Drivers of urban development in New Zealand

The cost of building new housing rises as population increases in a city. Photo: Chris Gray on Unsplash.

New research by Stuart Donovan, Dr Arthur Grimes, and Dr David Maré uses census data to reveal the drivers that influence urban development in New Zealand. The modelling looks at data from 132 New Zealand towns and cities over a 37-year period. It highlights the relationship between local amenities that benefit firms and/or benefit residents, availability of wages and jobs, and the cost and supply of housing.

“Consistent with what we find in many countries around the world, New Zealand firms are attracted to locate in our larger cities,” says Arthur, a Senior Fellow at Motu Economic and Public Policy Research and a Building Better Thriving Regions Principal Investigator.

“In contrast, it seems that residents are attracted to smaller places: as cities grow, factors such as increased congestion make the larger cities less appealing to residents.”

Towns and cities evolve in response to their attractiveness both to residents and to firms. Local efforts to improve amenities that benefit firms and/or residents will result in an influx of population.

“But the cost of building new housing rises as population increases. The best value locations tend to be built on first,” says Arthur. In addition, the supply of new housing lags behind influxes of population to our cities. “That can mean housing costs rise sharply when more people want to move to a particular location.”

“Through the process of this modelling, it has become clear that measures to improve the attractiveness of a town or city need to go hand-in-hand with measures to enable the building of new houses for the people who wish to move there.”

Arthur was recently interviewed on RNZ Nine to Noon Show about the research:

Read the report by the Motu/BBHTC Thriving Regions research team:

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