Can Zoning Reform Reduce Housing Costs? Evidence from Rents in Auckland

Zoning reform is increasingly advocated to redress unaffordable housing, but there are few real-world examples to demonstrate its efficacy. However, in 2016, Auckland, New Zealand, upzoned approximately three-quarters of its residential land, precipitating a boom in housing construction. In this paper we investigate whether the zoning reform reduced housing costs, adopting a synthetic control method to specify rental prices in Auckland under the counterfactual of no zoning change. Rental prices are measured using a hedonic index that quality-adjusts prices based on observable attributes of the rental properties. Six years on from the reform, the synthetic control from our preferred empirical specification implies that rents would be approximately 28% higher under the counterfactual. This difference is statistically significant at a five percent level under the conventional rank permutation method applied to post-treatment root mean squared error. Our findings support the proposition that large-scale zoning reform can enhance housing affordability.