Quantifying the costs of land use regulation: evidence from New Zealand

Land use regulations vary in the restrictions and enforcement that applies across time and space. That variation makes it difficult to determine when land use regulations hinder the flexibility of housing supply using a single time series method, so a range of approaches and country case studies may be most appropriate to test impacts. We use four methods to test for impacts of land use regulation in New Zealand utilising unit record data on house sales. We find: (i) house prices outstrip construction prices in many New Zealand cities; (ii) the extensive price of land is typically 5–6 times the intensive price of land; (iii) density and house prices are only weakly correlated; (iv) apartment and townhouses outstrip construction prices. All four results suggest land use regulations play a material role in constraining housing supply, driving up house prices.