Pristine, suburban Auckland.

Photographer: Fiona Goodall/Getty Images

Pulling Up the Property Ladder to Keep the Young Off

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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Auckland had a big meeting about zoning today! That's exciting, right?

OK, maybe not the first topic on your mind at the moment. But when I took what I thought was going to be a brief look at Twitter Tuesday night before I went to bed (Tuesday night in New York = Wednesday afternoon in Auckland), I got sucked in by journalist Bernard Hickey's reports of the goings-on in New Zealand's largest city.

At stake was a proposed Unitary Plan for the Auckland region that called for, among other things, denser development in Auckland's inner suburbs to address a big housing shortage. The debate, as Hickey described it, will sound awfully familiar to anyone who has followed housing issues in the U.S.

For example:

And this:

And this:

Jeffries is Peter Jeffries, chief executive officer of CORT Community Housing, an Auckland affordable-housing provider. Singh is Sudvir Singh, a physician appearing on behalf of Generation Zero, which calls itself a "movement of 29,587 young Kiwis working to cut carbon pollution." They favor higher density because they think it will mean more affordable housing and (in Singh's case, one assumes) a less polluting, more energy efficient city.

But the Auckland Council, the regional governing body, ended up voting 13 to 8 to withdraw the zoning changes. Several of those who voted "no" said their opposition had to do with the process the government had followed, not increasing density per se. Hickey was nonetheless appalled:

You can judge for yourself. The meeting (all 6 hours and 12 minutes of it!) is on YouTube. My two big takeaways after an admittedly cursory examination (no, I didn't watch all 6 hours and 12 minutes) are that:

  1. Wow, old Kiwi homeowners can be shockingly rude! I've never been to New Zealand but had always imagined it as this island (well, two islands) of genteel calm. Guess not when the topic is upzoning.
  2. Some version of this meeting must be happening pretty much every day in a city or suburb somewhere in the developed world. And my impression is that the result is usually the same as in Auckland: no to higher density and growth.

You might see this as a victory of popular democracy over technocratic elitism. But in this case the technocrats are generally pushing for more housing and the rowdy populists are pushing for less. Which seems kind of elitist, no?

It seems especially elitist -- not to mention wrong-headed -- in Auckland, where the average house price is higher than in London. In a recent nine-country survey by the consulting firm Demographia, Auckland tied for fourth place -- with Melbourne, Australia, and San Jose, California -- among the least affordable housing markets. Affordability was measured by dividing the median house price in a metropolitan area by the median household income; by that yardstick, the three least affordable metro areas were Hong Kong, Sydney and Vancouver, in that order.

This lack of affordability isn't just a problem for these cities. It's a global economic issue. Housing keeps getting more expensive in big, coastal metropolises in the developed world.  And while I guess you could say, "Hey, move to where the housing is cheaper," the best jobs are being created where housing prices are steep. The U.S., for example, is home to the 13 most affordable metropolitan areas in the Demographia survey (tied for first: Buffalo, Cincinnati, Cleveland and Rochester, New York). But shifts in the economy since the 1980s have for the most part steered highly paid employment away from those cities.

This economic dynamic is one big reason why housing prices are going up in Auckland and other in-demand cities. So is the fact that so many of these cities are on coasts, often with mountains behind them, which inevitably restricts the ability to construct more housing. Absentee owners, such as wealthy Chinese looking to protect their assets, may also be driving up prices in some cities -- Vancouver, for example.

Still, the fraught politics of constructing new housing in already built-up cities and suburbs is clearly a major force keeping prices and rents high. In most places (at least in the U.S.; I can't say for sure for the rest of the world) this plays out as it did in Auckland, with homeowners concerned about their property values and quality of life fighting against new development. Cities such as New York, San Francisco and Stockholm add another layer of complications with rent-control laws and affordable-housing rules.

I have cited, again and again, the estimate by economists Chang-Tai Hsieh and Enrico Moretti that reducing regulatory constraints on housing to the national norm in just New York, San Francisco and San Jose would increase U.S. gross domestic product by 9.5 percent. That's an estimate, and you may find the assumptions behind it debatable. But I'm willing to believe that it's directionally correct. And if you consider that similar forces are at work in Auckland and other cities around the world, it's hard not to wonder whether one of the major forces holding back global economic growth these days is old people yelling rudely at zoning meetings.

  1. They keep updating the number so it may be more than that when you click through.

  2. This also seems to be true of the big, coastal cities of the developing world, but that feels like a topic for another column. The politics are different, for one thing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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Justin Fox at

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