New Zealand will radically ease zoning rules to try to relieve its stubborn housing shortage

New Zealand will drastically ease zoning restrictions in a bid to “flood the market” with land for homes and override the powers of local councils to curb development, the nation's housing minister said in announcing reforms to what he called one of the world’s least affordable housing markets.

“It’s about allowing maximum choice and opportunity for people to build and develop,” said the minister, Chris Bishop, in a speech in Auckland this week. “Let’s get away from the idea that planners can plan our cities and let actual individuals and families decide how they live their lives.”

The new measures would require local councils — which decide what land in New Zealand is used for — to free up “bucketloads” of additional space for housing development, Bishop said. They must now accommodate the next 30 years of projected growth instead of the next three as is currently required.

Councils will also be barred from imposing urban limits on cities and forced to permit mixed-use development, with an end to rules mandating balconies and minimum sizes for apartments, in a suite of changes widely endorsed by analysts.

“It’s very easy for local councils to say no to growth because their residents don’t want it, because they don’t benefit from it, but the costs of those decisions are falling on central government,” said Stuart Donovan, a housing economist with the New Zealand thinktank Motu, who was speaking from Brisbane, Australia.

Bishop’s pitch that the market, rather than officials, should decide what and where homes are needed was a fresh attempt from a series of New Zealand housing ministers to resolve a chronic shortage of homes that has frustrated successive governments and marred the political fortunes of some. While two decades of runaway prices have eased since a 2022 peak, they remain far higher than before the COVID-19 pandemic and an average home costs eight times the average income.

The proportion of income spent on rent was higher in New Zealand than in any other country, Bishop said Thursday, citing research by the Organization for Economic Cooperation and Development, a grouping of mostly developed Western nations.

But in a country where housing stock is comprised overwhelmingly of single-family, standalone dwellings, efforts by lawmakers to cool prices before have at times been cautious. Favorable tax conditions have made housing the most popular form of investment in New Zealand, with half of all household wealth bound up in land and homes, according to the country's Reserve Bank — and some voters have rejected measures that would lower prices.

Remarks Bishop made to reporters last month that homes were “too expensive” and prices should be reduced were so unusual from a lawmaker for one of the major political parties that they prompted news headlines. But analysts said Thursday that public opinion had changed as a generation of younger New Zealanders found themselves priced out of the housing market.

“At one point in time, it would be, ‘I want house prices to be affordable for my children, but I don’t want my house price to fall,’” said Shamubeel Eaqub, an independent economist who specializes in housing. “But I think there is a general recognition that things have gotten so far out of kilter that something has to change.”

The new measures would not flatten the market, Eaqub said; New Zealand’s shortage of homes was so great that it would still take decades to resolve. But he was among many analysts to welcome the shift.

It follows a test case on easing restrictions in New Zealand’s largest city, Auckland, where a plan introduced in 2016 that increased housing density prompted a surge in building and reduced rents.

But Auckland's mayor decried the fresh measures.

“I am wary of any policies that will lead to urban sprawl,” Wayne Brown posted to LinkedIn. “We also don’t want to encourage low quality housing at the detriment of our unique landscapes, waterways, and harbours. Or make traffic congestion worse.”

The Parliamentary opposition also rejected the reforms.

“It’s all well and good to want to ensure development opportunities, but unless the Government fronts with infrastructure money, councils are limited in what they can offer by ways of expansion,” said the Labour party’s housing spokesperson, Kieran McAnulty, in an emailed statement.

“Labour is open to any measure that will lead to more housing and will lend support where it is likely to work, but not at the expense of building standards or loss of elite productive soil,” he added, referring to the relaxation of urban limits into rural areas. Bishop said building standards would remain unchanged.

“People often complain to me about all these shoebox apartments and I agree that they won’t be the right housing solution for everyone,” he said. “But do you know what is smaller than a shoebox apartment? A car or an emergency housing motel room.”