Auckland needs to increase its city limits by 22% if it is to meet its potential as a global city, new research from New Zealand Institute of Economic Research suggests.
A discussion paper commissioned by the Treasury, Ministry of Transport and Reserve Bank says Auckland is enjoying rapid population growth and rising incomes, but cannot reap the benefits because of its restrictive geography.
Auckland's twin harbours, Manukau and the Waitemata, made the city very narrow relative to most cities including its Australian peers, and meant demand for land close to the city was more intense.
''We think population growth is a really good thing for New Zealand,'' author Kirdan Lees said, but the flip side was housing pressures.
His report, ''Big city life _ Challenges and trade-offs for Auckland city'', suggests these pressures could be alleviated by a trifecta of increased land supply, better transport and improved housing productivity.
Lees said policy makers had generally identified the right levers, but public debate was ''underdone'' on the link between improving transport infrastructure and reducing the cost of housing.
The report noted Auckland's population was set to rise to two million people by 2031, pushing up the cost of well-located housing.
Average household incomes were also expect to rise to $119,000, lifting people's ability to afford to commute.
Each kilometre away from the city centre increased the cost of commuting by $738 a year.
But when transport infrastructure improved, commuting times dropped, the supply of well-located land increased and the price of land fell.
Families would either stay in the city and pay cheaper rents, or move to the suburbs and build bigger houses.
If by 2031 the city's Metropolitan Urban Limit (MUL) was increased by 22%, the NZIER estimated that households would be $860 a year better off, an improvement in welfare of 0.7%.
Lifting housing productivity by 15% would bring the largest gains, making families 1.4% better off.
A 2% decrease in transport costs, financed by a 1% income tax on Auckland families, would improve their welfare by 0.8%.
Property industry players had not read the report yesterday but said it sounded practical.
Auckland Chamber of Commerce chief executive Michael Barnett said it would give people a view of what Auckland would be like if they resisted the idea of a higher density city.
''If Aucklanders don't want to go up, they're going to have to go up a little and out a little.''
Property Council chief executive Connal Townsend said the Auckland Council continued to state it wanted to keep up to 70% of development within city limits, but politically it seemed inevitable that the boundaries would have to be extended.
His members supported the Auckland Council's broad bias towards high density but looking at the unitary plan now, that was going to be difficult to achieve.
''The target which I think everyone agrees is that over a 30 year period, you need something like 280,000 houses in greater Auckland ... Our rough calculations are that of the 280,000, they're probably short now by about 130,000.
''If we can't go up or or if we can't redevelop within the existing footprint of the city, actually to get the housing built, we have to go out.''