Thursday, June 9, 2022

Auckland at a Turning Point 2: Marking Down the Labour Market

 Reality Bites

For some years I have been calling out the over-exuberant growth expectations behind Auckland’s planning.  I have also argued that creating a single council to pursue a compact city strategy was wrong.  First, the supercity structure was always going to increase the cost of local government while diminishing its responsiveness to the increasing diversity of communities and changing external conditions.  Second, planning based on intensification and centralisation was always going to frustrate the growth it was meant to accommodate, pumping up house prices, business costs, and congestion. 

These were hardly popular views, and it gives me no pleasure to say today that the chickens have come home to roost. Emigration is rising. Housing demand is softening, although too late to prevent a growing division between expanded renter and shrunken owner classes. The need for social housing is well up, while the already high cost of home building keeps getting higher. (And through grandiose spending plans, Auckland Council has become a fiscal and economic liability). 

Meantime, in neighbouring Australia wages are higher, house prices and living costs lower, and the labour market buoyant, leading once more to the loss of young and productive people across the Tasman. And, more Aucklanders heading for the regions will compound the slump in the residential market – in prices and in building (but not necessarily the cost of building).

The region has for decades taken the lion’s share of the country’s population growth, but that dominance is fast diminishing.

The labour market: pausing or turning?

Unfortunately, the same goes for employment. Auckland’s job growth has trailed the rest of the country since the Global Financial Crisis (Figure 1), leading national growth into negative territory over the past five years (inset).

Figure 1: Regional Employment Growth, 2001-2021

This has not been helped by Auckland’s lagging productivity growth (Figure 2). While Wellington and Auckland still record the highest regional productivity, this is on the back of a tradition of falling primary and manufacturing jobs and increasing, well-paid white-collar employment in the business and government sectors.

Figure 2: Auckland’s Lagging Productivity Growth

     Source: Statistics NZ

According to Statistics NZ February counts, there have been significant falls in business services, manufacturing, logistics, and Covid-impacted hospitality. Only construction and public services (including education, health and social care, and government services) held up (Table 1).

Table 1: Recent Employment Changes in Auckland


























Business Services



Public Services



Personal Services






Structural Flaws

Unfortunately, this mix of employment is unlikely to help in the future. The downturn realised in 2021 may well prove to be a significant turning point (Figure 3).

For a start, the white-collar sectors, particularly in government and business administration, can be expected to shrink under the combined pressure of remote and flexible work practices and the loss of back-office occupations as advances in artificial intelligence automate an increasing array of transactional tasks. 

Government-funded services can be expected to follow the same path, particularly with the inevitable tightening of the fiscal belt in the face of ballooning global deficits and rising interest rates. 

How this will play out in the labour market – in favour of the administrators in the high rise offices or the providers on the ground – is yet to be seen. As the white-collar sectors stutter, though, the future of the labour market will rely increasingly on production and distribution, especially as construction also faces a sharp downturn.

Figure 3: Auckland’s Changing Employment Structure, 2001-2021

At the same time, possibly radical changes in world trade resulting from geopolitical upheavals and the increasing impact of climate change will favour regional economies with efficient production and distribution sectors. Among other things this is likely to sustain the movement of economically active households from Auckland to regional centres.

Time for a reset?

So here's my take on some of the hard issues facing Auckland against a background of a slowing world economy,an intensifying climate emergency, soft if not declining population growth, and a vulnerable labour market.

First, we have to revisit our infrastructure plans, acknowledging the vulnerability to climate change of key components, including the sewage treatment plant, airport, ports, rail, and downtown Auckland. Apart from the protective (and conservative) investment this will call for, the city needs to reduce its penchant for investment that does little more than prop up values in the central city, and instead address the liveability of the suburbs where the vast majority of people live and work. 

Infrastructure investment will have to be founded on sound evidence, be economically and environmentally sustainable, minimise fiscal and physical risk, and be shaped by reason rather than dogma, sound analysis rather than bureaucratic group think. 

Second, accept the logic of sustainable new suburbs, low impact housing (as opposed to multi-tiered, energy intensive, high density structures), and detached settlements supported by appropriately-scaled infrastructure, connected and networked by generous, multi-modal corridors.

Third, address the divisive problem of deprivation in Auckland, which has been reinforced by backward-looking policies favouring those who own property over those who don't; those who live in gentrified, well-serviced inner suburbs over those who don't; office over industrial employment; and large, centralised commercial centres over accessible local neighbour centres.       

Fourth, acknowledge the reality of climate change and its inevitable impact on properties and infrastructure in a city with an extensive shoreline. This may mean planning for resilience rather than containment, reducing the intensity of development in vulnerable areas among other things. The challenge is how to manage a long-term reduction of value of central and harbour edge sites over just one or two generations.

Finally, adopt a fiscally responsible approach to local government, reducing the bloated investment and operations that followed the creation of a monolithic city structure in 2010 and its quasi-commercial satellites and their opaque tolling operations. 

A good start could be made by acknowledging the reality of a slow-growth outlook by dismantling the Auckland Unitary Plan and its premise that centralised activity to support the historical concentration of wealth should be sustained at all costs. Replace it with light handed planning that fosters a region of connected communities, each meeting most of the needs of its residents locally. 

There is a need to provide accessible opportunities for work, play, and care in an era in which personal mobility could be compromised. This cannot be achieved seeking to contain growth (and now, perhaps, decline) in a highly centralised, high density, public transit-dependent city.  

Monday, April 18, 2022

Auckland at a Turning Point 1: The Coming Housing Glut

Too little – and too late

“… over the last 20 years, New Zealand has experienced faster growth in real house prices than any other OECD country. Housing has gone from being abundant and reasonably affordable to being scarce and prohibitively expensive, especially in our fast-growing cities.”

The decline of housing supply in New Zealand: Why it happened and how to reverse it, New Zealand Infrastructure Commission, March 2022

 The Infrastructure Commission concluded that faulty land use policies created a housing shortfall in Auckland over the past twenty years. It was right. The policy of rationing residential land as demand grew rapidly and became more diverse means Auckland has world-leading house prices. This has had recent spill-over effects among smaller settlements as Aucklanders look to move outside the city.

 Despite this, the Commission endorsed Auckland's Unitary Plan and the government’s Medium Density Residential Standards, supporting even more intensive development. Well, it’s too late. Two wrongs don't make a right, Piling more housing into a falling market looks like the next big blunder.

 The first blunder: a predictable housing crisis

A city on an isthmus always faced growth challenges.  When Auckland Regional Council (ARC) in the 1990s dumped policies to disperse growth among four nodal subregions (north, west, central, and south) and opted instead to intensify development focused on the CBD, the writing was on the wall. 

The 1999 Regional Growth Strategy relied on boosting density within a metropolitan fence and on blind faith in the capacity of ageing infrastructure to accommodate it. It failed to consider how much employment land to provide, and where, and relied instead on an outdated model of the centralised, white-collar commuter city.  And it paid no attention to the fiscal, commercial, and social costs.

The Chairman of the ARC at the time, Phil Warren, acknowledged the prospect that the Strategy would deliver high house prices and heavy congestion, calling it “a work in progress”. This was too subtle for the planners, who got it attached to local government legislation in 2004.

The rest is history: high house prices, big-city congestion, expensive reconfiguring of ageing infrastructure, and a growing and unfair division of wealth.

From high growth to low growth

Over-emphasising intensification ahead of selective (or, better, satellite) city expansion has been costly. It was also risky, based on the presumption that Auckland would be a long-term people magnet despite the fact that more New Zealanders were already moving out than moving in.  Its no surprise that a trickle in the 1990s is a flow today.

So, the planners had to bank on international migration to prop up their projections despite another fact: migration is cyclical (Figure 1).  The arrivals boom of the last decade was running down well before it was sunk by Covid.  Numbers peaked in 2017, then fell in 2018 and 2019, departures not so much.

Figure 1: New Zealand International Migration Movements 1991-2020

Another fact: Auckland’s much-touted dominance of national growth has been falling since 1996 (Figure 2). With Covid, it stalled completely, while the rest of the country grew. So much for the heroic planning extrapolation of continuous growth.  

Figure 2: Population gains, Auckland and the Rest of New Zealand, 1991-2021


This is not what we expected – or planned

It appears that the Council justified its plans and infrastructure spending on flawed expectations. Compare Auckland’s June 2021 population with two sets of Statistics NZ projections, for example (Figure 3).  The Council used the medium projection published in 2017 (based on the 2013 census) to inform its updated plan, Auckland 2050. Published in 2018, this projected 29% more growth to 2021 than actually occurred.

The next projections, published in 2021 using the 2018 Census, reduced the base figure, but still assume a medium migration gain of 12,000 a year to 2023[1]. This, already, looks unachievable.  

Figure 3: Projected and Actual Population Outcomes

What are the consequences? 

Promoting multi-unit infill housing when growth stalls raises the risk of a surplus of dwellings, particularly apartments and units. Are we looking at a housing glut?


Between October 2014 and June 2018 Auckland Council issued 33,000 certificates of compliance for new dwellings. [2]  Yet, between 2013 and 2018, Auckland’s population grew by 161,000 people, the equivalent of 54,000 households at 3 persons per household. This suggests 21,000 too few houses built relative to population growth.

This shortfall may have led to a lift in household occupancy with more large multi-family, multi-generation and non-family households, and left more people homeless or living in institutions [3] which, incidentally, raises questions about the drive for more small dwellings. We certainly need to know more about social and demographic changes affecting housing demand before we can be confident that boosting multi-units indiscriminately across Auckland is the solution to the city's housing woes.

Overs …

Since then, measures taken to facilitate consenting have lifted construction. In the four years to December 2021 63,000 consents were issued, equivalent to around 60,000 completed dwellings. However, population growth of just 60,800 people over the four years to June 2021 would have generated demand only 21,000 new dwellings. This suggests a surplus of close to 40,000 new dwellings relative to population growth.

This is good news for new home seekers if it corrects an over-heated market, although it’s not clear that it resolves the need for well-founded and well-placed social housing.

While the figures here are estimates, the story they tell is compelling. The pendulum is swinging back, with the prospect that an emerging  housing surplus becomes a glut.  

Short-term supply constraints may defer that outcome. Yet, while house prices should fall, Auckland’s flawed growth strategy has already made life hard for young households, and less attractive for empty nesters. So, with borders reopening post-Covid, international departures may well exceed arrivals for several years. The population slump promises to be prolonged.

Stand by for a disrupted housing market

Over-supply is not good for the construction sector. Those with long memories know that a slump in housing demand packs a triple punch. It undermines many businesses committed to a key economic sector, with negative flow on effects. It slows household spending as equity falls, especially if interest rates rise. And it generates a flow of construction skills west, across the Tasman.

If the latest tranche of cookie cutter units proves too crowded and cramped, other skilled and motivated young households will be joining them. For those assigned unwillingly to “generation rent” higher wages and lower prices across the Tasman may still offer the best path to home ownership.

Where, then, will the new demand come from to pay for the council’s super-city commitments and aspirations?

[1]         The medium projection then provides for gains of 10,000 a year from 2023 to 2048.

[2]         This was completion rate of around 95% compared with consents issued in the previous   calendar year

[3]          Census data indicated an increase of only 20,100 households.

Wednesday, February 9, 2022

Auckland Light Rail – Sinking a Tunnel or Sinking a City?

Light Rail: A solution in search of a problem

Auckland has seen that the creation of commissions, teams, or working parties to implement simple-minded solutions to complex problems allows little room for debate on alternatives.  Like the creation of the supercity and Auckland’s Central Rail Link, the proposed CBD to Airport tunnelled light rail is a solution in search of a problem.

In Tuesday’s NZ Herald economist Tim Hazledine strips Auckland’s congestion problem back to basics. He raises some facts that seem to have been overlooked: the limited nature of the problem, the availability of congestion pricing to resolve it, the changing of CBD work, the low utility of a service stopping at 18 stations over a short distance, and Auckland’s “topsy turvey topography”.

There's not a lot to add to his critique, but here’s some more on the environmental issues and changes in Auckland’s growth, both of which render the LRT already obsolete.

Climate Emergency: Yeah?  Nah?…

In 2019 Auckland Council declared a Climate Emergency. In January 2022 the Government announced new light rail (LRT) from the CBD to Auckland Airport, flying in the face of that declaration: risk maps (1) put the LRT terminals, the airport and the CBD’s Western Viaduct, below the annual flood level before the end of the 60-year horizon used to justify it.

Inundation Prospects 2080: Auckland CBD and Airport

Even without sea level rise and with heroic assumptions about Auckland’s growth (more on that below), the project makes no economic sense. An abysmally low return, the likelihood of delays, and inevitable cost blowouts will undermine productivity.

And on the environmental front, tunnelling and the demand for concrete and steel will boost medium-term CO2 emissions despite the declared climate emergency (2).  The project may not even achieve a net greenhouse reduction before flooding at both ends of the line stymies its operations. (3)

So, there is an elephant in the tunnel.

It gets worse.

The Minister of Transport also announced another major construction project, a “second” harbour crossing, predictably endorsed by lobby group, Infrastructure New Zealand.  

The new crossing will  parallel the Auckland Harbour Bridge and share its northern approach. Unfortunately, this portion of State Highway One road already floods in severe storms. Given that it will flood more frequently as the sea level rises and storm events increase, the planned crossing will do little for network resilience. (4)

(We should mention that there is already a second crossing. Between West Auckland and North Shore, it will not be directly affected by climate change because its approaches are well above sea level).


Acknowledging a Climate Emergency should lead to reconsideration of urban form and infrastructure to deal with the structural drivers of emissions. Current plans for excessive public investment will provide disproportionate private benefits to the small minority of Auckland’s households and businesses that benefit from the operation of fixed-route, heavily subsidised  transit services. Turning attention, instead, to land use and the relationship where most people live and work (which is clearly not the CBD) should lead to more much equitable urban form and investment outcomes. 

The government, the council, and its agencies should be revising their long-term plans to recognise the reality of climate change and shifting urban form, and aim to reduce transport demand without penalising mobility. Instead, their aim seems to be to cement in historical city form in the face of unprecedented climate change .

The plans will seriously disrupt lives and, through poor use of capital and crowding out better investment, undermine productivity. On the plus side (?), they should sustain an oligopolistic civil engineering and infrastructure sector and prop up CBD and on-route property values. 

Incidentally, climate myopia is not confined to the public sector. It’s fascinating to see businesses taking up new, ”green” commercial space in downtown Auckland’s future flood zone, while vacancies increase in the elevated uptown offices they are abandoning.

Auckland at a tipping point

We need to acknowledge another elephant.

With Covid people think about a new normal in terms of public health. Equally significant, though, Covid has accelerated shifts already changing Auckland’s growth path. Consider the combined impacts of:

·         A cyclical downturn in immigration, which commenced in 2018, accelerated under Covid;

·         A wage-disadvantaged economy will prolong the migration deficit beyond the “Covid effect”;

·         Technology advances and changing work practices undermining central city growth;

·         Land, service, and congestion costs leading to the decentralisation of industry;

·         Changes in attitudes to work, careers, and lifestyle reshaping how and where people want to live, and where and when they want to work;

·         A continuing population push out of Auckland;

·         Technology changes in the distribution of goods (bar codes, robotics, consumer-focused logistics) and services (decentralisation and democratisation through IT and AI);

·         An increasingly obsolete 20th Century model of urban and commercial hierarchies behind Auckland’s long-term planning.

Auckland is unlikely to grow to match the bullish projections used by the current crop of city planners and builders.  Nor will urban design based on debatable assumptions about where people should live and work. 

Revising urban form - planning for dispersal

With or without climate change, it is time to ease over-investment in that ageing tiara, the city centre, and put more into our scattered diamonds, emerging urban villages, and our pearls on a string – the centres of Wellsford, Warkworth, Drury, Pokeno, Tuakau, and the like – north and south of Auckland.

It is time to focus investment on the infrastructure and amenity needs of a range of urban centers rather than on mindlessly sinking public funds into the CBD. This means developing and maintaining well-balanced, localised land use and services. On the transport front, decentralised investment can facilitate more active travel options and demand-based vehicle sharing. Flexible bus options can operate both within and between centres, the latter on strong corridor connections among them.

Fortuitously, supporting dispersal within and beyond the city means spreading the risks associated with climate change and adopting defensive rather than intensification strategies on the waterfront. 

Dealing with the risk of climate change

Of course, that’s just an opinion from outside the tent.

But here's my take on these diverging scenarios in the form of a risk/regret matrix.  The risks (“How likely are the climate change projections?”) fall on the vertical axis, the planning options on the horizontal axis (“Which development path shall we take”?)


The case for changing direction

The current investment path (which leads to cell A or C) looks wrong.  If we stay with it and the models are about right, we will write off a lot of investment and lower our ability to react to the impacts of climate change (Cell A). Even if the climate settles, we may still look back with regret at misplaced and under-costed commitments (Cell C). 

If, on the other hand, we shift to dispersed and flexible investment and the climate remains benign (Cell D), we would at least have a policy framework that should cope well with slower growth and reduce inequities within the city.

Finally, if we are fully exposed to the rigours of an unstable climate, then catering for dispersed development and opting for flexible public transport would provide the resilience and capacity to bounce back from climate disruption (Cell B).  The consequences of climate change may not be pleasant, but we will be better placed to deal with them. There will be regret – it’s too late to wind back the climate change clock – but we will have done our best to minimise it.

By the way …

Globally, the money-printing presses are grinding to a halt. The prospect that inflation will ease central and local government deficits will be offset, in part, by rising interest rates.  Money is no longer free, or debt without consequence. The case for major transport projects must be robust rather than shaky, definitive rather than indicative.

Proceed with the LRT and Auckland’s Climate Emergency will generate a fiscal crisis and see the integrity of Auckland’s infrastructure undermined as the promise and pressures of growth diminish, fiscal and financial liabilities increase, and the sea encroaches.

[1]           Based on the 2021 IPCC global warming consensus

[2]              For example, cement releases over 0.5tCO2/tonne and steel over 1t/tonne produced.

[3]              The Technical Appendices behind the Indicative Business Case, including Carbon Assessment, are not yet                      published.

[4]              Flooding could be offset by extensive and expensive raising of the road (State Highway One), some of which will       be needed anyway to keep the existing bridge functional. Expanding it at the same time, over 8km of vulnerable           shoreline, raises a whole lot more issues (and costs). though.