A matching simulation to assess additional housing capacity in Auckland

Abstract

ABSTRACT The current policy focus to improve housing affordability in New Zealand is reflected in the National Policy Statement on Urban Development Capacity (NPSUDC), which prescribes that local governments must ensure there is sufficient housing capacity to meet demand. Though some households may benefit because of better purchase conditions, additional capacity may not have a significant impact on improving affordability. In this paper, I explore how additional housing capacity is matched with demand by setting up a housing allocation model to simulate competition between potential buyers as they bid for any additional unit. I found that rate of take-up differs across scenarios, and households that manage to buy a house have median incomes that are more than double than the median household income in Auckland. Hence, overall affordability does not improve for medium or low-income households. The model and results provide insights about the outcomes of the NPSUDC and support the development of other housing programs.