New Zealand’s Legalization of Incremental Housing Is Bearing Fruit

(Source: Flickr/Sightline Institute.)

New Zealand has proven what stateside housing advocates have been theorizing for years: Loosening restrictive zoning rules can increase housing supply and stabilize rents. While looking abroad for inspiration isn't routine for Strong Towns, the island nation offers insights as one of the few existing—and simultaneously most comprehensively studied—real-world testaments to what happens when you re-legalize an incremental pattern of growth in a place where that growth has been stunted.

"It's more similar to the U.S. than, say, much of Europe," Jenny Schuetz, an expert on urban economics and housing policy at the Brookings Institute, told Business Insider in an article detailing the country's reforms. "A typical New Zealand city looks a lot like a typical U.S. city," M. Nolan Gray, city planner and author of  Arbitrary Lines: How Zoning Broke the American City and How to Fix It, agreed. The “downzoning” of the 1970s and 80s and resultant single-family zoning across the island nation in many ways mirrored the suburban development pattern visible across the U.S.

However, when an 11% spike in population between 2013 and 2018 strained supply in Auckland, the nation’s largest city by both population and landmass began reevaluating where it was headed. The city’s home prices doubled between 2009 and 2016, Business Insider reported. “People even began to pay hundreds of dollars a month to rent garages in Auckland without bathrooms or kitchens.”

Unwilling to continue down this path, Auckland turned to incremental development. In 2016, the city upzoned approximately three-quarters of its residential land area under the Auckland Unitary Plan, legalizing duplexes, triplexes, and townhomes on single-family lots. 

The number of construction permits issued more than doubled. “New housing units permitted have increased every year since the policy was enacted, with all of these increases occurring in the city’s upzoned areas,” a 2021 research paper by Ryan Greenaway-McGrevy, the Director of Economic Policy at the University of Auckland, stated. 

Builders in Auckland, NZ (pop. 1.5M) are on track to complete the same # of homes this year as those in New York City (pop. 8.5M) 🤯 https://t.co/UFVdtL62KD

— Andrew Fine (@andrewdfine) August 7, 2023

In fact, seven years later, experts are concluding that the reforms not only produced more housing, but steadied rent growth. The conclusion is one that housing advocates have been trumpeting for years, now borne out by a compelling real-world example. "The Auckland example is so particularly groundbreaking because it's no longer a theoretical debate," Australian economist Matthew Maltman told Business Insider. 

“Part of what makes these reforms so successful is that they allowed incremental increases in housing density over a very large area, rather than concentrated upzoning to high densities in a limited number of places,” explained Strong Towns Editor-in-Chief Daniel Herriges. This opens the playing field to smaller-scale developers working on sites that won’t attract the interest of more conventional, large-scale builders. It also avoids the speculative surges in land prices that can occur when housing demand is funneled into small areas of a city, so that others can be kept under glass.

While Auckland remains one of the few cities to have systematically upzoned large shares of land as a mechanism to promote affordability, the U.S. isn’t without its kindred attempts. In 1998, Houston reduced minimum lot size requirements from 5,000 to 1,400 square feet, which by Gray’s estimate produced tens of thousands of low-cost, townhome-style houses. More recently, in an effort to avoid “California-style sprawl” and a companion housing crisis, Montana introduced a bill to allow multiplexes on single-family lots. 

Even California is reckoning with its realities, having effectively ended single-family zoning statewide, giving homeowners the flexibility to subdivide their lots to support accessory dwelling units (ADUs). “One in every four homes built last year in [Los Angeles] was an ADU,” Gray observed in a piece for The Atlantic. “These new ADUs are overwhelmingly used for housing—only 8 percent are used as short-term rentals.”

At the same time, reforms in Minneapolis—which are perhaps closest to the Auckland Unitary Plan in scope—have produced mixed results. Passed in 2018 but only enacted in 2020, these reforms effectively ended exclusive single-family zoning and abolished parking minimums citywide. Yet much of the housing production since has focused on larger apartment buildings. The production of small-scale, medium-density units has been comparatively anemic.

“The devil is often in the details,” Herriges wrote in an article about the reforms. “Lots of factors can add cost or complication to a project that is technically legal.” He cites ADUs as a common example. While legal in many cities, ADUs remain rare because “practical considerations make them uneconomic or undesirable.” Los Angeles is the aforementioned exception.

He also noted that larger developers are generally unlikely to pursue multiplex projects, and without a network of incremental developers and community lenders at the ready, it simply might take time before certain infill snowballs.

With comparable policy and land use, what makes the difference between stateside hesitation and Auckland’s scale of incremental development is yet to be fully understood. Continued research into the New Zealand city will hopefully uncover those variables and it’ll be up to U.S. cities to listen.

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For too long, housing policy has put investor returns and macroeconomic goals over the universal human need for shelter. Restrictive housing policies have also prevented people from collectively building the prospering cities they desire. That’s why incremental housing is a core campaign for Strong Towns. The next increment of development should be allowed, by right, in every neighborhood in America.

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