recommendations from the panel, the environment minister can override the council.
Cost-benefit analysis estimated that intensification under the policy would bring NZ$9 billion (US$5.6 billion) in benefits in the years to 2043. Removing minimum car parking requirements in itself had an average estimated cost-benefit ratio of 8.6 in the five major urban areas assessed. Requiring car parks adds costs to developments. Allowing developers to choose whether to provide parking enables them to build more apartments on smaller sites, closer to the inner city and public transport connections – the kinds of projects that may have been financially unfeasible under the previous rules.
This second policy was still subject to the same exemption process as the first upzoning policy, including for historic-character areas.
The cost-benefit analysis of this policy estimated that the net benefit accruing to 2043 would be approximately NZ$14.5 billion (US$8.9 billion), or NZ$11,800 (US$7,261) per household in 2019 prices. Rising rents and house prices over time are essentially a wealth transfer from wage earners to landowners, and from future generations to the current generation. This policy was estimated to prevent a transfer of NZ$198 billion (US$121.8 billion) over the same period.
These standards were enacted as part of the Resource Management (Enabling Housing Supply and Other Matters) Amendment Act 2021.