The effect of upzoning on house prices and redevelopment premiums in Auckland, New Zealand

Abstract

We study the short-run effects of a large-scale upzoning on house prices and redevelopment premiums in Auckland, New Zealand. Upzoning significantly increases the redevelopment premium but the overall effect on house prices depends on the economic potential for site redevelopment, with underdeveloped properties appreciating relative to intensively developed properties. Notably, intensively developed properties decrease in value relative to similar dwellings that were not upzoned, showing that the large-scale upzoning had an immediate depreciative effect on pre-existing intensive housing. Our results show that the economic potential for site redevelopment is fundamental to understanding the impact of changes in land use regulations on property values.

What’s so special about character?

“…This accounts for the fact that empty land has a higher potential for (re)development than land with dwellings on it. The intensity variable is a valid measure of redevelopment potential and has been used in Clapp and Salavei (2010), Clapp et al (2012), Greenaway-McGrevy and Sorensen (2017) and Greenaway-McGrevy et al (2018). Any other physical measure would most likely reflect what our intensity variable already does, but such a variable does not exist, as rezoning does not necessarily imply that actual changes in the house would occur in the short run or within the timeframe of our dataset.…”

Going hard and early: Aotearoa New Zealand's response to Covid-19

“…But it is still too early to judge how the A/NZ economy will perform overall, and in comparison with other countries that took different decisions in managing COVID-19. Certainly, the economic cost over the next few years will be significant, but it is also seen as offering opportunities to fill key infrastructure gaps (see above, Section 9) and to support and work with the private sector to reorient the economy to delivering higher-value products, in more environmentally friendly ways (Greenaway-McGrevy et al ., 2020 ).…”

A spatial model averaging approach to measuring house prices

“…Clapp et al 2012 argue that hedonic specifications that fail to control for the redevelopment premium are incorrectly specified. Changes in the value of these premiums are particularly important source of variation in house prices in our sample due to changes in residential zoning in Auckland in 2016 (see Greenaway-McGrevy et al 2021). Following Clapp et al (2012) we therefore include a proxy for the redevelopment premium-site intensity-which is the ratio of the estimated value of improvements of a property to the total estimated value.…”