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.


Tuesday, April 5, 2016

Auckland Planning: Doing Less with More

The burgeoning bureaucracy
In 2010 the eight Auckland councils were amalgamated into one.  I’m not sure why and my early prognosis gave the experiment five years before failing.  This was based on the unwieldy nature of the proposed council – multiple layers of management were bound to complicate and slow down decision-making and further remove policy-makers from the places and people for whom they are actually making policy.

More managers also means much higher wage costs, more internal meetings, and a reduced capacity to respond on the ground to the needs and wants of different communities and places. 

Talking, talking …
It was no surprise, then, to read the report in the Herald (4 April 2016) of 37 city managers attending a workshop on updating the Auckland Plan in February.  The manager of the strategic planning process for the Council justified this by saying that “input from different experts across the organisation and workshops are used as the most efficient and effective way to ensure expertise is shared across the organisation”. 

Talk about talking to ourselves!  And what have we got to show for it?

Well, most people are beginning to understand that the approach promoted in the Auckland Plan of using less land to absorb more development is pushing up prices for housing, costs for businesses, and congestion for commuters.  And these inevitable outcomes of rationing urban land can be compounded by inadequate infrastructure provision.

It’s certainly time for the council to have a rethink.  But I’m not holding my breath.  The last time planners recognised their plan for a compact city was not working, they simply argued for more regulation (in Growing Smarter, Auckland Regional Council 2007).

Getting grounded
The deficiencies of the current planning culture go further than the impacts of land rationing on property markets.   I’ve attended several hearings reviewing the Proposed Auckland Unitary Plan (the PAUP, a statutory document intended to implement the aforementioned Auckland Plan).  I’ve been struck by three things. 

(1) Private costs and commitments
First, there is the amount of time spent by the very large number of professionals drawn into the process: lawyers, independent planners, and a variety of experts (including the many consultant planners and experts commissioned by the council to advise its "different planners and experts" – go figure). 

The cost of all this to the wider community must be substantial – quite apart from the Council's $70m annual planning budget ($45 for every person living in the region).

(2) Getting grounded
Second, many private citizens are putting real time and thought into making submissions to a plan that has serious implications for them and their neighbours, their livelihoods and their lifestyles.  However, at the plan hearings in different parts of the region submitters addressing local, practical matters are up against by a centralised process and a complex and coercive set of regulations built in large part on supposition.

In fact, it is the many parties with a commitment to living and working in the region that anyone charged with thinking about the future of Auckland should be listening to, rather than talking to each other.  

Unfortunately, the groupthink taking place in Auckland Council excludes divergent views and local circumstances when they cut across the beliefs that mark the current planning culture.

Institutional myopia generally is one of the reasons we end up with dubious decisions by large organisations out of touch with their public. This has already been demonstrated in the Council’s faulty assessment of housing capacity behind the proposed Auckland Unitary Plan.

Hopefully, the Plan Review Panel will counter such narrow thinking and ground the PAUP in reality rather than theory.

(3) Push back
Third, council officers and consultants seem almost inevitably to push back against any deviation from the PAUP proposed by submitters, implying that the principles they have adopted should prevail over the knowledge, aspirations, and circumstances of households, businesses, and community groups. 

Even when council officers change their position in the face of the evidence, it seems often to be to draw back from increasing flexibility or providing for wider development opportunities, even to the extent of retreating from provisions set out in the PAUP as originally notified.  

This might be acceptable or understandable if we are confident that the Council has properly identified and prioritised the issues, objectives and policies in the first place.

House of cards?
Unfortunately, we can’t be.  Drilling down into some of the material cited in the hearings and the documented rationale for various objectives and policies in the PAUP (contained in Section 32 reports) is disquieting.  There is a plethora of material, it is difficult to access, not especially conclusive, and in many cases, hard to relate to the policies it purports to support. 

A lack of clarity or critical analysis means that much of this material appears irrelevant, dated, or contradictory.  This raises the uncomfortable thought that despite its budget, the quality of expertise bought to bear on planning in Auckland does not match the challenges associated with a region of 1.5 million people (and growing), compared with preparing plans that deal more directly with the circumstances of different areas within the region. 

Consolidating planning and plans (and truncating the process) with the aim of streamlining is beginning to look like a step in the wrong direction.

Or less charitably, it may indicate that the quality of our planning is not up to the challenges of reconciling sound environmental management with the diversity and volatility of modern urban development.  This has serious implications, including that of not providing for the housing and employment needs of a population that the planners expect to continue to grow strongly for the foreseeable future.

When is more too much?
All of this led me to revisit Auckland local government employment numbers.  I haven't dug up the numbers employed directly in planning.  But the overall Auckland figures increased 8.8% over the two years to 2015 compared with just 2.2% for the rest of New Zealand.

In fact, Auckland’s local government employment jumped by over 50% from 2010 to2015!  The rest of New Zealand experienced just 5% growth.  (This included 23% growth in Canterbury, a short-term boost attributable presumably to the response to the 2010 and 2011 earthquakes). So much for the greater efficiencies trumpeted for amalgamation.

Worringly, 50% growth in local government employment compares with an estimated 9% growth in population and less than 13% growth in other employment over the same period.  

In this case, more may be less
Auckland is clearly putting more resources into local government. It’s hard to see the benefits this is delivering to a city struggling still with expensive land, inadequate transport infrastructure, inappropriate land use, and an intrusive planning culture which appears to be promoting more rather than better regulation.

Wednesday, February 24, 2016

On the Same Track? The Auckland Transport Alignment Project

Governments getting together
It’s good to see that central government and Auckland Council seeking to align their thinking on the city’s future transport needs (New Zealand Herald,19 February 2015) with the joint objective of  “value for money”.
Here’s how the Auckland Transport Alignment Project (ATAP) is pitched:

“The challenge for transport is to identify opportunities and proactively respond to the pressures arising from growth, to deliver economic, cultural, environmental and social benefits to Auckland and New Zealand as a whole. However, this outcome cannot be achieved at any cost. Wise investment will be required to maximise the value from every dollar spent. “Auckland Transport Alignment Project Foundation Report, February 2016, p.5)

I particularly like the bit about wise investment: this suggests that no investment will be made without a sound knowledge of the demand it is designed to meet. 

Understanding the Problem
The problem requiring alignment of transport objectives is responding to growth:

The scale and location of the population and employment growth creates a challenging transport future.  Medium growth projections will see Auckland’s population increase by over 700,000 over the next 30 years (approximately half again from current levels) and the number of jobs increase by over 270,000. (ATAP, p.5)

So how sound is this as a representation of future demand? 

A Departure from the Proposed Auckland Unitary Plan?
The Future Urban Land Supply Strategy (FULSS, Auckland Council, November 2015) sets out the expectations of the Proposed Auckland Unitary Plan.  It projects Auckland’s population:

to grow by one million people over the next 30 years.  This means around 400,000 new dwellings and 277,000 additional jobs will be needed” (FULSS, p.4)

These figures project a population gain 42% higher than the figure the ATAP is using, just three months later.  I would like to know why there is such a difference, and particularly whether alignment allows for changes to the PAUP.  It’s going to be difficult to achieve value for money if our transport investments do not align with our land use plans, even worse if those plans prove spurious. 

How many jobs?
The Auckland Plan certainly seems confused on the land use front. This has been obvious for a long time with respect to housing.
But what puzzles me now about the PAUP is that, according to the FULSS figures above, provisions for business land are based on a labour force participation rate of just 28% for the additional population, or 69 workers for every 100 new dwellings.  This compares with 41% actual participation across Auckland in 2013, and 114 workers per 100 dwellings.

Projecting a slump in participation makes no sense given that the population growth the PAUP projects depends heavily on immigration.  But without commensurate job growth, this will dry up.  Statistics New Zealand’s most recent medium projection is for 736,000 more residents.  Of this 38% are assumed to come directly from migration (52% in the first five years), and of course more come indirectly as migrants settle and raise their own families. 

Without the provision of land for their employment, though, don't expect even this much reduced population projection to be anywhere near the mark.

Underestimating labour force growth will lead to an undersupply of land for employment.  This is a major flaw in the PAUP. The results will be higher costs and fewer options for business establishment and expansion, lower investment, lower employment and, consequently, lower population growth. 

If the PAUP projections prevail but a more realistic participation rate is achieved (the ATAP figures suggests it will be 39%) then the PAUP is heading for 30% less land than needed for employment, a sure recipe for depressing growth, boosting congestion, undermining housing affordability, and making Auckland just that much less liveable.  That surely has to be corrected.

Where will employment be?
Here’s another thing: the PAUP persists in promoting the central city as the focus of employment.  The ATAP project picks up on this:

Employment growth is highly concentrated in a few locations, particularly the city centre, the airport and other regional metropolitan centres. Over a third of employment growth is projected to occur within 5km of the city centre. The growth in service sector jobs, which tend to locate in major centres to benefit from agglomeration, is a key factor behind the projected concentration of employment growth. (ATAP, p.8)

The evaluation of the current Auckland Transport Network Plan by ATAP indicates that this is a poor starting point. It shows that aligning transport plans will not be enough to correct for an inappropriate, over-centralised land use plan.

Current Prospects Grim
Looking out in ten year steps the ATAP review of the current Auckland Transport Network Plan points to deteriorating private vehicle accessibility to employment, widespread and increasing congestion, and a slowing and uneven rate of growth in public transport use.  This raises significant equity issues:

… the central (isthmus) area benefits the most while other parts of Auckland experience a much more mixed and patchy transport future. The west and south appear to face the greatest private vehicle access challenges into the future and are also the areas where public transport improvements appear most muted.

Deprivation will increase in large areas of Auckland which will be “partly excluded from the benefits of Auckland’s expanding employment base" (ATAP p.10).

Getting to Value for Money
None of this was unpredictable, of course, but it is useful to see the current package of transport proposals tested in this way.  Whether or not the ATAP can come up with an alternative package that will provide value for money and significantly improve efficiency and equity outcomes is yet to be seen. 

However, to avoid these negative outcomes and meet Auckland Council growth expectations will require a significant revision of the prevailing package of interventions.  Ultimately, this may mean abandoning the spatial plan that gave rise to the transport externalities that requires such a programme.  Only when we begin to plan for a more sustainable city might we move towards a more sustainable transport programme.

Aligning land use and transport
So the challenge is not simply to find a package of transport interventions that will get Auckland working.   The problem -- and the challenge -- goes deeper than that.  Even before the ATAP sets about the task of evaluating alternative interventions it has confirmed in its evaluation the flawed nature of the spatial plan. 

In a constrained geographic environment the Auckland Plan and PAUP put too many eggs in the CBD basket.  They promote a monocentric, centralised city on a narrow isthmus, and rely on the assumption that the inefficiencies this will generate can be resolved simply by spending ever increasing amounts on transport. 

The ATAP foundation document raises serious doubts over that.

The real task is to align transport investment with sensible land use plans.  Get the land use plan wrong and any analyses about value for transport investment will be meaningless. Only a fundamental review of the land use assumptions behind the PAUP -- particularly where people might live and work -- will deliver value for money, and avoid Auckland grinding to a fiscal as well as a physical halt.