New Zealand has adopted a radical rezoning plan to cut house prices ? could it work in Australia?

New Zealand's cities could be reshaped for decades to come, forcing the long-entrenched dream of the quarter-acre block to the margins, after the government joined forces with the opposition to pass sweeping legislation in favour of housing densification.

In a rare display of cross-party collaboration, Labour and National passed the Resource Management (Enabling Housing Supply and Other Matters) bill - a policy that aims to counter urban sprawl and boost supply by up to 105,000 new homes in the next eight years by forcing councils to loosen restrictions on building in urban areas.

The country has been in the midst of a housing crisis for more than a decade, driven by multiple factors including restrictive planning law, a lack of housing supply, an unchecked property investor market, and a widening gulf between income and housing costs.

Its large cities of Wellington and Auckland have some of the least affordable property markets in the world; home ownership rates in New Zealand have been falling since the early 1990s across all age brackets, but the drop is especially pronounced for people in their 20s and 30s.

Last year, the United Nations' special rapporteur on the right to adequate housing, Leilani Farha, visited New Zealand and called the housing situation "a human rights crisis" and "a dark shadow that hangs over the country".

The OECD has ranked New Zealand top for unaffordable housing for its poorest families.

Planning law has long been criticised for being restrictive, unwieldy and slow. It is blamed in part for slowing down housing development, entrenching single-house dwellings, and creating urban sprawl, which has implications for transport, infrastructure and climate change.

Building a standard single-story house in New Zealand comes with a lot of paperwork, but trying to build a multi-storey or multi-dwelling development could tie someone up in regulatory battles for months or years, at great expense.

If an area is zoned as a single-family area, the standard residence is a single house with a garden. Anyone wanting to build multiple dwellings, or anything other than a standard house, requires consent from the local council. Councils can reject the application for a whole number of reasons, including, for example, an unhappy neighbour about to lose some sunlight.

The law will scrap some of those restrictions, forcing councils to allow up to three three-storey houses on most sites in the country's major cities, without requiring consent. Building approvals will still be required.

There will be exemptions in areas where densification is inappropriate, such as where there is a high risk of natural hazards, or a site has heritage value.

The bill is paired with an acceleration of the government's national policy statement on urban development, which aims to further reduce constraints on urban planning and development. That will come into effect to August 2023, instead of August 2024.

Probably not.

Modelling by Price Waterhouse Cooper predicted the new rules could result in about 48,200 to 105,500 new homes being built in the next five to eight years across New Zealand's major cities.

The national median price hit an eye-watering high in November - up by 23.8% to $925,000, compared with $747,000 in November last year. The analysis suggests that an increase in supply from this policy could slow down the runaway prices but not cause them to drop. However, if the policy was not in place, the prices would continue to balloon.

Australia is facing its own housing affordability crisis, driven in part by record-low interest rates and an increase in household savings. Just 30% of the poorest 25-34 year-olds now own their homes, a 10% decrease since 1981. Grattan Institute program director Brendan Coates said restrictive zoning played a significant role in house prices in Sydney and Melbourne.

Research published by the Reserve Bank of Australia in 2018 found restrictive zoning contributed about 40% to the price of houses in the two major cities, and was even higher in wealthy councils including Willoughby, the Northern Beaches and Melbourne's inner east.

"The new legislation attacks one of the key impediments to greater density - the structure of government - which led to too few homes being built," Coates said.

It depends.

Coates said a similar approach to New Zealand could "help solve" Australia's housing affordability crisis while boosting lagging productivity growth. "Decisions about development approvals largely sit with local councils," he said. "People who would like to live there can't vote, and their interests are left unrepresented.

"Unsurprisingly, fewer homes are built than what's needed."

But research by urban planners Mark Limb and Cameron Murray published this year found repeated zoning changes designed to encourage urban infill didn't lead to cheaper housing. Instead, while the zoned capacity for housing at the locations doubled, the vast majority weren't developed within five years, suggesting it was the market price, not planning regulations, that determined if and where development occurred.

"I don't think it's going to do anything in New Zealand," Murray said. "People will certainly build apartments where they couldn't before but they're not going to flood the market and crash prices.

"This argument has been around since the 1960s - we've blamed overregulation but if it was true rezoning would reduce house prices, property developers lobbying for it are the worst lobbyists ever or they're lying."

Murray said the solution in Australia was to provide free government housing to people unable to enter the market. "Rezoning isn't going to massively reduce prices just as they said in Australia's housing supply inquiry," he said. "It's become a religion, it's a neat silver bullet."