Drivers of Urban Development in New Zealand

Jul 30, 2020

New research by Stuart Donovan, Arthur Grimes and David Maré uses census data to reveal the drivers that influence urban development in New Zealand. The modelling looks at data from 132 NZ 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, NZ firms are attracted to locate in our larger cities,” said Arthur Grimes, Senior Fellow at Motu Economic and Public Policy Research and one of the authors of the paper.

“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,” said Arthur Grimes. 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.”


The Motu Working Paper, “Modelling Urban Development in New Zealand” [link] by Stuart Donovan, Arthur Grimes and David Maré is funded by the National Science Challenge “Building better homes, towns and cities” and is available on the Motu website.