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We zoned for density and got higher house prices: Supply and price effects of upzoning over 20 years

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  • Murray, Cameron

    (The University of Sydney)

  • Limb, Mark

    (Queensland University of Technology)

Abstract

Does planning for higher density increase housing development and decrease housing prices? We study the outcomes of planning for density in established suburbs over a twenty-year period using a large site-level dataset on dwelling stock, planning regulations, and prices, in 19 planned densification areas (activity centres) comprising 25,775 sites in Brisbane, Australia. Planning rules in these areas were repeatedly relaxed to allow for higher density; a policy change that should have observable price effects. To study the effect of zoning, we create a variable for each site called zoned capacity, which is the estimated number of additional dwellings able to be built under the planning code. Only 2% of the zoned capacity was taken up in any five-year study interval. Zoned capacity doubled over the whole twenty-year study period (going from 0.9x total dwellings to 1.4x), however despite these changes, 78% of sites with zoned capacity in the first period remained undeveloped. Higher rates of new housing supply are robustly related to higher prices despite demand arguably seeing a similar increase across locations. Our zoned capacity variable has no relationship to price across numerous regression models and is robust to various data selection choices. It could be that planning is not a binding constraint on new housing in Brisbane—yet price growth over our study period is comparable to other Australian cities. This evidence suggests that private housing markets will not rapidly supply new housing and cause significant price reductions, even if the planning system allows it.

Suggested Citation

  • Murray, Cameron & Limb, Mark, 2020. "We zoned for density and got higher house prices: Supply and price effects of upzoning over 20 years," OSF Preprints zkt7v_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:zkt7v_v1
    DOI: 10.31219/osf.io/zkt7v_v1
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    References listed on IDEAS

    as
    1. Murray, Cameron, 2020. "A housing supply absorption rate equation," OSF Preprints 7n8rj, Center for Open Science.
    2. Peter Schmitt, 2013. "Planning for Polycentricity in European Metropolitan Areas-Challenges, Expectations and Practices," Planning Practice & Research, Taylor & Francis Journals, vol. 28(4), pages 400-419, August.
    3. Quigley, John M. & Rosenthal, Larry A., 2005. "The Effects of Land-Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt90m9g90w, Berkeley Program on Housing and Urban Policy.
    4. Murray, Cameron K., 2020. "Time is money: How landbanking constrains housing supply," Journal of Housing Economics, Elsevier, vol. 49(C).
    5. Paavo Monkkonen, 2019. "The Elephant in the Zoning Code: Single Family Zoning in the Housing Supply Discussion," Housing Policy Debate, Taylor & Francis Journals, vol. 29(1), pages 41-43, January.
    6. Alvin Murphy, 2018. "A Dynamic Model of Housing Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 243-267, November.
    7. Joseph Gyourko & Albert Saiz & Anita Summers, 2008. "A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index," Urban Studies, Urban Studies Journal Limited, vol. 45(3), pages 693-729, March.
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