America, Take Note: New Zealand Has Figured Out A Way To Bring Down Home Prices

[M II A II R II K]

America, Take Note: New Zealand Has Figured Out A Simple Way To Bring Down Home Prices


Aug 7, 2023

By Eliza Relman

Read More: https://www.businessinsider.com/america-...ces-build-more-houses-new-zealand-2023-8

Imagine a bustling neighborhood with a mix of single-family homes, triplexes, apartment buildings, businesses, and public amenities. Rent growth is slow, home prices are reasonable, and there are plenty of affordable-housing options. Families, young people, retired folks, and businesses are all able to coexist, making the area diverse and vibrant. Unfortunately, most American neighborhoods don't look like this.

- Instead, huge parts of the country have zoning laws that make it illegal to build anything other than a single-unit home. But these laws — originally designed to keep residential neighborhoods separate from manufacturing and to segregate and exclude people based on race — are running up against a harsh reality. American cities, especially those with growing job markets and a healthy influx of new residents, need to build millions of new homes to keep housing from becoming unaffordable. And keeping single-family-only zoning laws in place makes it almost impossible to meet these areas' housing needs. --- To make housing more abundant and affordable, economists and urban planners say, we need to upzone many neighborhoods — legalize the construction of denser, taller housing like duplexes, triplexes, and townhomes. Upzoning won't cause the price of existing housing to suddenly tumble, but it will slow the growth of housing costs by meeting demand. It's a necessary, but not sufficient first step in solving the affordability crisis.

- Aggressive opposition to zoning reform has limited the number of real-world models we have in the US. So experts have looked abroad for solutions. New Zealand stands out as an exceptional example of how to successfully boost housing supply through zoning reform. Facing an urgent housing crisis, the island nation implemented upzoning measures that legalized the building of medium-density housing. Not only did this help to slow down skyrocketing housing costs, it inspired a bipartisan, nationwide expansion of the policy. --- "The Auckland example is so particularly groundbreaking because it's no longer a theoretical debate," Matthew Maltman, an Australian economist who's closely studied New Zealand's housing reforms, told me. "It just makes it a lot easier to sell to people." --- A law passed in 2016 allowed for "gentle density" — making it legal to build duplexes, triplexes, and townhomes on single-home lots. The policy tripled the city's housing capacity. Between 2015 and 2020, researchers found that new housing units permitted in the city grew from 6,000 to more than 14,300. Auckland went from mostly single-family homes to a much denser mix of multi-unit homes and attached single-unit buildings.

- In the US, there are many opponents to zoning reform — particularly higher-income local homeowners, who don't want to see their neighborhoods change. Some question the basic laws of supply and demand and insist that new housing actually raises prices. Others have more founded concerns about strains on infrastructure, schools, and other services. --- Many cities are also operating under old, complex regimes of regulations that make it hard to build. Land-use regulations tend to pile up and sometimes contradict each other, Vicki Been, who served as New York City's deputy mayor of Housing and Economic Development under Mayor Bill de Blasio, told me. "So you have to, really, every once in a while, just sort of take a scalpel and say, 'OK, we're going to update this, we're gonna cut through all of the layers of complexity,'" she said. --- But New Zealand offers a way out of this morass. The country is a particularly good model for the US, because the countries have relatively similar urban-planning systems, land-use regimes, and geographies, Schuetz said. "It's more similar to the US than, say, much of Europe."

.....

Houston has been one of America's housing success stories: A reduction of its minimum lot size has allowed homes to be built more densely.

[Crawford]

This article is absurd. NZ has one of the worst income-to-housing cost ratios on the planet. It makes Canada and Australia look cheap.

And Houston doesn't have particularly dense or affordable housing. Those are expensive SFH right in the metropolitan center. A healthy metro isn't mass-building SFHs in the core.

[jmecklenborg]

Not worth reading. An island in the middle of nowhere with only 5 million residents doesn't have the economy of scale that the United States has, where materials and labor can freely move throughout a large area.

New homes are expensive in the United States because they're big, luxurious, and require a lot of highly-paid skilled labor to construct.

If we made it legal to live in Home Depot barns, prices would come down. But no housing advocates are willing to live in such structures themselves.

[TexasPlaya]

Originally Posted by Crawford

This article is absurd. NZ has one of the worst income-to-housing cost ratios on the planet. It makes Canada and Australia look cheap.

And Houston doesn't have particularly dense or affordable housing. Those are expensive SFH right in the metropolitan center. A healthy metro isn't mass-building SFHs in the core.

Why not? Houston was primarily developed in a different era so it's just pointless to try and compare it to traditional urban metros. If you want to say that a healthy, urban metro isn't mass-building SFHs in the core then sure.

Houston is generally building what people want, where they want which is why there is a variety of housing being built including massive, 3 story detached townhomes. The problem is the infrastructure like roads, sidewalks, drainage, electric poles, etc isn't keeping up or worse, not really being considered.

Be like Houston, in that you build a variety of housing wherever it is wanted. Don't be like Houston, where the infrastructure is pretty bad. The "no-zoning" has always been a bit of a red herring.

[mhays]

Houston also demands two(!) parking spaces in each of those houses. Even in urban areas.

[iheartthed]

Did New Zealand also create a system where a substantial percentage of their middle class use their homes as piggy banks? If so, how did they manage to bring down housing costs without bankrupting everyone?

[llamaorama]

I think there's another side of this that's not mentioned.

In Texas and Florida and other "Red State" parts of the US, the lion's share of new development is greenfield suburban single-family home construction taking places in areas with NO ZONING OR MUNICIPAL GOVERNMENT WITH LAND USE ORDINANCE POWERS.

Investment Capital -> National Homebuilder -> petitions state to create utility district to offload cost of infrastructure on taxpayers -> builds "The Landing at Tuscany Creek". Homes starting in the "affordable" $350k range. Private playground and residents-only pool to make up for total absence of parks in the area, at a cost of $300/month HOA fees. Has site set aside for elementary school in the "good" school district, which will levy $1000/yr property taxes but Republican states are "low tax" so lets just pretend this isn't an issue.

This is all outside the city limits. In Texas counties do not have the power to implement zoning. Only cities do. Over half of the population of Greater Houston, so about 7.5/2 = 3.75 million people live in unincorporated Harris, Montgomery, Fort Bend Counties. This is like 75% of the entire population of New Zealand. Let that sink in.

Then, over time -> developer builds grocery-anchored retail center. Apartment complexes pop up along major roads. Auto-body shops and self storage lots and low income manufactured housing pops up on land in the cracks between all this.

Absolutely nothing is planned and is 100% exclusively accessible from a 6-lane "stroad" with no sidewalks and drainage ditches along the side, with above-ground wooden power poles, grass that's 3 feet tall full of litter and trash and advertising signs.

This is the only way the US knows how to build housing, so the places that embrace this have somewhat cheaper housing. But the downside is places like this are also kind of shitty if you aren't an upper middle class family, and they are horrible for the environment, they take up a massive amount of space, and they assume a perpetually high budget that can be spent on maintaining a significantly larger infrastructure grid.

New Zealand and Canada and Australia don't want this kind of development. My understanding is that every inch of land there has some kind of land use regulation on it. And from a progressive point of view that is really good. But that is also not compatible with the only viable way for construction to work in the kind of modern anglosphere economy where a few billionaires and giant corporations dominate the market. So they only get a bit of brownfield urban infill and that's not enough to meet demand.

What I think would fix it if national governments viewed this not as an urban planning problem at all and saw it as an economy and legal problem. What I would do if I was dear leader for a day would be to write some laws that create innovative new ways for small investors (so homebuyers) to pool money for real estate development. The end goal should be something where the norm is when people want a house, they buy a lot that's been carved out of a plot of land that local government planners had a say in how it was subdivided, then there are a bunch of competing, highly efficient home builders where you go on a website, design your dream home, and a week later a truck full of guys shows up with some pre-fabricated pieces from an automated factory and before you know it your new house is ready.

Originally Posted by TexasPlaya

Why not? Houston was primarily developed in a different era so it's just pointless to try and compare it to traditional urban metros. If you want to say that a healthy, urban metro isn't mass-building SFHs in the core then sure.

Houston is generally building what people want, where they want which is why there is a variety of housing being built including massive, 3 story detached townhomes. The problem is the infrastructure like roads, sidewalks, drainage, electric poles, etc isn't keeping up or worse, not really being considered.

Be like Houston, in that you build a variety of housing wherever it is wanted. Don't be like Houston, where the infrastructure is pretty bad. The "no-zoning" has always been a bit of a red herring.

Yes, I agree.

I don't think there is any reason to believe that in order for a city to not have zoning it must also be run by a bunch of oil barons and old money country club snobs who think functioning power grids are socialist, and who occasionally share power with a populist machine that takes advantage of the tendency for poor minority populations to vote for it exclusively every election.

Sorry I am salty, but that is my honest opinion. Houston has never been a well governed city. It's lack of zoning is a historical accident. And the lack of zoning only really leads to good outcomes in areas where there are high land values to begin with and a low chance of dirty/noxious activities moving in.

[JManc]

Originally Posted by mhays

Houston also demands two(!) parking spaces in each of those houses. Even in urban areas.

One or no parking spaces would be a deal breaker for most Houstonians. Just about everyone who can afford a $500k townhouse drives to work and it's usually two incomes. I personally would never own a house without at least two parking spaces

[jd3189]

All I know is that a lot of new greenfield suburban development in this country is "built for rent". Which means, not only is it more sprawl, but most people won't be able to buy to build generational wealth. And SFHs only works well if you have a bunch of large families moving in. The proportion of families in the US population is also decreasing and even single people, let alone couples wanting to start a family, can afford to buy a home and will have to put up with renting for life. A clusterfuck of a future if you ask me, but I guess most Americans want it this way so that folks can fund their wealth and retirement off the backs of renters en masse

[wwmiv]

Originally Posted by JManc

One or no parking spaces would be a deal breaker for most Houstonians. Just about everyone who can afford a $500k townhouse drives to work and it's usually two incomes. I personally would never own a house without at least two parking spaces

Yes.

Also: many Houston residential streets are not designed for on-street parking and without a complete public transportation network there needs to be a place for cars.

Thankfully, as population density increases it will move the needle financially and politically in favor of more transit and when more transit is built a decent share of these ground floor garages can be renovated for other ground floor uses when Houston inevitably removes parking minimums (it’ll happen after transit is sufficiently decent).

I’d wager that some of them on choice corridors may even end up being used as ground floor shops in a live/work set-up as usually there is only the garage, a closet, stairwell, and a bathroom on the first floor in a ~20x35 floorplate. This keeps the commercial uses separated from the residential upstairs. For others (with larger floorplates, perhaps including a preexisting bedroom they don’t want to sacrifice), an ADU or STR to monetize the property, another bedroom for a child, a mother-in-law suite for aging parents, etc., may make more sense. Of course, many may keep their garages—it’ll depend on location. The options are there. Hating on the fact that these homes include garages is short-sight and doesn’t admit their full potential.

Long-term, the designs are easily retrofitted for better pedestrian and commercial activity and population density. And like I said: the economics of doing so will change as transit is increased and the market and government no longer dictate garages.

Can I also add: this is exactly what happened in Chicago and other legacy cities with alleyway garages. After the second or third renovation round for a structure that makes it that far, extra residential capacity was often added into attics, garden units, and rear carriage houses. They aren’t ever built that way. At least the garages are highly functional in the meantime unlike an unfinished garden level basement.

[wwmiv]

Originally Posted by jd3189

All I know is that a lot of new greenfield suburban development in this country is "built for rent". Which means, not only is it more sprawl, but most people won't be able to buy to build generational wealth. And SFHs only works well if you have a bunch of large families moving in. The proportion of families in the US population is also decreasing and even single people, let alone couples wanting to start a family, can afford to buy a home and will have to put up with renting for life. A clusterfuck of a future if you ask me, but I guess most Americans want it this way so that folks can fund their wealth and retirement off the backs of renters en masse

Summary: the economy has been rigged against everyone but the ultra-wealthy.

[isaidso]

Re-zoning is an obvious solution but articles like these will fall on deaf ears.

Some will argue whatever irrelevant or flimsy idea pops in their head why Country X is different; then conclude they have nothing to learn. House prices are a matter of supply and demand. Re-zoning absolutely increases housing supply which puts downward pressure on prices.

Affinity for big luxurious houses, not being an island, not being geographically isolated, and having 40 metros of 2 million + instead of 1 has no bearing. And lastly NZ has the same, if not more pressure on house prices than the US due to immigration rates that far exceed the US posts. This completely negates the argument that labour moves around more in the US so has more demands placed on it.

Some seem unwilling to accept that they have anything to learn from another place/country and/or guided by their political agenda/what they want to happen. They won't budge no matter how much data, real life experience, or evidence you put in front of them. Instead, they'll aggressively ignore, dismiss, or refute anything that threatens SFH neighbourhoods.

[mhays]

Originally Posted by JManc

One or no parking spaces would be a deal breaker for most Houstonians. Just about everyone who can afford a $500k townhouse drives to work and it's usually two incomes. I personally would never own a house without at least two parking spaces

That's sad if true. You're talking like the urban core like it's the farthest suburb.

The truth is that not everybody thinks the same way. Some people already have one car (many of these have a single adult resident). The only question is how many. I bet the number without a car is over zero.

Why not give people the option? Let the market decide?

[jmecklenborg]

Originally Posted by jd3189

Which means, not only is it more sprawl, but most people won't be able to buy to build generational wealth.

Primary residences are terrible tools for building "generational wealth". A house only builds generational wealth if:

1. it appreciates wildly in value and doesn't require hundreds of thousands of dollars in upkeep during that time period, which rarely happens
2. the parents die almost instantly and not from a protracted and very expensive illnesses
3. there are only one or two kids

[jmecklenborg]

Originally Posted by isaidso

R
Some seem unwilling to accept that they have anything to learn from another place/country and/or guided by their political agenda/what they want to happen. They won't budge no matter how much data, real life experience, or evidence you put in front of them. Instead, they'll aggressively ignore, dismiss, or refute anything that threatens SFH neighbourhoods.

Real estate is local.

The United States has absolutely, completely, and positively nothing to learn from New Zealand.

Whoever posted this just wants attention.

[mrnyc]

Originally Posted by mhays

Houston also demands two(!) parking spaces in each of those houses. Even in urban areas.

so no zoning rules except oh wait a rule where you have to have 2 parking spaces per home? really?

[lio45]

Originally Posted by Crawford

This article is absurd. NZ has one of the worst income-to-housing cost ratios on the planet. It makes Canada and Australia look cheap.

Exactly, this article is worthless without a graph to show the evolution of (adjusted) NZ home prices before and after that measure.

I suspect real world data wouldn’t support the article’s clickbait title…

[llamaorama]

Originally Posted by jmecklenborg

Primary residences are terrible tools for building "generational wealth". A house only builds generational wealth if:

1. it appreciates wildly in value and doesn't require hundreds of thousands of dollars in upkeep during that time period, which rarely happens
2. the parents die almost instantly and not from a protracted and very expensive illnesses
3. there are only one or two kids

I think it depends on what you are defining as generational wealth.

A house is a safety net. Adult kids can live there rent free with parents in their 20s and save a lot more money and avoid student loan debt traps their peers get into. It helps them buy their own house, and get started on their own retirement and investments earlier. At their peak earning years they also aren't having to divert income away from savings to help retired Mom pay for rent. The house can then be sold to pay for things like elderly parent's assisted living instead of bankrupting the rest of their nest egg.

I guess from a pure investment advice standpoint where you are assuming the parents are making a comfortable income and are trying to determine how to maximize their investments to leave something to the kids, then okay sure I'll take your advice as I know nothing about this topic.

But from some kind of sociological standpoint, having parents who own a home would definitely be one of those things that tends to give middle class kids a leg up in life.

[SnowFire]

This smells like the finland solving its homeless problem. Absurd comparison.

[chris08876]

Poor urban planning and single detached homes taking up valuable land are making the chickens come home to roost. If its the U.S. or Canada or other places that mirror somewhat a U.S. style.

I'd be more impressed if a country like the U.S. or Canada can bring down home prices through a combination of zoning, incentives for builders, better urban planning and a better legislative process and legal process to get these units from blueprint to reality. Ah, and political as well, considering your folks that fight change because they want to sit on their investment and lock out any potential unit growth for others.

Rent is going up, property ownership costs are going up... a big party! Good luck future generations!



Fix the zoning, encourage incentives to build, cut political opposition and local opposition and bar foreign buyers on buying properties in areas with low inventory... and we might see some change.