Wednesday, April 24, 2013

Denial as Defence: Time to Acknowledge Flaws in Auckland’s Unitary Plan

Evidence mounts, resistance increases
Yet another research project has reminded us what the majority of Aucklanders already know.  Most of them want to live in suburbs, and prefer detached to multi-unit dwellings.  Yet the Auckland Council – or at least the majority of councillors and their planners – apparently remains in denial.  Through the Auckland Plan and now the Unitary Plan the Council continues to elevate higher density dwelling in and around town centres, the CBD, and arterial roads as the principal response to Auckland's growth potential and to a longstanding and growing housing crisis confronting the city.

But the evidence is mounting that it is not an appropriate plan for accommodating growth and maintaining Auckland’s liveability on either economic or environmental grounds.  And the signs that Aucklanders will resist the plan are mounting, even as the Council aims to rush it through with limited consultation and even more limited evidence.

Who are we planning for?
This left me wondering just who will occupy the medium- to high-density residential precincts planned to shape our future. To get an insight into this I went back to the 2006 Census to find out who lived in the inner city in Auckland, Wellington, and Christchurch.[1] 

I looked at a number of indicators for the inner suburbs, and compared them with the same statistics for the respective regions (which include their peri-urban catchments, additional urban areas in Wellington, and towns in Canterbury). 
The results are displayed in the various graphs at the end of this blog. Take a look. 
The evidence is compelling.  Inner city dwellers tend to be in rental accommodation, they are generally younger – with a marked absence of families – they are less likely to be currently married or in a civil union, they haven’t been at their current address very long, and are likely to have moved in from other parts of New Zealand and overseas. 

Central Auckland residents –passing through
This pattern prevails in each of the three inner city areas considered to a greater or lesser extent.  But it looks most pronounced in Auckland, so I delved a little deeper there.  The table tells the story: inner Auckland by no means represents Auckland or Aucklanders.

Inner Auckland – an area in which small, often multi-unit dwellings tend to prevail – is where people appear to touch down briefly, not where they settle.  They come from elsewhere, and do not stay for long.  They are predominantly young adults, a significant share being students.  Older people are not necessarily attracted to the smaller units of inner city living – something we looked at in an earlier post.  Most residents in inner Auckland are not in permanent relationships.  And the people who are tend to be are couples without children. 

So where is the evidence that suggests that the plan will be widely accepted?
If this is the sort of profile we might relate to inner city and multi-unit living (apartments, terraces, and the like) the Auckland plan could be on shaky ground. It may well be shaped around the residential preferences of a distinct (and diminishing) minority: younger, transitional and transient people and households. 

Of course, the data is dated, and there has been a pretty intensive PR effort by the council and its supporters to push a plan telling us that we ard ready to make the shift to higher density.  But surely such a push should be based on evidence that suggests many more people are prepared to accept a radical change in the lifestyles that typified Auckland in the recent past?  And while the evidence cited here against the plan is a little dated, I have seen none that suggests tastes and behaviours have changed that much.
So we are left with a radical shift in the way we think about and live in Auckland, apparently founded on little more than supposition and dogma.

More evidence is around the corner
Perhaps we should seek a stay in play at least until the 2013 census results become available later this year and early next.  Maybe they will show the sort of shift that might increase the credibility for the plan. Either way, it makes sense to actually wait and see, if for no other reason than what the most recent data tells us about the housing market and residents' preferences is bound to be brought to bear as communities dig in to resist it. 

And no need to hold up the main task
And with a more relaxed (and realistic) timetable for the Unitary Plan, the Council could push ahead in a more focused way with a series of changes under currently operative plans – or even in partnership with central government through special legislation – to address the city’s housing crisis.  And it could do that without getting caught up in the growing debate over a plan that at the moment is not standing up well to community (and perhaps even government) scrutiny.

[1]         Including the following Census area Units:
Auckland: Central West, Freemans Bay, Central East, Newton, Grafton West, Grafton East
Wellington: Lambton, Willis Street-Cambridge Tce, Thorndon-Tinakori Rd, Aro St-Nairn St, Mt Cook-Wallace St, Mt Victoria West
Christchurch: Cathedral Square, Hagley Park, Avon Loop, Mona Vale, Riccarton West, Riccarton, Riccarton Sth, Merivale, St Albans West, St Albans East, Edgeware
 The Inner City is Different ....

 Note: Married includes civil unions



Wednesday, April 10, 2013

More land, more jobs more incomes – addressing the other side of the affordability equation

Boosting residential land supply is a start

In my last blog I argued that boosting residential land is necessary but not sufficient to achieve affordable housing.  Industrial, institutional and investment issues also play a part, but massaging demand without freeing up supply won’t solve anything.  
In this post I look at the other side of the affordability equation: how do we increase our incomes to match our housing aspirations and needs?  Once more,my focus is on Auckland - but the point made, I think, is relevant elsewhere. 

Delivering land for employment needed to lift incomes
I address just one issue,the supply – or rather the scarcity - of business land.  This is one investment barrier that planning can influence, and needs to if the council is serious about delivering a truly liveable city.  Because most people will want to live where they can make a decent wage.

If business land is in short supply or expensive to develop, establishment costs go up, deterring investment.  If it is in the wrong place labour and transport costs go up, deterring investment.   And without continuing investment in new and existing business, jobs and incomes suffer.  And if incomes stall, housing affordability diminishes.
And we don’t have it yet
Put simply, the message about business land is that there is not enough of it in Auckland and that hurts employment and incomes.  What we do have has often been the wrong sort in the wrong place. Consequently, where good land exists it is highly priced.  Like the prevailing approach to residential planning, this approach rations land rather than utilising it to best effect. 

Planning for Business in the compact city
A key component of the compact city doctrine behind Auckland’s unitary plan has been an expectation – or requirement –that the city can cater for an expanding workforce by encouraging firms to intensify their development – to “do more with less”. To this end, the Auckland Regional Council spent a lot of time estimating how many employees could be squeezed into existing zoned areas (by increasing building height, site coverage, and the like) and how much of the residual vacant land in the region could be absorbed before having to zone the larger parcels that the market was interested in and perhaps create a large enough pool of sites to keep prices in check.

Unfortunately the business land market does not work like that.  Businesses grow and decline.  They invest in expansion, they relocate, or they enter new markets.  And in each case they have particular requirements of the sites they invest in.  If available zoned land doesn’t tick the boxes, they won’t use it. 

More numbers, growing gap
Regular reports quantifying “the gap” between estimated demand and estimated supply have not been especially helpful.  They overlooked the development and access difficulties of the “vacant” sites that they managed to identify, their small size, and the fact that many were simply unavailable. 

They also failed to recognise the mismatch between where any vacant land was compared with where it was wanted.  And by failing to address the needs of sub-regional labour catchments and dispersed investment opportunities, they perpetuated the costly cross-regional commuting and associated congestion necessary for many Aucklanders to meet both work and housing needs. 
A focus in the draft unitary plan and underlying spatial plan on consolidating employment in and around the CBD and focusing transport investment on the central city will make matters worse, given the much more rapid population growth and greater residential capacity of suburban Auckland.

Rationing land to get some sort of numerical match with projected employment growth meant that what little quality industrial land that was ready to go – where it actually existed -- was (and remains) highly priced. Rather than encouraging higher densities (and, by some obtuse logic, higher productivity) this approach is more likely to discourage investment and suppress employment growth because no suitable land is available, because the costs of entry are too high for new investors, or because under such a regime land banking becomes an attractive option for existing owners. 
How much industrial land is available?
In 2011 we estimated around 1,460ha of zoned vacant industrial land in Auckland, but only 550 ha “ready to go”, with perhaps 70% of that (400ha) suitable for development.  And that’s probably generous. 

Recently, retail analysts at CBRE in March 2012 said that:
Currently zoned industrial land classified as vacant amounts to 1,148 hectares although this headline figure is largely meaningless in a real world context. The land market is highly fragmented which means that a wide range of development barriers exist that, at any given time, prevents the take up of a significant portion of land classified as vacant. Options also reduce significantly at higher parcel size thresholds especially for heavy industrial land uses.
So what’s happening today?
A shortage of suitable industrial land was seen as one issue that the new Auckland Council might tackle.

It’s not clear that it has done so.  The Unitary Plan talks about possibilities and the need for more planning.  It suggests that there is 510 ha, of brownfields land for redevelopment, 430ha in the planning pipeline and a 1,400 target for greenfield land., and that together these sources will  provide “109ha/per year for 30 years”.  But this is subject to the “ongoing audit process” depicted in the following table:

Source: Auckland Unitary Plan Implementation Addendum

It’s not clear whether this is a ten or twenty year timetable, but it does suggest that we still don’t know a lot about what we have got at the moment, and what we might expect in the foreseeable future.  Instead, it simply specifies a planning mechanism to manage a pipeline comprising five, ten, and twenty year targets.  It seems to assume we can predict when, where, and how much land will be required.  Such an assumption ignores our past inability to forecast demand and supply with any credibility, and appears to overlook the protracted timeframe between conception and delivery.

And if this approach continues to impede a well-functioning commercial land market, the opportunities for businesses expansion, new investment, and the income growth necessary to increase access to housing will be curtailed

But there are more direct ways of addressing the problem of scarce, expensive, or overpriced business land.  Here are a couple of current success stories.
Success Story 1: Highbrook Industrial Park
Highbrook Industrial Park comprises 107ha of developable land and 40ha of parkland 18 km southeast of Auckland CBD.  This got underway in 2005, four years after approval, with over 530,000 sqm in floorspace capacity.  Just seven years after development, almost half of that capacity has been absorbed (261,000sqm) –t hat’s around 7ha a year in just this one locality during difficult economic times. 
Development continues and a 25,000sqm retail and service centre will open later this year. 

Highbrook Industrial Park - Industrial Infill in the Urban Area

Some lessons from Highbrook:

  1. The planning and development timetable was protracted, although progress since has been rapid. We need to be aware of the time from concept to delivery and do what we can to ensure we have plenty of land in the pipeline to cope with this (and do what we can to speed up the planning and development process). 
  2. Allowing for parkland, site coverage is relatively low at 35% (but 50% of developable land). We need to recognise that modern industry and commerce is not necessarily going to be attracted to high density, high cost sites, and need to reflect preferences for space and amenity in our plans.
  3. There is a real mix of occupants – from industrial, though logistics, to retail, services, and offices.  In planned and well integrated environment these work well together.   It is hard, though, to predict the future form and function of the businesses and business complexes we need to provide for.  Better to plan business estates to meet environmental (and community) performance standards, rather than prescribing what activities are allowed to locate in them. 
  4. A large scale site with large individual lots diversifies the range of organisations that can locate there and creates opportunities for lowering impacts on surrounding communities and the environment, while delivering amenity that will attract investment, even in adverse times, and employment.  We need to be generous in our land allocation to achieve satisfactory land use outcomes. 
  5. Highbrook is located close to a growing residential suburb.   If we are serious about cutting transport costs and congestion and consequently lowering the costs of employment without lowering incomes we need to ensure that we provide adequate business land close to the suburbs where the majority of the workforce dwells and to those places where we plan to locate new housing

Given the quality of the Highbrook land and scarcity of competition, occupation costs are not particularly low.  But demand has been and continues to be strong.  This shows how much demand there is for land of the right quality, scale, and right location.
Success story 2: Pokeno Village Estate
The Pokeno Village estate is a new 400ha integrated development of relatively low cost residential and business land.  It is in a rural location less than an hour from the Auckland and Hamilton CBDs to the north and south, and two hours from New Zealand’s principle export port at Tauranga.  It is on the rail system and a minute or two from State Highway 1. 

And it is getting set to grow – with the recent announcement that Chinese company Yashili International Holdings has recently got approval to invest in a $212m infant formula factory there. 

Pokeno Structure Plan - Integrated Urbanism in  a Rural Environment

Some lessons from Pokeno:

  1. It is possible to create well-planned urban areas outside the metropolitan area that can provide complementary residential and business opportunities at a single location;
  2. Location remains important – good connections to key nodes and markets can be achieved without being in the centre of any one of them;
  3. A quality residential environment and the public domain will add to the attraction of the locale;
  4. And a village environment in the right locality gives residents easy access to the rural, natural, and coastal environments that lie at the heart of Auckland’s appeal.

The Big Lesson?

We need to address the questions of where people will live and where they will work jointly. 

Let’s hope that the Mayor’s and Minister’s bureaucrats take a note of this when they get together to mull over how to solve Auckland’s housing crisis.

New opportunities for business investment can be created around Auckland, but not necessarily within the contiguous urbanised area. 
But they can allow for generous, integrated planning that will enable Aucklanders’ aspirations for housing work, living, and lifestyle to be met.  They do not mean sacrificing rural output, urban productivity, or environmental quality.  But they will require a more creative, generous and responsive approach to the needs of the city’s people and businesses than has been evident in our planning for the last 15 years.

And bit by bit we can expect such initiatives to help rationalise the markets for both business and residential land.

Friday, April 5, 2013

The Great Housing Debate Plods Along

Another day, another working party

The government and Auckland Council are working on the terms of reference for a working party to look further into Auckland’s housing crisis and how to resolve it.  Enough already.
A passage of reports, going nowhere
There has been a host of reports on Auckland’s housing needs, not many of them useful (otherwise the problem should have been solved).  Past attempts to reconcile statistical projections of demand with rose-tinted views of supply failed to stir the councils into doing something about a problem we have known about for 15 years.   

When we diagnosed it then, we argued (and the Auckland’s Regional Growth Forum agreed) that the Growth Strategy (the genesis of the Auckland Plan and its bloated progeny, the 7,000 page Unitary Plan) was too mechanistic in its approach to housing. 
The solution lay in more, not less, flexibility.

Matching residential capacity estimates with projections of household numbers is done at too coarse a level ...  Given diverse demand and ... differences in components of supply, capacity for some types of land is likely to be exhausted earlier than projected… The likelihood is that property prices will escalate if greater flexibility is not introduced… This raises the prospect of adverse equity impacts associated with housing affordability from a strategy that over-emphasises containment …”
Auckland Regional Growth Strategy Review, McDermott Fairgray for Auckland Regional Growth Forum, ARC 1998

Unfortunately, the interim has seen falling supply, rising prices, and perversely intransigent planning.
Deliberating and debating
The Productivity Commission’s was the latest, most wide-ranging and the most thoroughly grounded report into the issue.  It set out the parameters of the problem in a full and systematic manner. 

But that was a year ago now, and its urgency has been diluted in the war of words between central and local government.   And the prospect of a debate over a draft regulatory document the Unitary Plan - and when it might come into force as Auckland’s latest (and most constrictive) statutory planning document promises further procrastination.
I would set aside the Draft Housing Strategic Action Plan Stage 1, Working Draft Version 14 (yes, that’s right, 14!) put out by the Auckland Plan Committee, as yet another report from inside the bunker.  This one contains seven objectives, 12 Priority Areas, and 32 Actions.  Like all the others before it, this plan acknowledges the complexity of the problem.  Unfortunately, it seems to compound this with the complexity of “the solution”.  

The choices we face
As I think the Minister of Housing, Dr Nick Smith, was trying to get across in his recent exchange with the Auckland Mayor, we are running out of time.

We have three choices for dealing with the housing crisis (or not, as the case may be).

First,   can continue to convene working parties, write reports, and debate the detail.

Second, we can save paper, and do nothing, ignoring the problem on the grounds that it may go away. 

And it will, in due course, with a large (younger) chunk of demand heading offshore and another (older) chunk heading for provincial and small town New Zealand. Demand will wither.  And that will bring forward the day that the bubble bursts.  Given so many eggs in the Auckland basket that will be a disaster for the country as a whole.

Incidentally, waiting for the bubble to burst should also bring plenty of newly bank-owned properties onto the market at fire sale prices – a somewhat perverse correction to a problem created by a shortage.  The problem then will be that not too many people will be able to afford them, certainly not the people who need them.

Unfortunately, inaction points the way to economic decline in the long-term (and, it seems, xenophobia in the short term).

(Thinking about it, Option 1 is just a variant on option 2, but it might let our politicians and report writers feel a bit better about it).

Third, We take action now.

The action option and political palatability
How?  Well the Productivity Commission demonstrated that this is a multi-faceted problem.  And if it was easily and painlessly fixed, it would have been.  It needs a multi-faceted solution that not everyone will like.  There will be short-term losers, including people affronted by a loss in property value. Some of us may have to accept that selling our houses will not necessarily fund retirement in the style we had hoped for.

Sometimes, though, political popularity has to give way to strong leadership.
The obvious starting point – land supply
The Commission emphasised the role of land scarcity.  So let’s start there. There is an urgent need to line up capacity for perhaps 60,000 houses in and around Auckland.  

If we are to have a land shock, though, let’s moderate its impact on infrastructure, environment, and transport by spreading it across multiple sites (brownfield, infill, the greenfield edge, and satellite towns).  This should also ensure the diversity of new stock and limit downward pressure on existing prices and equity within sub-regional markets.
Supported by sensible regulation
We also need to avoid clumsy heritage rules in the city’s proposed plan that will stymie quality urban renewal and prevent modest gains in density in existing suburbs by restricting demolition of any old houses (pre 1940s).  Better by far to preserve with some sensitivity those structures (and perhaps streets) of true character and enduring merit and let the others go if this serves housing demand better.  This approach will make increasing densities in long-established suburbs easier, and the results more attractive.

In fact, let’s streamline all regulation of land use change that does not relate directly to protecting environmental quality and capacity, so that our decisions reflect better how critical good housing is to Auckland’s social and economic wellbeing, and its liveability
And balance
We will also need to provide adequate land for the growth of local employment opportunities at the same time.  Failing to prioritise this is another black mark against the Auckland Growth Strategy and successive planning documents that underlie today’s congestion.

The notion of balanced decision making needs to be carried over into infrastructure.  Let’s get over the myths that bigger is better and that more spending now saves costs later.  It doesn’t, because excessive infrastructure imposes costs today that limit our capacity to implement better solutions tomorrow.  A little more fine tuning of infrastructure design, funding, and delivery is critical to efficient land use in the long run.
For this issue, it’s worth changing the law
It might be hard to countenance, but freeing up land supply for housing around Auckland requires legislative action so that it doesn’t get bogged down in the procedures and strictures around Auckland’s Draft Unitary Plan. And we cannot afford to wait and do it indirectly through the clumsy process of ongoing reforms to the Resource Management Act. 

A development corporation
If Minister Smith and Mayor Brown want to collaborate, perhaps they could create between them a corporation capable of assembling the necessary parcels of land.  Once this is done substantial parcels already approved for development can be released to the market for development through a variety of transparent and competitive methods. 

There are plenty of successful precedents and we have the examples of Council Controlled Organisations (including Auckland Property) that should be capable of breaking through bureaucratic logjams.  Surely the government and council can get this jam-breaker sorted quickly.
Beyond fixing land supply
Of course, adequate land supply is only one condition –albeit the most critical - necessary to re-establish an effective housing market. We also need changes in the institutional, industrial, and commercial environments.  We need to lower infrastructure costs.  We might also expect changes in the social environment as households and communities adapt to a new housing reality, because whatever we achieve, it is unlikely to be the same as what we had in the past.

I will address possible changes in these matters another posting. 
The time is now
For the moment, the message is that a new approach to land supply is urgent. We know enough to stop debating and pondering and to begin the job.  Without action on land, any other initiatives will come to nought and we may as well just carry on wringing our hands and writing reports.