Zoning Reform Works (Even For Small & Mid Sized Cities): The Lower Hutt Evidence

Rents declined 21% (relatively) and 3x more permits: How zoning changes made a mid-sized city the Wellington region's housing leader

A new study in the Journal of Housing Economics, "Going it alone: The impact of upzoning on housing construction in Lower Hutt" by Matthew Maltman and Ryan Greenaway-McGrevy, shows that Lower Hutt, New Zealand's aggressive upzoning reforms tripled housing construction and cut rents by 21%, providing crucial evidence for housing reformers worldwide.

The big picture: Between 2016 and 2023, Lower Hutt (population 114,000) implemented an ambitious sequence of zoning changes that allowed medium and high-density housing on 80% of residential land.

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Data and Insights

• Housing permits increased by 3x compared to similar cities

• Generated ~3,000 additional housing units over 6 years (61.8% of total permits)

• Reduced rents by 21% below what they would have been otherwise

• Increased region-wide housing construction by 10-18%

• Nearly quintupled housing starts within a few years

• Went from 13% to 36% of Wellington region's new housing permits

The reforms were distinctive because:

• They were widespread, affecting ~80% of residential land

• The city acted independently, not forced by higher government

• They relaxed both density and building size restrictions

• Earlier reforms in other cities often only changed density rules

The sequence of reforms

1. Plan Change 39 (2016):

• Reduced parking requirements from two spaces to one

• Notified October 2016, operational March 2018

2. Plan Change 43 (2017):

• Created new medium-density and mixed-use zones

• Allowed 3-4 story buildings

• Removed minimum lot sizes

• Enabled medium-density housing on large lots citywide

• Notified November 2017, fully operational February 2021

3. Parking Reform (2020):

• First city to completely remove minimum parking requirements

• Implemented September 2020

4. Plan Change 56 (2022-23):

• Enabled high-density (up to 22m) and medium-density housing

• Covered approximately 80% of residential land

• Notified August 2022, operational September 2023

The impact breakdown

Housing Types:

• Largest increase in townhouses/rowhouses (8x higher than baseline)

• Significant growth in apartment construction

• A modest increase in detached houses

Regional Effects:

• No statistical evidence of displacement to other areas

• Even conservative estimates show a 9.5-12.6% region-wide increase

• Maintained higher construction rates during the 2023 recession

The research methodology

• Synthetic control methods compared to similar cities

• Multiple robustness checks

• Analysis of individual building permits

• Rental price data through 2023

Key findings

1. Strong statistical evidence reforms caused construction increase

2. Effects persisted through the economic downturn

3. There is no evidence of simply shifting construction from nearby cities

4. Meaningful reductions in rental costs

5. Population density increased while housing costs decreased

Demographic changes

• The city's population grew 0.6% between 2020-2022

• Housing reforms absorbed the existing population rather than driving migration

• The adult-to-dwelling ratio decreased after decades of increases

The bottom line

Lower Hutt demonstrates that ambitious zoning reform can substantially increase housing supply and improve affordability, even when implemented by a single municipality.

Go deeper:

• The study adds to evidence from Auckland, Zurich, and São Paulo showing widespread zoning changes can effectively address housing shortages

• This contrasts with more limited reforms in Minneapolis and other cities that haven't shown the same level of impact

• Provides a model for other cities considering zoning reform

What to watch: Whether other Wellington region municipalities will see similar results from their recently implemented reforms in 2023-24.

Technical note: Research relied on building consent data from 1990-2023, with 90-96% of consents resulting in completed dwellings.

[Editor's note: Throughout this article, when the authors refer to "reduced rents by around 21% relatively," using a specific type of statistical comparison. The researchers created a "synthetic control" - essentially a model of what would have happened in Lower Hutt without the zoning reforms, based on data from similar cities.

By 2023, actual rents in Lower Hutt had an index value of 1.47, while the synthetic control predicted rents would have reached 1.79 without reforms. This means that while rents still increased in Lower Hutt, they were about 21% lower than what the statistical model suggests they would have been without the zoning changes. We use "relatively" to emphasize this is a comparison to a predicted alternative scenario, not an absolute reduction in rents.]

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