Between 1996 and 2016 Auckland’s population increased by 499,000, or by slightly more than the increase in the rest of New Zealand. Yet only half the number of building permits were issued in Auckland as in the rest of the country. To understand this difference, this paper uses regional data to investigate how population growth affects residential construction. It estimates that if Auckland had built houses at the same rate as the rest of the country (adjusted for population growth) it would have needed to have built an additional 40 – 55,000 dwellings during the period – and needed nearly 9000 more construction sector workers. The shortfall was modest until 2005, but sharply accelerated due to the cessation of apartment building in central Auckland. The results show the large increase in the average size of dwellings was not a major factor in Auckland’s shortfall relative to the rest of the country as new dwellings were smaller in Auckland than elsewhere.

This paper aims to understand how population growth has affected building activity in New Zealand regions during the last twenty years. Using panel data regression techniques, we estimate that 0.25 – 0.30 additional houses are built for every additional person in a region. The additional 0.25 – 0.30 building permits per person equate to about 40 m2 of new construction, with a value of just over $60,000 in 2016 terms. This construction is in addition to the ‘background’ construction that occurs to replace old houses, which amounts to 2.5 – 3.0 dwellings per 1,000 people per year, or approximately 11,000 – 13,000 dwellings per year. The estimates suggest Auckland’s construction shortfall between 1996 and 2016 was between 40,000 and 55,000 dwellings, or approximately 10 percent of Auckland’s housing stock. The estimates of the shortfall are fairly robust to changes in the specification of the models; moreover, they all suggest that the shortfall was modest until the end of 2005, after which it increased rapidly.