Heterogenous treatment effects of a voluntary Inclusionary Zoning program on housing prices

Abstract

Housing affordability remains a social and economic issue in New Zealand. Affordability policies such as Inclusionary Zoning have been promoted to streamline land delivery and boost the housing supply. This paper takes the Special Housing Areas (SHA) programme implemented in Auckland, New Zealand, as a case of a voluntary IZ, and explores the effects on the distribution of housing prices. We rely on a Difference-in-Difference framework as the general identification strategy to estimate quantile treatment effects. We use about 175 thousand sales transactions between September 2011 and September 2016. Considering all transactions, the results show that the SHAs program failed to reduce housing prices across the distribution; and, even in some cases, prices increased. We also find that, for new dwellings, the program decreased prices at the lower end of the distribution while increasing them at the upper end. We argue that the mechanism driving these results is the construction of larger dwellings in the upper part of the distribution. As the SHAs did not involve a mandatory mechanism for affordability purposes, we argue that non-affordable dwellings were built and delivered in the first place with the added price premium of a streamlined delivery. Therefore, as an example of a voluntary IZ program, the SHAs may have stimulated supply, but numerous implications arise as improvements in affordability are negligible or questionable.

Keywords:

• Housing affordability
• land use regulation
• counterfactual distribution
• quantile difference-in-difference
• changes-in-changes

JEL Codes:

• D04
• R21
• R31
• R58

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 After treatment period occurs in October 2013 in most cases. However, for New Lynn Area Units occurs in November 2013; for Albany Area Units occurs in May 2014; and for Otahuhu Area Units occurs in June 2014. We adjust the indicator accordingly.

2 Legacy districts corresponding to those that amalgamated in 2010 to form the Auckland Council.

Additional information

Notes on contributors

Marcelo Ortiz-Villavicencio

Marcelo Ortiz-Villavicencio is a doctoral student at Emory University. His research interests focus on econometrics, causal inference and machine learning.

Gonzalo E. Sánchez

Gonzalo E. Sánchez is an Associate Professor at Escuela Superior Politécnica del Litoral. His research focuses on the impact evaluation of public policies using econometric methods.

Mario A. Fernández

Mario A. Fernández is Principal Economist at DairyNZ and Fellow Researcher at Universidad Espiritu Santo. The research for this paper was carried out during his tenure at the Research Unit of the Auckland Council, New Zealand.