Tuesday, March 14, 2017

Not Another Downtown Sports Stadium? How Many White Elephants do we Need?  

More Monumentalism
I’ve said it before but it looks like it needs saying again: Auckland does not need a new downtown stadium. (Actually,the  last time I said it I was talking about convention centres.  But the principles, and the downsides, are much the same).
Somewhat surprisingly, then, new Auckland Mayor Phil Goff, who is clearly concerned about the risk to the city's fiscal position in the face of a ballooning transport and infrastructure spend, has revived the idea of a waterfront stadium.  This by one of the steadier, more rational, and experienced members of the last Labour Government: what was he thinking? 

Through Council Controlled Organisation, Regional Facilities Auckland (RFA), Mr Goff has commissioned a pre-feasibility study from Price Waterhouse Coopers of a stadium with capacity for 25,000 to 50,000 people. The consultants will consider potential CBD sites, the benefits (and presumably costs) to the city, demand, development of a stadium precinct, building and running costs, and planning issues.
The answer in four
I’m not sure much work is required to demonstrate:
(1) Stadiums do not pay their way and, it might be added, the economic impact studies that suggest that they justify the subsidies dished out to get them up and keep them running are usually spurious;

(2)  Through expensive stadiums ratepayers end up subsidising professional sports teams;

(3) Where downtown and waterside locations are growing new stadiums are an uneconomic use of valuable land;

(4) Auckland’s waterfront does not need a big area to be sterilised and effectively privatised – or confined to the use of the few people who can afford the eye-watering cost of tickets to get in.
In short, a quick review of the existing evidence would save ratepayers' money even on a pre-feasibility report.

How to pay?
The evidence suggests that we can't.

The 2016 RFA annual report does not separate out the performance of individual facilities (indoor and outdoor sports stadiums, Auckland Museum, Zoo, and Art Gallery). But we can guess that excess capacity (or limited demand) in the outdoor stadiums contributed to the relatively poor aggregate figures: total income (before revaluations) of $131.5m included a capital subsidy of close to $26m and an operating subsidy of almost $31m from the Council, and just $44m in revenue across all facilities. 

In fact, total entrance and admission fees amounted to under $11m, with venue hire just over $13m, this based on land, buildings and plant (excluding art works) assets of around $800m.
Given this record, it’s hard to see a new $1bn sports and concert facility making any financial headway, especially when all the evidence suggests stable if not declining attendance. A few hallmark events and concerts aren't going to boost revenue ahead of what is being dragged in at the three other signifcant stadiums in the city. 
It’s also hard to see sponsorships making any dent in the public funding that would be needed for a new stadium. Sponsorships of all RFA venues apparently generated under $620,000 in 2016.

And, despite any enthusiasm they might show for the project, Auckland’s major sports franchises, the Rugby Super 18 Blues and the NRL Warriors, are in no position to provide financial support.  The experience in the US, the apex of professional sports, is quite compelling; the major leagues free ride on local government funded stadiums. 
Little surprise, then, that the New Zealand Government is not interested in contributing to the guesstimated $1bn price tag.

So what are the benefits???
We do not need reports telling us about wonderful spin off effects, or me-too claims about how a global city needs a landmark stadium, or to have appointed advisors spraying ratepayers’ money about building monuments to civic stupidity when we can’t even begin to get a return on our existing facilities investments.

The bulk of research in the United States finds the economic contribution from major sports leagues or the construction of stadiums for them (or of convention centres) is negligible if not negative. This is  despite the benefits touted by the beneficiaries: the sports codes, the development sector, the city boosters and, dare I say it, the consultants (see, for example,  Sanders H, 2002, “Convention Myths and Realities: a Critical Review of Convention Center Feasibility Studies”, Economic Development Quarterly).

Transforming downtown?
The urban transformation effects are more often than not illusory.  Even if there were to be benefits from developing major civic projects in rundown precincts they would be irrelevant in central Auckland, with the CBD already straining under the weight of tourism, mushrooming apartment building, office development, and the construction of another mayoral monument, the Central Rail Link. 
It is a mistake to think that there will be benefits from opening waterfront spaces up to the public by building what is effectively a large enclosure that is empty most of the time. Instead, we will end up with a temple to elitism, excluding the general public, and surrounded by draughty voids where there might otherwise be more street activity, more people, and more income earning opportunities.

(And quite apart from any operating disadvantages, the rectangular stadium structure favoured by Mr Goff will exacerbate the creation of dead spaces around it).

Seeking a better city? Do better with what we’ve got
Certainly, there is a need to rationalise our existing stadiums, to focus on getting costs down and revenue up. RFA has been looking at the options for some time now.

The ideal strategy at this time in the city's development might be to rationalise existing investment, intensify returns from sunk capital, and realise any land value uplift that might come, for example, from shrinking Eden Park, consolidating and diversifying other facilities, creating local specialisations, and maintaining a presence close to the wider communities of Auckland.   

Throwing a downtown stadium into the mix is simply going to hinder progress.
Why the distraction?
It’s not just the capital outlay that would contribute to the City’s indebtedness and put more pressure on the city’s credit rating. Long-term operating, maintenance and depreciation costs will be substantial.  The risks this raises are enough to say don't even think about going there.

There are also the foregone opportunities, both for more intensive and continuous use of downtown land, and for investment in physical or social infrastructure that might contribute  more meaningfully to community wellbeing. 

If we are going to throw money at things that make a difference, let's start by cleaning up the city’s sewage overflows, sorting out stormwater network problems, or by lifting our commitment to resolving ever-increasing transport and housing issues.

Tuesday, March 7, 2017

Breaking Through and Moving on: Beginnings of a New Plan for Auckland

The Break Through
After years of pushing the compact city fallacy and ignoring the obvious approach to solving Auckland’s particular growth problems, the city and its planners have at last begun to water down their dearly held but doomed compact city plan.  The New Zealand Herald revealed that today “the council's planning committee will consider a report to allow for 120,000 new homes at six main locations in the north, north-west and south of the city.” A range of smaller rural settlements has also been identified for further development, spread over 130km from north to south. 

While only 30% of the assumed requirement for 400,000 dwellings is targeted for the “mini-cities”, the appetite for new greenfield, peri-urban settlement won’t stop there.  After all, there is only so much that can be crammed into the current urban area, especially in central Auckland. without destroying its appeal.  Apartments in the suburbs, the latest battlefield for entrenched urban planning, is least popular of all options.

We’re not there yet, but momentum is gathering for moving Auckland into a sustainable future. 

Breaking with the past makes sense
The ground has been giving for a while now.  The conceit of planning by projection is clear as migration figures deviate wildly from the analysts’ assumptions.  The estimates of housing supply underlying the Unitary Plan are demonstrably spurious.  The impacts of intensification on air and water quality and nature in the city are now coming to be realised.  And the impact on council finances as it aims to retrofit under-capacity infrastructure and pours money into transit threaten the City’s credit rating and the pockets of its citizens.

The advantages
I have been documenting the short comings of a compact city plan somewhat tediously since my report on the proposal to the Auckland Regional Council in 1999.  So, to change my tack, here are some advantages of the new direction towards satellite cities and settlements.  It provides:
·       The opportunity to develop attractive, affordable 21st century settlements, with emphasis on diversity, mobility, mixed activity, and balance – all so much easier to achieve in green fields compared with retrofitting existing services, congesting the suburbs, and squeezing housing into compromised brownfield or mixed use sites;

·        Better access to nature, greenspace, clean air, cycleways and trails, and recreational amenities;

·        Consequently, better health – an antidote for the urban epidemic of obesity;

·        Greater opportunities for self-reliance (detached, terrace, and duplex houses provide safe play space for toddlers and food growing opportunities) and more time to enjoy it;

·        Pressure off traffic congestion in the urban area;

·        Protection and restoration of community life –an alternative to the transience and anomie of apartment living;

·        A chance to focus on quality development in existing suburbs and on sustaining what makes Auckland an attractive place to live in and visit; quiet streets, healthy treescapes, generous parks and play spaces, bungalows and gardens, ease of movement, local shops and services, and a sense of place.

·        Urban form better suited to limiting the impact of extremeevents (mainly associated with climate change, but there is an increase in fretting over Auckland’s volcanic field), reducing over-concentration of resources, people and infrastructure, and an improved capacity to recover from disasters with dispersed development.

The provisos
Will all these good things come to pass?  Here are four provisos we need to consider as we allow our “pearls on a string” to expand:
(1)  Ensure that the mini cities have adequate commercial and employment land and in doing so avoid applying 20th century views of what should be where on that land, and how densely it should be occupied.  Just set some standards to manage conflicting uses, protect the environment, mandate minimum levels of amenity, and let the investment happen;

(2)  Ensure that mini-cities are well-connected, to each other, to the main urban area, and to key economic nodes (including port and airport).  Corridors need to be generous to allow for diverse traffic, transport modes, and growth;

(3)  Planners need to back off saying what should happen where and when, and instead say what is required before development can proceed.  This will allow demand to influence the timing of investment.  It will lower the speculative gains and land banking that coercive planning and orchestrating development sequences foster. 

(4)  Treat these as greenfield opportunities in the widest sense: encourage innovation in design, infrastructure, and investment to achieve more cost effective delivery, allow for new funding instruments, and reduce demands on public finances.

So what can the Council offer?
Many years of resistance to peri-urban growth suggest that planners are not necessarily the people to determine when this the proposed development might take place, or even to design it.  Instead, the Council needs the skills to negotiate delivery packages with investors and developers, and to provide oversight, and authority. 

And Wither Auckland Council?
Finally, while I find this development a justification for the many critical pieces I have written about Auckland’s planning in the past, I will indulge in one more observation.  Marry the mini-cities approach with the push for Urban DevelopmentAuthorities and we can begin to peel back the institutional onion that is Auckland Council.

So here’s a thought.  The mini-cities could be subject to development under an Urban Development Authority.  This should involve some community representation.  And when the development task is over, perhaps they could assume the managerial and regulatory role of a local authority.  

Sure, I was wrong when I gave the new, consolidated (or overweight) Auckland City just five years.  It’s still with us.  But maybe it’s time we acknowledged the short-comings and costs of a super city.  And if the region’s future does lie in Council Controlled Organisations and special purpose authorities to fulfil its functions, perhaps it’s time to at least shrink it down to fulfil basic funding, purchasing, high order spatial planning, and regulatory functions.

Sunday, July 31, 2016

Back to Basics: Planning, Housing Markets, and the Cost of Ignoring Economics

Acknowledging the impact of planning on housing

At last, economists, commentators and the media in New Zealand are recognising what has been evident in many countries since late in the 20th century; that plans to contain city growth in urban boundaries betray the hopes of large and growing numbers of urban dwellers and job seekers.
In Auckland, an independent panel has modified the proposed Unitary Plan to allow more dwellings.  But it is too little, too late; so Auckland remains consigned to increasing social division fashioned around a new poverty, a poverty rooted in the failure of the housing market.

This post doesn’t deal with numbers, or with evidence of why the Auckland Unitary Plan remains a pig’s ear.  Plenty of others have picked up on that.  Instead, it aims to set out the basics of housing supply – the complexity of the market itself and the economic principles that regulators need to understand if the ground lost is going to be recovered.

The Conclusion
This is quite a longish post that concentrates on the basics of housing markets and economics.  If you don’t want to read it all, here is my conclusion.

There are no options if we want to make housing affordable again.  Without adequate supply, initiatives to dampen demand will be futile at best, destructive at worst.
Arbitrary restrictions on urban land development that cannot be justified on environmental or infrastructure grounds must be removed from the city’s plan.  Attempting to force people into small, high density dwellings by rationing land for inside or outside the metropolitan boundary penalises all new housing and large sections of the community.
Prescribing when, where, and how much  greenfield development can take place means that the price of brownfield land, infill, and remaining unbuilt lots within the urban boundary is inevitably pushed up to the point that virtually any dwellings in any location – whether apartments, terrace houses, or detached homes on tiny sites – will be unaffordable (and unfundable) for a very large share of the community.  Trying to make high density housing affordable will require small dwellings, cheaply fitted out, built to minimum specifications, little suited to most market segments.  They will be unattractive to developers and to the banks, and, if they can be delivered, are  likely to concentrate rather than alleviate the health and welfare consequences of inadequate housing. 
This is basic economics: generation rent, the millennials, the homeless, and families across the board will benefit only if land speculation is taken out of the housing equation by removing arbitrary restrictions on where, when, and how much urban development can occur in and around Auckland.

If you struggle with this conclusion perhaps you could read on.

What Happens When You Limit Land for Housing?
It’s simple, really: if supply is artificially restricted in a market with growing demand, that market will be distorted.  As a result, monetary and non-monetary costs will be higher than they need to be. 
If the market is at all complex, regulations aimed at managing demand to offset a supply failure (like investment or lending thresholds for house mortgages) will lead to further distortion. Distortion will show up in unexpected and inequitable outcomes, advantaging some groups and disadvantaging others.

A complex market
In a growing city the market for housing is continuously changing, which makes it difficult to predict.  It’s also complex, which makes it difficult to regulate. 

Complexity comes from the many ways housing demand is divided up; for example:

·  Across suburbs and sectors (e.g., inner, outer, north, south, east, and west);

·  According to where individuals or households stand on the housing “ladder”, which in simple terms distinguishes among people seeking a first home, households after a subsequent family home (or homes), empty nesters aiming to downsize, and those wanting a retirement home;

·  By demography which, while associated with progress on the housing ladder, will further influence the dwellings people need according to household size and type (non-family household, solo occupant, couple without children, couple with children, solo parent with children, extended family, and so forth);

·  By different lifestyle preferences among, for example: large and small dwellings, modest and indulgent scale or design; different types of locality (in or near the city centre, coastal, suburban, urban village, rural township, countryside); and, increasingly, whether or not in a planned or managed community;

·  By ability to pay, through which a household might exercise its preferences.

Together these divisions can be used to describe many market segments, each with distinctive housing needs and expectations.  Consequently, a trade-off between medium/high density and lower density development is meaningless: a differentiated housing market needs both, and options within each.
When housing supply is suppressed by regulations that reduce the availability of land, the impact is spread unevenly over dwelling types and therefore impacts unevenly on demand segments.  This is most obvious in the way in which new entrants are excluded from home ownership, along with low income earners, single income households, and young families with a preference for space; in fact, young people generally.  Social divisions that were once defined predominantly by income and socio-economic status are now also marked by a generational divide.

Housing and employment
The adverse impacts of limiting the land available to meet housing demand – by location, type, and price – are compounded by the link between housing markets and the labour market. Like the housing market, the labour market is organised geographically.  People want employment close to where they live; and businesses want to invest close to where the sorts of workers they need are likely to reside.  

Ideally, the catchments for certain types of labour will overlap with the areas in which those people live. This makes jobs readily accessible to households.  Accessibility can be maintained as cities grow with the development of transport connections that let people move easily between residence and work.  This is straightforward when a city is small enough and the city centre and inner suburbs account for a large share of employment.  But as cities grow and employment becomes more specialised, the role of the central city changes, and jobs and houses become dispersed, increasing the time and resources committed to commuting. 
Restricting land for housing and employment increases the costs of investment in both.  It makes houses less affordable and business expansion costlier.  The increased commuting times, costs, and congestion penalise both residents and businesses.  By lowering discretionary spending, increasing staff turnover, and inflating wages, the effect is to reduce productivity and competitiveness.

Fiscal pressures also increase, through the need to fund more roads, transit, and associated facilities. 

The social costs
There are costly social consequences. The impacts of substandard housing and overcrowded living conditions are well known.  They include poor health, difficulties securing and holding down jobs, erratic school attendance, limited educational achievement, and diminished employment prospects. 
Even for those who are housed, the high costs can create financial stress, contributing to domestic violence, and welfare and charity dependence.  The absence of starter homes, high rental commitments, and excessive mortgage repayments act to delay family formation and child-bearing, reducing fertility.  Ultimately, high housing costs will also suppress any offsetting demographic or economic gains that might come from immigration by making a city unaffordable to new arrivals.  It may well fuel outward migration, particularly among those with the skills and motivation to improve their situation elsewhere, robbing a city of some of its most socially mobile citizens.

The consequences of declining ownership
That fact that lower affordability reduces the opportunity to own a house is now well documented.  A prolonged period of renting becomes the only viable option for many if not most new households.  

This brings its own problems, especially in New Zealand where the institutional arrangements that might bring stability to renting are absent.  Lack of secure tenure is reflected in negative measures of school attendance, job retention, income growth, and social networking.  In contrast, home ownership has been a traditional path for saving and building equity, with the benefits of home improvement and appreciation accruing to the owner-occupiers.  Ownership provides households the stability required to underpin educational and career progression, savings, health, and social stability.

The opportunities to profit
The upsides of a housing shortage are confined to particular groups.  Home owners with significant equity may purchase one or more investment properties for rental purposes, boosting their incomes while bidding upprices. This favours older groups at the end of their careers and heading towards retirement, further highlighting the contrast in fortunes between retiring baby-boomers and the millennial generation

Then there are the speculators.  They may be small investors on-selling their rental properties for the capital gain.  Or, they may simply be owner-occupants who buy and sell regularly, sometimes improving their houses, but always seeking to exploit rapid price escalation by on-selling.
Large scale institutional investors, development companies and investment trusts, may accumulate green or brownfield land for development, and simply hold it in undeveloped form to farm the long-term gains from appreciation, writing holding costs off against investments elsewhere.  This slows the market – with less properties on sale than might otherwise be the case – and entrenches the shortage, compounding the distortion initiated by planning restrictions. 

Fixing it
Increasing housing supply alone will not solve the problem once the distortions initiated by inappropriate plans have become embedded in the behaviour of market participants, as is the case in Auckland with 15 years of compact city plans.  While boosting the supply of land for development is an essential first step on the path to normalcy in the housing market, reform to taxation laws will also be necessarily to remove the market manipulation evident in land banking and speculative investment. Imposing a modest capital gains tax across the board is the most obvious such measure, which would bring New Zealand into line with the rest of the world.

On the land use front, there are no options if we really do want to make housing affordable again.  Any attempt to force people into small, high density dwellings by limiting how much land will be made available for new housing penalises all categories. By prescribing when and where greenfield development can take place, the price of brownfield land, infill, and remaining unbuilt lots within the urban boundary is pushed up to the point that any dwellings built on it – whether apartments, terrace houses, or detached homes on tiny sites – will be highly priced and remain unaffordable to a very large share of the community.  Making high density housing affordable means small dwellings, cheaply fitted out, and built to a minimum specification, little suited to most market segments and difficult to finance. 

This is basic economics: generation rent, the millennials, the homeless, and families across the board will benefit from access to housing in whatever form they might seek only if land speculation is taken out of the equation.  This means removing arbitrary restrictions on where, when, and how much urban development can occur.  Until then, the Auckland Plan, even in its revised form, will remain the major impediment to creating a livable city which works for the majority of its residents. 

Monday, July 25, 2016

Silk Purse Planning: Can Auckland’s Unitary Plan Be Remade?

The Next Step on the Auckland Planning Path
The Independent Hearings Panel has presented its recommendations for the Proposed Auckland Unitary Plan (PAUP) to Auckland Council.  We now await their public release and the response of the Council to the recommended changes.

The Panel faced a huge challenge[1] in trying to ground the PAUP.  An obvious problem it has had to deal with is the erroneous estimate of Auckland’s capacity to absorb around 70% of predicted growth within the proposed urban boundary, a fundamental starting point for the Plan.  

The question is, has the Panel managed to turn this sow’s ear into a silk purse?  And, if so, will the Council accept its recommendations?

Room to move?
One of the challenges the Panel faced was whether to focus simply on the rules, their application, and their effects; or to address the more fundamental issue of the appropriateness of the principles on which the Plan is based. From my reading of the Panel’s early communications, it could not avoid the latter.
Certainly, much of the debate about the Unitary Plan has focused on the key principles and objectives around city containment and intensification. Just like the Auckland Regional Growth Strategy (1999) from which it evolved via the Auckland Spatial Plan (2011), the PAUP is wedded to locating the majority of regional growth in the existing built-up area. 

Unlike the Regional Growth Strategy, though, the Unitary Plan had to make the near impossible leap from principle to practice.  That’s where the high rise vision fell to the ground. 
 In order to work, rule-based policies need predictability in the scale, nature, and timing of population and employment growth.  They assume conformity, compliance, and consistency of response by those they impact on.  And they assume that multiple decisions on business expansion and housing investment can be nudged to fit the web that a large number of complicated and often ambiguous rules seek to weave.  Good luck with all that.
However well the Panel has done its job, the implementation of the Plan's web of rules is bound to be source of frustration, costs, and conflict for some time to come.

Mission impossible?
The very idea of a single long term plan for a large (16,100sq km), largely rural (over 70% of the landmass) region containing a rapidly growing and diversifying urban mass is flawed. 

The challenge is compounded by the fact that it is unitary plan.  It tries to cover environmental, economic, cultural, and social policies in a single document intended to set the long term land use directions - or constraints – on Auckland’s development when we have little idea of what the future holds.  

This suggests that regardless of the quality of the Panel and its deliberations, the mission was impossible to start with.  A minimalist or at least more measured and flexible approach to Auckland’s future would have served the region better.

The real issues
Auckland faces two underlying problems that mean a comprehensive plan cannot deliver what its protagonists want by way of streamlining, clarity, and consistency of decision-making.   

First, Auckland comprises many diverse communities, each with its own needs, prospects, and possibilities.  Given an increasingly articulate, disparate, media savvy, and engaged population and galloping technical change, crafting a plan that will satisfy the many communities, cultures, and interests that comprise Auckland is well-nigh impossible. 
Becoming more authoritarian – more rule dependent – to deliver a vision based on containing the city will increase the challenge of implementing the plan, increase resistance, and lead to more unexpected outcomes.

Second, a single unitary council is simply wrong for Auckland.  Rather than streamlining processes it disempowers constituents. Promised efficiencies are not delivered.  Costs blow out.  Systems become more complicated.  Regular restructuring and internal reforms distract staff.  Various subordinate organisations – branches, divisions, council controlled organisations, even subcommittees -- take on a life of their own, pulling in different directions.  The weight of management increases, compromising the governance relationship with the board (or council), and the organisation loses its way. 

The elephant in the council chamber
Large-scale mergers don’t often work.  This one doesn’t look any different.   The Committee for Auckland in its push for a single city, the Royal Commission on Auckland Governance with its 800-page prescription, and the Minister for Local Government of the day with his can-do/will-do approach, all got it wrong. 

They apparently didn’t reflect on the recent history of the New Zealand corporate sector.  This would have shown them that as you push seemingly complementary organisations together with their different roles, markets, management practices, and cultures, they tend to become unwieldy, bureaucratic, slow moving, and ultimately unmanageable.  Our leading businesses in forestry, primary processing, food production, and development went on a merger spree in the 1970s, only to find themselves undone and asset stripped in the 1980s and 1990s. 
No matter how good a job the Independent Panel has done, a land use plan cannot remedy the flaws inherent in a large unitary council trying to be all things to all peoples.  

[1]           Bernard Hickey documents it:
"On Friday, Auckland's 'Eagle' landed in the offices of the Council and it's a moment that will prove pivotal in the future of both Auckland and the rest of the economy.  The Independent Hearings Panel on the Auckland Unitary Plan handed 1,000 of documents, plans and recommendations over to officials after five years of work, including 249 public meetings and 21,210 pieces of written feedback.
"There were 13,394 submissions from members of the public and all sorts of interested parties covering 1.494 million separate submission points over 249 days of hearings on 70 separate topics.  Submitters made 4,000 appearances and submitted over 10,000 pieces of evidence".

Thursday, May 19, 2016

Breaching the barricade: the beginning of the end for containing Auckland's growth

After 25 years of opposing indiscriminate urban containment – some of it through this blog, more through advising clients (including councils) and participating in Environment Court Hearings – it is pleasing to me to see the growing tide that looks like sweeping it away.  This is not a tide that will block higher density development where that offers benefits to the households and businesses that may occupy it. But it is a sea change in thinking that promises to restore a semblance of balance in planning and policy for Auckland City and its citizens.

And this should not just be about houses. It is about the people who occupy them and the communities they live in. 

Breaching the barricade
It’s clear that limiting land supply by means of the Metropolitan Urban Limit (MUL, and now the proposed Rural Urban Boundary) is at the heart of the Auckland housing crisis – too few homes, over-priced dwellings, and a growing economic and social divide defined by access to housing. 
The housing storm is not only causing social distress and undermining the liveability of Auckland; it is also influencing the Reserve Bank’s role in monetary policy and impinging on public discussion around migration and population policy.

After two decades of myopic urban policy, this travesty is finally gaining widespread recognition .  Today politicians are picking up on years of analysis by the Productivity Commission, among others in proposing doing away completely with the MUL. 

Failure to recognise the simple truth that we need to expand the city to accommodate an expanding population means that candidates who don’t change tack could find themselves foundering in the forthcoming council elections.

The bigger picture
This is not an Auckland-only debate.  All OECD nations are experiencing it one way or another; and even developing nations are confronted by western advisors seeking to transfer this particular practice to places where it is neither relevant nor appropriate. How urban policy has got into this mess is another issue for another time.
Within New Zealand, plans to compress urban settlement are not confined to Auckland.  Containment has long-been a preoccupation in Canterbury, driving thinking about the shape of Christchurch even though the city has little more than a quarter of the residents of Auckland.  The compact city policy was hung onto even after earthquakes destroyed swathes of the inner city and its eastern suburbs.  It also holds sway in Wellington where the physical geography and risk profile are hardly conducive to more intensification.

The risks
Now that the Auckland community, through its politicians, is contemplating changing course, let’s not make the mistake of assuming that this can be done simply by building more houses.  It’s actually about building communities, and repairing the damage done by years of denying the need for more land.  And it’s about doing so in a manner that is sympathetic to both the environment and the public pocket.
Launching lifeboats does not solve the problem: it simply changes the risks.  Take the creation of Special Housing Areas in Auckland.  First, there is the collateral damage to the Resource Management Act. Its credibility and currency are undermined when it has to be bypassed in this manner.  That has to be attended to.

Second, and more importantly, we are now faced with proliferating housing under pressure, much of it sprawling grey over the edge of currently built up areas, with little regard to the need for local employment, access to retailing, services, parks and walkways, and green space, or for strong arterial connections to other parts of the region.  We risk creating potentially new forms of deprivation in communities, lacking amenities, physical stranded, and socially isolated.

The haste with which the Council is rushing through Special Housing Area approvals risks a shortfall in the quality and capacity of infrastructure.  And the opportunities SHAs offer for developers to make rapid commercial headway also raises questions over the quality of urban design that will be achieved.
Some success stories?
That is not to deny examples of well-designed housing areas with some integration into the fabric of the city.  Hobsonville Point is the exemplar, but well-founded developments like this shouldn’t need to rely on special housing status and, ideally, should be readily achieved under existing legislation. 

Ironically, the success of such projects results from the damage already done because they can command high prices in a market starved for dwellings.

Unfortunately, this doesn’t make for affordability relative to even Auckland City's aspirational cost-to-annual income ratio of 5 (compared with the more conventional, and historical 1:3 ratio). 

For example, a three bedroom, one garage home  in the latest Hobsonville Point release would typically cost in excess of $800,000. Four bedroom homes with capacity for two cars are priced around $1m or more. The recently reported average salary in Auckland (of $74,000, which has been labelled unrealistically high, and no doubt sits well above the median income) suggests prices well over 10 times the average income for the majority of new homes in a high density suburb.
And even well-designed developments generate substantial traffic on an already overloaded regional network.  Hobsonville Point adds to congestion on the under-capacity north-western motorway. Additional swathes of housing on the Hibiscus Coast are overloading critical motorway intersections in the north, even as their commuters crawl past local land long-slated for employment uses that for some reason has yet to get off the drawing board.

Charting the way forward
The only way to get new Auckland houses priced anywhere near a price to income ratio of one:five is not to lift supply in an incremental fashion behind an arbitrary barricade (a sure recipe for sprawl), or in keeping with potentially spurious projections of dwellings, or even to toss out Special Housing Areas here and there.  It is to open up the supply of land across the region to the disciplines of the market, subject to some important qualifications.

Doing so should be innovative, comprehensive development shaped around the needs of households and communities, rather than by the predilections of a particular phalanx of planners and their political patrons,
At the very least, though, any new housing areas should at the outset include land for new business investment to absorb and take advantage of an expanding labour force without obliging commuters to sit for hours in cross-regional traffic.  This means enabling large, generously landscaped, high amenity, and readily accessed land for employment. 

New urban precincts also need adequate community resources by way of commercial and cultural centres, formal and informal parks, and the means to access them, on- and off-road.
Finally, it is important to find new ways to fund development, ways that recognise the long-term benefits to the community as a whole of investment in modern, efficient infrastructure.  It is pleasing to see the proposal by the Labour Party to move towards long-term funding via bonds which will spread both the costs and the benefits of sensible, comprehensive development.  

Avoiding the shoals
Breaking down the barricade does not mean that we should sail into uncharted waters.

Basic building codes and environmental standards will be required to ensure the integrity of development. 

It is important that areas of environmental sensitivity beyond the city are flagged.  Most of them are known – areas of native bush and regeneration, cultural and heritage land marks, areas of physical instability, wet lands, reclamations and low-lying coastal zones, flood-prone river valleys, and the like. Areas of elite, high producing soils that society particularly values may also be flagged for preservation.

But charting these shoals in the course of expansion is a preferable approach to development than a city anchored behind a barricade.

Friday, April 29, 2016

Changing the Game in Australia: Federal Government Looks at Local Infrastructure

Commonwealth Government looks local
A report in the Sydney Morning Herald this morning raises some interesting possibilities, with Malcolm Turnbull indicating that the Commonwealth government is ready to deal direct on projects for urban development.  If they are economically sound it will consider assisting with favourable funding over a time period in keeping with their effective life.

The grounds for following our neighbours
New Zealand should take a lead from this on several grounds. 

(1)   Grandiose plans and projects that bear little heed to need, geography, or, in particular, to basic economic principles (don't spend more than you are going to get back by way of benefits!) continue to be promoted in both Christchurch and Auckland.  The Auckland heavy rail project is so bad that it would be a joke if it was not such an economic misfit.  The notion of throwing ratepayers’ money at a stadium locking away much of the waterfront is just as  silly.

(2)   The infrastructure spending of councils seems geared towards preserving a dated conception of the city as mono-centric. Modern cities aren’t.  They may have interesting and fun CBDs, but the bulk of life takes place outside the central city.  The suburbs are no longer undifferentiated swathes of housing, but include their own distinctive and often large centres, entertainment and recreation precincts, restaurants, and medical centres and specialists. Cities of scale have much more employment outside the city centre than inside.  Economic projects are those that fit the needs and capacity of their various communities, not some me-too dream of CBD grandeur.

(3)   Short-term funding of infrastructure through development charges is a sure way to push up costs and does not reflect the useful life of urban infrastructure.  If public monies are going into it, then that should only be on the basis of demonstrable economic benefits, not wonky, unrealistic and consequently defunct business cases.

The productivity impact
The Grattan Institute report on which the Australian Prime Minister was drawing confirms that many local and state government infrastructure projects are hopelessly uneconomic. 

Uneconomic infrastructure is a sure way to undermine national and local productivity. 

And, despite the New South Wales government's determination, there is scant evidence that amalgamation will solve the problem.  Just look at Auckland's experience.   

Beyond ageing urban form
Turnbull’s response sees grandstanding infrastructure and civic obsession with spending to preserve the CBD and sustain ageing urban form regardless of the economic consequences as contributing to the failure to achieve more sustainable urban form and the affordable housing that would follow.  

He espouses the vision of the 30-minute city –

one in which, "no matter where you live, you can easily access the places you need to visit on a daily basis". Mr Turnbull believes such cities will allow people to live further from the centre, making housing more affordable.
The plan
To help bring that about, the Prime Minister talks about commonwealth partnerships with private interests and issuing long-term, low interest government-backed bonds to fund approved projects and perhaps some form of charge on businesses that benefit.  Approved projects will be those that can demonstrate their economic worth thereby contributing to faster economic growth and a lift in tax revenue.  

Changing the game
We may or may not agree with the mechanisms proposed.  However, the Turnbull initiative confirms that central government can play a significant role in urban form and housing affordability when local government consistently gets it wrong.

That's not saying that central government consistently gets it right!  But it recognises the game changers that support decentralised urban form and the benefits that can bring. 

The Turnbull initiative may well prove a game changer in its own right.  And it highlights the question of when - or whether - central government in New Zealand will get off the sidelines and into the game.