Estimating the effect of immigration on rental costs in New Zealand

Immigration into New Zealand has recently been at an all-time high, while relative to incomes the country’s housing market is one of the least affordable in the OECD. Using public release census data from 1991 to 2018, we estimate immigration’s impact on rental costs at Area Unit level relative to domestic population growth or migration. We instrument for immigration using previous settlement. In our most credible specification, a percentage point increase in immigrant share raised local rents by a modest 0.91 percent relative to domestic population increase. Results persist using the broader Ward level, clustering standard errors, using sparse controls or spatial lags, but not when dropping the 2018 census. We find the effect is significant for Wellington but not for other major centres, nor for low-income or -education receiving areas. Effects are strongest for immigrants originating in Europe or Asia, and those having lived in New Zealand ten or more years.