Tuesday, October 30, 2012

Redesigning a City: Planning an Affordable Future for Auckland

At last some urgency ...
The Government has responded to the analysis of housing affordability by largely adopting the multifaceted approach proposed by the New Zealand Productivity Commission.

My interest is in what it says about boosting the supply of houses, a necessary but not sufficient condition to improve affordability and sustain the liveability of our two largest cities.  The government response acknowledges the urgent need to boost dwelling numbers in Auckland and Christchurch by providing sufficient brownfield and greenfield land accessible to the market in a regulatory environment that no longer unduly impedes development. 

This posting explores where some of this land might come from. 

The Government concedes that land supply is largely the responsibility of local government.  Having said that, it suggests that legislation will be needed to support the regulatory tools councils need to accelerate consent processes.

The risk is that the Auckland Council (and others) will offer up an all too familiar response: “We agree, and we are doing it already”.  Because that would belie the performance that got us into this fix and suggest a complacency unjustified by current plans.

It’s time to get beyond the glib.  A failure to rise to the challenge – and it is a challenge – that faces Auckland risks continuing distortion of the housing market and all that entails.  This in turn undermines the labour market, as employers are obliged to pay higher wages to offset high housing and living costs to attract and retain skilled and experienced employees.  And wage inflation detracts from any advantages of scale associated with operating in New Zealand’s biggest city.

We need jobs as well as houses
A failure to ensure the availability of suitable land for business in the right places has also prejudiced development.  This was a hole in the 1999 Auckland Regional Growth Strategy, subsequently squeezing the supply and lifting the price of industrial land.  It has continued to receive scant attention, despite the gloss in the Auckland Plan.  It was not addressed by the Productivity Commission.  But a failure by the Council to move with alacrity on deficiencies in land for industry will undermine any response to the housing shortfall, continue to exacerbate costly cross-region commuting and congestion. 

An integrated response is needed to ensure that sufficient business land is released in the right places to facilitate investment and employment accessible to growing residential areas.

Where will the houses go?
Simply pushing housing up or out is not a sufficient response. There are limits to demand for medium density housing in central locations, and cost impediments as well as community resistance to their proliferation. 

At the same time, the usual form of greenfield development – the tack-on model of occasionally stretching  urban limits – is not good enough.  It risks all the inefficiencies and social shortcomings of undifferentiated sprawl by creating extensive, contiguous, tracts of housing – often large houses on small sections – with minimal local employment and poor transport connectivity

There is a real risk that Auckland Plan’s centrepiece for urban expansion – the Southern Initiative – will simply  go down the path of continuous development of limited merit, limited amenity urbanisation, and little by way of local employment.

Here, instead, are some options available to create a truly interesting and liveable Auckland.

Some options
Thinking brown? Then think big
One of the problems of brownfield and infill development is finding sufficient land for comprehensive development. Piecemeal development that simply fills in the spaces, including green spaces (such as golf courses) is not especially exciting.  And squeezing multiple units onto scattered sites demands a lot of care and innovation in design, cost, and development. 

We need substantial brownfield sites where the amenity and variety associated with greenfield sites can be incorporated.  The existing public housing estate is a start, but hardly enough. This is where the Council and the Government might most usefully work together, assembling sufficient land and, once done, calling tenders for substantive, integrated (re)development.
There are few obvious areas for doing this, though. Henderson central may be one. The head of the Manukau Harbour may provide an opportunity close to industrial and commercial areas.  Ageing industrial areas on the Isthmus  may work, although the costs of land remediation will mean that some public funding is inevitable.   With imagination, though, and the clout of council and government backing, there must be more brownfield opportunities of substance.

Decentralised intensification
Greenfield sites on the fringe are okay if based on integrated suburbs or urban villages which meet many if not most residents’ needs locally – for community activities, recreation, shopping, and work.  They may include a mix of housing options, townhouses, low-rise apartments, detached and semi-detached homes.  Ideally they will be on sites that offer some interest by way of contour and the natural environment.  The secret is in smart design. And not all such development need be contiguous.  Let’s bring green space – and nature -- back into our city as it expands.

Satellite towns
Ideally, small and medium-sized towns will be promoted in a green hinterland, linked by effective and flexible transport corridors which allow for a variety of modes..

Pokeno in the south is leading the way (with the added benefit of a potential rail connection), building on existing infrastructure and community in an attractive physical environment, well removed from the urban limits but utilising good urban design and providing for substantial local employment. 

The growth of nearby service town Pukekohe over the past decade tells us something about the market's positive view of this sort of setting.  Warkworth and eventually Wellsford will follow the Pukekohe path, providing real grounds for plans to push the motorway corridor north.

The opportunity of progressive expansion through rail-linked towns to the west is an exciting one, through Kumeu, Waimauku to Helensville and Kaukapakapa.  This is an  area of significant natural amenity and an opportunity for effective commuting to new employment precincts around the north-western motorway.

Village Life
Some consolidation and growth can be founded on existing villages. Already Matakana and Whitford are showing the way, acting at the same time as centres of rejuvenated rural economies.

There are similar opportunities elsewhere – Waitoki, Wainui, and Coatesville stand out in the north, all reasonably close to a north-western rail commuter service in  one direction,  and the commercial infrastructure of Albany, in the other.  Tuakau, Waiuku, Bombay and Te Kauwhata offer similar opportunities in the south.

We might also encourage the emergence of totally new villages and hamlets, catering in compact, contained sites of character for those who might otherwise opt for sprawling and wasteful countryside living under the current planning regime.   

Detached greenfields
Greenfield areas beyond the city edge could be the focus of substantial new townships: Dairy Flat on the Hibiscus Coast, Riverhead near Albany, and Drury in the south are opportunities where land and land use would be enhanced by sensible urbanisation.  Each is far enough removed from existing development to protect extensive green belts but close enough to offer efficient connection. 

This is perhaps how the Auckland Plan's Southern Initiative might work – developed as a new community at Karaka, rather than as an  extension of Manukau.  It would be detached but close to the southern urban edge in an area where the landscape calls for sensitive and comprehensive planning rather than piecemeal enlargement of the urban boundary.

Moving markets
There is the risk that good quality development will maintain a tendency for new houses to be the preserve of established households already well up the housing – and income – chain.  Mixed communities with a variety of styles and tenures might offset this.  But the ideal outcome of a multi-faceted supply shock like the one outlined will be a more active market in existing dwellings.  Moving on means someone else can move in.

And here’s the how
It goes without saying that this all has to be done within environmental constraints.  The council may have to develop a new mindset, a new culture; one that ensures good things - innovative and varied -- can happen, rather than that they can’t.  

And to achieve some momentum, it may need  adopt a project-managed approach to a whole range of new initiatives , rather than attempting to spread planing, evaluation and design  through various divisions of the council focusing on just one or two models for boosting the land and housing stock

It may even mean creating a new public land development agency that can work with central government and the private sector to rise above currently constrained thinking and remove impediments to large scale development in a number of localities. Only when we get a variety of development opportunities and move away from the monotony of contiguous development might we realise the variety of housing models available.   Multiple initiatives may reduce the incentive  to land bank at the city boundaries-and encourage new players into  the development and housing field where a prolonged downturn has left competition weak.

Land assembly must be high on the list of actions so that a growing and hopefully increasingly efficient supply sector gets the opportunity to respond in a comprehensive fashion to a diverse market that has for too long had its material needs and diverse preferences curtailed.

Sunday, October 28, 2012

Trans-Tasman Blues – the Housing Crisis and Our Future

Boxed in thinking
While filling in time in the Auckland International Airport waiting hall last Thursday I read about a Property Council discussion of what accommodating  an extra 1.2 million people over the next 30 years might entail. Martin Udale, the development expert heading Essentia Consulting Group, talked about having to push the envelope to meet the challenge posed by the Council’s population growth expectation and its commitment to housing three quarters of that  growth over the next thirty years within the city's boundaries: that's 10,000 new dwellings a year (not counting any catch up from the current  shortfall ).

This is going to need as much as 15% of the current stock to first be demolished, to be replaced with infill housing – apartments and townhouses -- at a ratio of perhaps three or four new for every one knocked down . But for this to happen, Martin said,  Aucklanders -- and that includes planners -- have to first "get over their phobia about height".

Affordable living, Auckland City
Now that’s a challenge. Building medium density housing to a standard and in localities that Aucklanders might like at a price they might afford has so far proven well nigh impossible. New apartments are generally over-priced relative to detached houses because of land prices in preferred locations, consenting and development challenges, and construction costs.  The result has often been cost cutting and poor construction. Consequently, most apartments built over the last 15 years cater for transient populations – students, recent immigrants, solos, non-family groups –often in tight accommodation. 

Outside the box
There are other options for increasing densities – in greenfields, satellite towns, and through selective suburban infill and brownfield redevelopment (including developments modelled on retirement communities and suburban villages).  Going down this path – of decentralised intensification --- would take a serious re-think by the city fathers, though, and their planning advisors. 

But if we take on the challenge  of demolishing 50,000 to 85,000 of our existing housing to build apartments and townhouses, we might inadvertently solve the problem another way: by  stalling population growth. 

Or outside the country
The slowdown is already here.  And intensification along the proposed lines with the congestion and loss of amenity that goes with it will make Auckland that much less liveable and Australia that much more attractive.

Affordable living, Sunshine Coast
Which brings me back to why I was waiting at the airport.  My wife was returning from visiting our three Australian-based children and their families. She’s beginning to think we should move there.  Some of our friends have done just that.  Even though they are not far off retirement age, their skills and experience are transportable if they want to work in Australia and be closer to their families.  

And they are in good company. According to Statistics New Zealand (SNZ) there was a net national loss (an excess of long-term departures over arrivals) to Australia of 486,000 people over the past 30 years, 212,000 of those in the last ten years alone (September years).  The trend has been accelerating (Chart 1).  Add that to the cyclical nature of movements from other countries and we can anticipate more, and more prolonged, net migration losses from all sources in the future.

Chart 1: Net Migration Movements, New Zealand 1991-2012 (September Years)

So how will Auckland fare?
The latest population projections from SNZ suggest that there could be another 480,000 people living in Auckland in 20 years time under a “medium scenario”,  a figure which  more or less lines up with 10,000 new dwellings a year.  Over a third of this  growth is based on assumed migration gains .  Of course, some of the natural increase projected also depends on migration : fewer migrants = fewer babies.

Going down
So I took a look at the assumptions behind the projections. According to SNZ sources, there was a net gain of 66,600 international migrants (arrivals less departures) in the five years ending 2006, but that dropped 56% to 37,700 between 2006 and 2011 (September years).

And the net loss from Auckland to other parts of New Zealand from internal migration has been growing –18,000 estimated between 2001 and 2006.  So, international and internal migration over those boom years contributed around 48,000 new citizens, 9,600 a year.  

Without a 2011 Census subsequent internal movements cannot be calculated.  But since 2005 gains from  international migration  have continued to fall, down to an average  7,000 a year. The trend continued in 2012 with a gain of just 4,100 (Chart 2). 

Chart 2: Net International Migration Gains, Auckland 2002-2012 (September Years)

More hope than history?
The SNZ medium assumptions in fact assume an average 6,000 gain in migration through to 2016 (actually, that’s now closer to 6,500 following the overshoot in 2012), before it is assumed to jump back to boom-time figures of 9,000 a year for the next 15 years.  But the conditions experienced ten years ago are unlikely to be repeated in the foreseeable future.  And our longer history certainly doesn't support a view of such prolonged gains.  And even a modest 6,000 a year through to 2016  looks  out of reach if real house prices cannot be brought down to where they were a decade ago.

So who are we losing?
So what does this mean?  Well, over the past twenty years, more than half of the people who have left Auckland have been aged between 15 and 34 (again, based on SNZ data), mostly educated young adults at the start of their work career and entering the housing chain.  Lose them, and we can trim our housing demand figures. More than that, though, we can reduce our aggregate fertility expectations and lower forecasts of workforce growth 

Some of these young adults  are embarking on the traditional New Zealand passage of rite, the Overseas Experience trip  – rather like my daughter and her partner did ten years ago.  But they are now well settled north of Sydney with an affordable home, pool and yard for the children, great amenities, good friends,  good schools and jobs.  I don’t see them – or many others like them – heading back this way in my lifetime.

In any case, Chart 3 shows a shift over time towards more  family groups leaving, older adults and children. This is worrying because they don't  make such a significant move without  good reason.  Could it be tied up with housing affordability?  Is it associated with the challenges facing the intermediate housing sector – people with good jobs and dual incomes still unable to afford a house in Auckland ? And not wanting to live in ever-more crowded suburbs?  

Chart 3: Age Distribution of People Leaving Auckland for the Long-Term

Of course, there is always the prospect of resurgence in immigration from Asian origins offseting the  loss of young New Zealanders.  Even that is not  assured, though.  The prolonged GFC  and economic uncertainty here changes New Zealand's appeal  relative to other options opening up to them. We cannot count on New Zealand always being a destination of choice, especially if we are busy recreating the sorts of urban densities that many potential immigrants are moving from.

Maybe exporting some of our housing problem to Australia  is positive move – but we are also exporting our future and accelerating the ageing of our city as a result.  It would be a shame if by going along with the urban design consequences of consolidation that the advocates of a compact city are bestowing on us  the Property Council somehow legitimises the dogma that risks the undoing of our city.

It is time, instead, to begin to think about quality not quantity in our urban planning.  And that means really thinking outside the compact city box.