Urban planning is bad for the poor

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Here's the Deputy Prime Minister of New Zealand:

"Poor regulation of housing has the largest proportionate effect on the lowest quartile of housing costs and rents. So when we're having the debate about whether there is sufficient land available, we have to recognise that the people who lose the most from getting that decision wrong – and who stand the most to gain from fixing those decisions – are those on the lowest incomes."

Housing costs are becoming a larger proportion of incomes – and that matters the most at the bottom end of incomes among people who have few choices. The new supply of lower-priced, affordable housing has dried up. There are parts of Auckland where no new houses are entering the market priced at the affordable end of the market. It is not surprising to see prices and rents rising disproportionately at the bottom end given this lack of supply."

Bear in mind here that Auckland is one of the ten most unaffordable housing markets in the world. What the DPM is saying is that planning has lost its way. Once we had urban planning in order to try and include the externalities to development but now:

"For those among you who are economists, I would go so far as to say that while the justification for planning is to deal with externalities, what has actually happened is that planning in New Zealand has become the externality.

It has become a welfare-reducing activity.

And as with other externalities, such as pollution, the Government has a role to intervene, working with councils to manage the externality."

I suspect this might be right.

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