Beyond Average Effects: Distributional Price Effects of an Inclusionary Zoning Program in Auckland

Abstract

Housing affordability remains a significant social and economic issue in New Zealand and the developed world. Affordability policies such as Inclusionary Zoning (IZ) have been promoted as alternatives to streamline the delivery of land as an intermediate stage to boost the supply of affordable housing. IZ has been applied with relative success in several countries. Nonetheless, research on price effects is relatively scarce and applications of causality approaches remain limited. It is of interest to explore whether voluntary IZ (or rezoning policies in general) may have effects beyond average prices considering the heterogeneity of housing markets. This paper explores if and how a rezoning policy (the Special Housing Areas in Auckland, New Zealand) affects the distribution of prices within designated areas. Our empirical strategy relies on quantile difference-in-difference models to identify distributional effects. We estimate changes-in-changes models to relax functional form assumptions and to incorporate heterogeneity. We use about 175 thousand sales transactions between September 2011 and September 2016 in the Auckland Region. Our findings show that the SHAs program increased housing prices for all distribution segments, ranging from 3% to 7%. That is, the SHAs may have affected market segmentation within the designated areas, and it cannot be concluded that there was a cross-subsidy from more expensive houses toward affordable. Hence, the distributional effects may affect the potential of a voluntary IZ as an affordability policy.