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

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 given-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.