The Answer Is Urban Consolidation – What Was The Question?

Perpetuating the Myth

The Green Party is perpetuating the claim that development beyond Auckland’s “city limits” imposes a high cost on ratepayers.  A spokesperson claims that the current Auckland plan which allows for some new development outside the current urban area, “will cost ratepayers $42b billion to 2042, an annual levy of $200 per ratepayer”  according to a report in the New Zealand Herald.   

But is just so happens that  study on which these calculations are based is a flawed commissioned report  rather than a peer reviewed academic study (Roman Trubka, Peter Newman and Darren Bilsborough (2008) Assessing the Costs of Alternative Development Paths in Australian Cities, Curtin University Sustainability Policy Institute, Fremantle, Report commissioned by Parsons Brinckerhoff Australia). 

Oops – Contradictory Claims

The authors of the Curtin report acknowledged at the outset that

"The challenge ...  is that infrastructure costs are so heavily dependent on area-specific values.  For instance, road costs among different prospective development areas may vary based on the necessity for major arterial roads, costs for sewerage and water infrastructure could vary immensely depending on terrain and trenching conditions, and many infrastructure components will differ depending on the level and degree of excess capacity” (p.4)

So why did they try to develop a generic tool for estimating the cost of urban development in Australian cities based on a mishmash of evidence from different cities and suburbs in Australia and the United States?  And why would anyone even contemplate applying such “findings” to Auckland with its distinctive physical geography, so different from its Australian counterparts? 

A Quick Critique

The Productivity Commission actually considered the study, among others, in a brief review of housing costs and urban form (Appendix B of the final report).  It noted substantive differences in the physical and social settings  behind the data assembled to support the  study’s claim to some sort of universal cost relationship between development and distance from the city centre.

And there are glaring methodological deficiencies:

“An obvious one is mixing discount rates (zero for infrastructure capital costs, 7% for transport-related costs, and 3% for health and emission costs), and omitting operating costs for some items (non-transport infrastructure) and not others (pp. 295-296)

To these flaws can be added the assumption of a cost of Aus$170/tonne for carbon emissions when the carbon floor price set by the Australian government (of $15) has since been rescinded and figures at or below $10.00 may be more appropriate based on today’s European prices.  So the environmental argument is seriously overstated.

And the analysis fails to deal with the costs of expanding the capacity of ageing infrastructure in long-established urban areas, of remediating services designed for far lower loadings than they are now expected to sustain, of the health impacts of apartment living in an increasingly brown – not green – environment, and of reductions in the physical and socialresilience of high density and often congested urban areas in the face of possible natural disasters or infrastructure failures.

Penalising the Household - is that Socially Sustainable, or Politically Justified? 

Even if it can be proven that the balance of public benefits favours medium or high density living, is there any evidence that such savings will not be offset by the better affordability of traditional suburban housing and the benefits residents derive from living into it?

Putting aside  flawed data and methodology for the moment, the results indicate that 70% of the differences in costs between decentralised and central locations is attributable to travel and transport.  Over half of these comprise travel costs and  time carried  by households.  If we take these private costs out of the equation the authors' estimate of the difference  between centralised and decentralised development falls by 40%.  

The resulting "present cost" for the average household (whatever that might be) of A$22,000 is easily  justified by savings on land and housing in “outer” areas, the benefits households get  from  additional space, greater choice over housing style, and the security and community benefits of suburban environments.

So who pays if we deny people the choice of living in medium to low density housing?  Mainly new households through exclusion from household ownership, or commitment to punitive mortgages, or through the insidious extension of housing poverty through ever higher income brackets. 

So what about the Auckland case: where does the evidence really lie?

Surprisingly-- given the obstinacy of the planners and politicians pushing the consolidation barrow --   no-one has actually done the analysis required to determine the relative economic benefits of different urban development paths for Auckland.  

A technical analysis of the gaps in the Auckland Regional Growth Strategy made the point that the planning  model that informed it was hardly up to the task.  The principal conclusion that came from using the Regional Council's land use and transport  model was that there is “little [identified] economic difference between growth options”.(McDermott Fairgray Ltd (1999) Gap Analysis, Review and Recommendations: Auckland Regional Growth Strategy, Technical Report, Auckland Regional Growth Forum )

The failure of the model to demonstrate economic differences between alternative urban forms was used to suggest that intensification imposes no additional costs than traditional  decentralised development.  Of course, the converse is true – although it has been conveniently ignored: there were no demonstrable economic benefits from consolidation or net cost penalties to decentralisation.  This suggests that it would make most sense to let the market prevail, subject  to broad environmental standards and fiscal constraints.   

The  conclusion  that consolidation was the best option for Auckland ignores other shortcomings  in the  model that could  tip the balance  in favour of strategic decentralisation:

• The failure to actually define realistic alternatives that would  clearly demonstrate economic differences;
• A failure to evaluate the marginal rather than average impacts of differences in urban form;
• The failure to identify the costs of implementation.
• Ambiguous measurement (both omissions and double counting);

To this list we can add underestimation of the high infrastructure and development costs associated with brownfield development and urban consolidation.  These are turning up today in high financial and development contributions for inner city projects.

Calling for  Consolidation – a Case of Artificial Intelligence

So why is the Auckland Spatial Plan so fixated on consolidation –despite the begrudging lip service the final version pays to decentralisation (a small concession to market reality that appears to have  upset  the Green spokesperson)?

I can only think it is "artificial intelligence": if enough people say the same thing, it must be right.  Consensus becomes an excuse for lack of evidence, critical analysis, or even common sense.  Groupthink prevails,: a phenomenon defined by psychologist Irving Janis as:

A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action (Janis, I L (1972). Victims of Groupthink Houghton Mifflin p. 9)

Contrary evidence is dismissed while reports favouring an emerging consensus, such as the Curtin one, obtain a degree of currency which, while unjustified,  plays into the hands of policy makers looking for easy (or ideologically comfortable) answers to difficult problems.

And so we blunder on, potentially building our cities on myth and misconception and reinforcing the gap betwen generations as we do it.

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Being dense about dwellings: check the numbers!

Good news, bad news
In a previous posting I suggested that in New Zealand we are heading into the perfect housing storm. 

Now we have news that house prices and rentals are on the climb again, although stocks remain tight, as an annual inflation rate of 5.3% hits a 21 year high.  The economists are suggesting this is good news, although it means interest rates may have to be pushed up sooner than expected.

Well the bad news is that the housing crisis might just have worsened. 

Sure, its not an across-the-board crisis, but it is very real to large and important sections of our population.  Lack of housing affordability remains a threat to social sustainability and economic recovery.  So how are we responding to the threat -- or perhaps now the reality -- of a perfect housing storm?  What provisions are we making in our urban plans?

Smaller boxes – bigger footprint
Urban planners are still more preoccupied with fitting more dwellings into smaller areas than they are with responding to people's needs for housing.  It might help shift this fixation to point out that the preferred compact city solution is not only socially destructive, because it doesn't reflect need and does nothing for affordability, but it is also environmentally short-sighted.

Think about the metrics.

Take 100 people and house them at 1.5 residents per dwelling.  That’s arbitrary, but it reflects a widespread expectation that most new dwellings will house smaller households in central locations. 

In the interests of sustainability, let’s assume the resulting 67 dwellings are small, so that we can fit more of them onto less land.  Say, 120 sq meters per dwelling.  That totals 8,000 sq metres or thereabouts (more if we count the common areas in apartment buildings), 80 sq metres per person.  It’s also 67 kitchens, 67 lounges, maybe 67 media centres, at least 67 bathrooms, maybe some additional lighting for common areas and even some lifts.

Now take 100 people and fit them in at 3 people per dwelling, terraces, duplexes or fully detached houses.  Let’s make the dwellings bigger, say 200 sq metres.  We now need only 33 dwellings, 6,600 sq metres of dwelling, or 66 sq metres per person.  Less space per person, sure, but that's okay because now we need just half the kitchens, bathrooms, lounges and media centres.  However we look at it, we’ve used a lot less resources and have a spare 1,400 sq metres for open space, extra gardens, courtyards, whatever.  And with the capacity for extra bedrooms, we have much more flexible housing stock.

So which is the more sustainable?  Surely bigger dwellings with higher occupancies.  Surprised?

Can we plan for higher occupancies?
Now, we can’t engineer household size, can we?  Well, actually we already do.  With a housing shortfall we now require young adults to stay longer with their parents, force singles to move in with others,  require couples to take on boarders, or even promote multi-family living, all boosting occupancies.

So let’s at least understand that building more, smaller dwellings, especially medium- or high-rise apartments, does not necessarily deliver sustainable urban settlement, nor does it provide the flexibility to make the higher occupancy "solutions" we force on people easy to live with.

Larger dwellings do allow for diverse living arrangements, though; more multi-generational living, more non-family households, more sharing.  Like them or not, such arrangements are likely to increase, if only in response to the affordability issues we seem intent on entrenching.

So what’s happening to demand?
So why are planners trying to put more people into smaller dwellings anyway?  How relevant is the expectation that average household size will be smaller in the future than it has been in the past?

Most forecasts of housing “demand” simply extrapolate diminishing occupancy across demographic projections.  its all about the coefficients, and the assumption that household structures won’t change much in the medium to long-term. 

Well, it’s not that simple.

Things like an unexpected boom in the dissolution of relationships over the past three or four decades, the rapid growth in migration, and the recent stabilisation and even reversal in occupancy rates undermine the conceit that we can accurately forecast the structure, preferences, and behaviour of households 20 or 30 years hence.  If that's the case, why are our prescriptions for housing increasingly rigid?

Projecting household types
To understand this let’s stay with the current ”best”  projections of what households might look like in the future, and think about the implications for housing.

Statistics New Zealand (SNZ) medium projections to 2031 indicate that families with children will account for a minority of household growth in our main cities (see chart).  The figures may even shrink in Wellington and Christchurch.  According to this projection, they will make up 28% of new households in Auckland, though, so we could still need over 71,000 new dwellings for families there.  It’s reasonable to expect that detached housing will still work best for them.

Household Category Projections, Statistics New Zealand

Couples will account for more growth, though, maybe 36% of new households in Auckland according to SNZ, and singles for 32%.  So let's think about the preferences of the small household segment. 

So what will the small household segment look  like?
To get a feel for this, I divided the SNZ age projections into four (setting aside the main family age cohorts) : young adults (aged 20-29), empty nesters (the kids have left home, aged 50-64); early retirees (65-79), and later retirees (80+).  These are the groups most small households will come from.  But they have quite different housing preferences, so the nature of future demand for smaller dwellings depends on which ones grow the most.

Age-Based Housing Demand Segments (based on SNZ Projections)

So who will dominate growth?
Empty nesters and retirees will dominate the demand for new houses.  And these are not usually people who want to move into small, centralised apartments, at least not as a primary residence. 

Many of them have significant financial equity in their existing homes and emotional equity in their neighbourhoods.  If they move into smaller dwellings, they won’t be that small!  They will expect them to be well appointed and well located, probably close to where they already live. 

They won't want high or even medium rise.  And they are  likely to seek three or four bedrooms.  They will need the space to maintain active  lives into their seventies and eighties, more so than past generations.  They will be accommodating visiting family and friends; they will need offices, hobby areas, workshops, and storage. 

Here’s a model to take seriously if we are serious about sustainability

And as the baby boomers eventually become less independent, we might expect them to head into retirement villages, already a booming – and highly sustainable – form of housing.

In fact, we should look seriously at retirement villages if we want to understand the sorts of arrangements that could dominate new housing demand over the next 30 years.  Here, the market seems to have got it right. 

They offer varied living arrangements – detached and semi detached housing, terraces, apartments, and even on-site nursing facilities.  They offer medium density living with plenty of green space and gardens; common areas and shared facilities for recreation and leisure; plenty of on-site activity to cut down transport needs but also on-site parking to reflect the realities of modern living.  They achieve density and sustainability with style.  And – there must be a lesson here – they do it overwhelmingly in suburban if not city edge localities. 

So let's not assume that rising house prices mean a return to business as usual.  Far from it - freeing up the housing market must remain a top priority if the economy is in recovery mode.  And let's start looking to the suburbs  –and beyond  – for the housing solutions that might just help it stay that way.