Spatial Mismatch and Housing Affordability of Key Workers: Evidence from Auckland

Abstract

In New Zealand, the shortage of affordable housing in its urban centers is forcing essential public service workers (also known as key workers) to move further out of the city to access cheaper housing. This increases workplace commuting costs and poses sustainability concerns for the local economy. In this study, we developed a spatial mismatch index to quantify the negative externalities in terms of the additional commuting involved due to the job–housing locational mismatch. Our analysis empirically examined how the housing affordability crisis distorts the residential choice of key workers in Auckland. The results indicated that a 1% increase in a housing unaffordability measure for key workers results in an extra 3-km commuting distance, equivalent to a $124 million deadweight loss annually. Theoretically, this study represents the first attempt to theorize the concept of spatial mismatch hypothesis in relation to occupational groups against the backdrop of deteriorating housing affordability in New Zealand, and it expands the scope of the spatial mismatch hypothesis by taking into account worker occupation. Besides, we highlighted that key workers suffer the most severe suboptimal residential locational choices compared with other occupational groups. The findings also imply that policymakers seeking to mitigate the problem by addressing housing affordability issues through developing affordable housing should take into account transportation infrastructure and site selection.