Zoning rules push up prices

Zoning restrictions are driving up house prices by as much as 73%, according to new research by the Reserve Bank. Its report The Effect of Zoning on Housing Prices says that although zoning regulations provide benefits, they also restrict housing supply and hence raise prices.

Zoning restrictions added $489,000 to the price of a detached house in Sydney in 2016, which is effectively 73% above the marginal cost of supply, according to the report. The number is $324,000 in Melbourne, $159,000 in Brisbane and $206,000 in Perth.

Apartments also feel the zoning effect. In Sydney it’s equivalent to an extra $399,000 on top of the marginal cost while in Melbourne it is $120,000 and in Brisbane it is $110,000.

The authors of the Reserve Bank note, though, that these figures are not the amounts by which housing prices would fall in the absence of zoning.

Denita Wawn, chief executive of Master Builders Australia, says its research has shown that reforms to these “restrictive and inefficient” zoning laws could improve supply by more than 20,000 new dwellings over the next five years.

Master Builders Australia has called on governments at all levels to reform their planning and zoning

regulations to improve housing and land affordability and reverse the trend of deteriorating home ownership rates in Australia.