Bad zoning discourages infrastructure and drives up land prices

Dr Eric Crampton, Summarised by The Centrist

According to Dr Eric Crampton, when zoning makes it too hard to build in places where people want to live, land prices will be out of whack. And inflated infrastructure costs make everything harder still.

The problem? The lengthy approval processes bring delays and project rescoping. All of it causes costs to blow out.

The consequence? Places with high infrastructure costs cannot afford to have tramways, light rail lines and subways that could make sense if construction costs were not astronomical.

When infrastructure is impossibly expensive to deliver, city councils set zoning and consenting restrictions to try to stop cities from growing in places where there may be a need for infrastructure.

The result is a sharp appreciation in the value of land zoned for urban use because zoned land is very scarce relative to demand. There is plenty of room for cities to grow up and out. But cities try to avoid it.

So, the price of land under existing houses, townhouses, and apartments goes up instead, along with rents.

Read more over at NZ Initiative

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