Thanks for writing this, I found it interesting, and heartening to see we're making progress! I grew up in Auckland, and I'm back here for a month over the summer. One of the reasons I've not lived in NZ since graduating uni is how extraordinarily unaffordable it is.
Two things I think are worth mentioning: I was surprised that you didn't mention the Auckland "supercity" which started in 2010. This was when they rolled up a number of regional councils into one council. My understanding is one of the problems this solved was that previously, councils would argue about who should pay for things, because rates revenue would accrue to one council as a result of infrastructure that another would build. E.g. allowing office space to be built near the city didn't benefit that council because people would commute from further away, and most of the council revenue those office workers generate people would be raised where they lived - in another council. I think rolling all these councils up made it more politically feasible to do the zoning changes you talked about in your essay. I imagine it might have solved some other problems too.
And while housing density has definitely increased, we don't appear to have figured out the political willpower to improve transport and utility infrastructure to the extent I think is required. I haven't done much research on this, but while there is investment in bus and train infrastructure, it has a few problems, mostly related to "last mile" dynamics, where people still have to drive to the bus station.
New Zealanders are generally fairly allergic to public transport and high density housing, probably because of poor execution in the past. I'm a fan of them when done well, based on my time in Singapore, Japan, and South Korea, but many haven't been to those places. I even had a friend who recently visited South Korea who I've talked to about these topics, and he was still surprised at how good the trains were!
Anyway, these are solved problems in other parts of the world, but it might take a while to play out here. Fingers crossed these are signs of more progress to come!
One thing I’d love to see discussed is market rate vs public housing. The former clearly works in reducing house prices, however there’s a strong political contingent in favour of the latter, citing fairness. Is the Singapore model more fair than the Tokyo model? Are they both equally as effective in reducing house prices?
Pradyu, there are arithmetic errors in the Hsieh & Moretti (2019) paper. Hsieh is aware of these issues and chalked them up to just a bit of careless oversight. The wage improvements are substantially higher than they noted if you do the arithmetic properly. Bryan Caplan wrote about this here: https://www.econlib.org/a-correction-on-housing-regulation/. Note that even he left off an exponent where he put his wage growth figure.
The correct estimates were that US GDP would be 36% rather than their reported 8.9% higher, and wage growth would be 13.55% higher rather than 3.7% (i.e., +$13,495/almost $13,500 instead of $3,685), while total GDP would be $3.39 trillion larger, rather than $1.95 trillion larger. The wage bill increase they estimated at +$0.53 trillion was actually +$1.32 trillion as well.
The benefits of improving housing problems are worth much more than you might be aware. Hope this helps!
Transaction cost economics in the 1970's proved that anyone with sunk investment costs will capture governance, because they have the incentive and the resources, and really no alternative. This is just as true for sugar plants and oil refineries as for homes. So there's nothing surprising about it, and no amount of sunlight will change it. If the democratic masses revolt, investment (i.e., nice homes and their owners) will go elsewhere.
Thanks for writing this, I found it interesting, and heartening to see we're making progress! I grew up in Auckland, and I'm back here for a month over the summer. One of the reasons I've not lived in NZ since graduating uni is how extraordinarily unaffordable it is.
Two things I think are worth mentioning: I was surprised that you didn't mention the Auckland "supercity" which started in 2010. This was when they rolled up a number of regional councils into one council. My understanding is one of the problems this solved was that previously, councils would argue about who should pay for things, because rates revenue would accrue to one council as a result of infrastructure that another would build. E.g. allowing office space to be built near the city didn't benefit that council because people would commute from further away, and most of the council revenue those office workers generate people would be raised where they lived - in another council. I think rolling all these councils up made it more politically feasible to do the zoning changes you talked about in your essay. I imagine it might have solved some other problems too.
And while housing density has definitely increased, we don't appear to have figured out the political willpower to improve transport and utility infrastructure to the extent I think is required. I haven't done much research on this, but while there is investment in bus and train infrastructure, it has a few problems, mostly related to "last mile" dynamics, where people still have to drive to the bus station.
New Zealanders are generally fairly allergic to public transport and high density housing, probably because of poor execution in the past. I'm a fan of them when done well, based on my time in Singapore, Japan, and South Korea, but many haven't been to those places. I even had a friend who recently visited South Korea who I've talked to about these topics, and he was still surprised at how good the trains were!
Anyway, these are solved problems in other parts of the world, but it might take a while to play out here. Fingers crossed these are signs of more progress to come!
Tokyo is the famous example.
One thing I’d love to see discussed is market rate vs public housing. The former clearly works in reducing house prices, however there’s a strong political contingent in favour of the latter, citing fairness. Is the Singapore model more fair than the Tokyo model? Are they both equally as effective in reducing house prices?
first like!
would have loved a longer "what do we do about it?" section
Pradyu, there are arithmetic errors in the Hsieh & Moretti (2019) paper. Hsieh is aware of these issues and chalked them up to just a bit of careless oversight. The wage improvements are substantially higher than they noted if you do the arithmetic properly. Bryan Caplan wrote about this here: https://www.econlib.org/a-correction-on-housing-regulation/. Note that even he left off an exponent where he put his wage growth figure.
The correct estimates were that US GDP would be 36% rather than their reported 8.9% higher, and wage growth would be 13.55% higher rather than 3.7% (i.e., +$13,495/almost $13,500 instead of $3,685), while total GDP would be $3.39 trillion larger, rather than $1.95 trillion larger. The wage bill increase they estimated at +$0.53 trillion was actually +$1.32 trillion as well.
The benefits of improving housing problems are worth much more than you might be aware. Hope this helps!
Transaction cost economics in the 1970's proved that anyone with sunk investment costs will capture governance, because they have the incentive and the resources, and really no alternative. This is just as true for sugar plants and oil refineries as for homes. So there's nothing surprising about it, and no amount of sunlight will change it. If the democratic masses revolt, investment (i.e., nice homes and their owners) will go elsewhere.