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Why being a liveable city is important economically

Len Brown made a big deal in his first term about making Auckland the world’s most liveable city and projects like the CRL are key to that vision. But when it comes to business and Auckland’s economy is that vision worth it or should we instead be focused on keeping rates as low as absolutely possible – as the likes of Cameron Brewer would have us do.

Well a study just released out of the US suggests the focus on liveability is exactly what we should be doing if we want to build the economy and attract entrepreneurs. Richard Florida writing at the Atlantic Cities:

Creating high-growth, high-impact entrepreneurial enterprises has become a common goal of cities. Metros and states have cut taxes, implemented entrepreneur-friendly business policies, launched their own venture capital efforts, and underwritten incubators and accelerators – all in the hope of creating the next Apples, Facebooks, Googles, and Twitters.

But what really attracts innovative entrepreneurs who create these economy-boosting companies?

The answers: talented workers, and the quality of life that the educated and ambitious have come to expect – not the low-tax, favorable-regulation approach that many state and local governments tout.

These are the findings in a new report from Endeavor Insight, the research department of the non-profit Endeavor, which focuses on fostering and mentoring “high-impact” entrepreneurs. Based on surveys and interviews with 150 founders of some of the country’s fastest-growing companies, the report answers the basic question, “what do the best entrepreneurs want in a city?” It offers basic evidence that cities should focus on factors and conditions that attract the talented, educated workers that fast-growing entrepreneurial enterprises need.

Looking at this sample of America’s most successful new businesses, Endeavor identified two fundamental patterns.

For one, size matters. These top business-creators gravitated towards cities with at least a million residents in the metro area. This offered the scale and diverse array of offerings needed to attract talent.

A city also needs to be able to appeal to the young and the restless. The entrepreneurs surveyed were a highly mobile bunch when they first started out. They moved often and easily in the early phases of their careers, following personal ties or certain lifestyle amenities while also seeking the right environment to launch their enterprises. But eighty percent of respondents had lived in their current city for at least two years before launching their companies, meaning that cities had to catch them early. And once they started their first company, these business leaders rarely moved. So attracting this mobile group at an early age is key.

That talent is the most important aspect is common sense but the key is that it’s much easier to attract talented workers to an liveable city than one that’s not – although in Auckland’s case we probably have to be even more liveable to make up for our geographic isolation. Of course the idea that talent is key is something many larger businesses have understood for some time and in a local context it’s one of the reasons behind a number of big corporate office developments in recent years. EY is one of the companies that falls into that bucket and this video from just over a year ago talks to some of these factors for why they chose to be where they are.

Other important factors included access to transport networks and proximity to customers/suppliers. And at the bottom of the list of most important

Perhaps even more interesting from the perspective of urban policy are the location factors that did not make the cut – those that high-growth entrepreneurs found to be of little consequence in their location decisions. At the very bottom of the list were taxes and business-friendly policies, which are, unfortunately, exactly the sorts of things so many states and cities continue to promote as silver bullets. Just 5 percent of the respondents mentioned low taxes as being important, and a measly 2 percent named other business-friendly policies as a factor in their location decisions.

To drive this point home, Endeavor tracked more than 100 of the most common descriptive words that entrepreneurs used to answer the question, “Why did you choose to found your company in the city that you did?” Tax doesn’t make the top 50, falling below “rent,” “park,” “restaurants,” and “schools.” In fact, it barely manages to edge out the word “girlfriend.” Of the top ten most popular words, “lived,” “live,” and “living” all make the cut. Talent takes the first slot.

Here’s the list of the top 100 words.

Entrepeneurs list

Of course having a vision for the most liveable city is one thing, it’s a completely different thing to actually deliver on that and that’s something that’s still seems a long way off in Auckland.

37 comments to Why being a liveable city is important economically

  • Kent Lundberg

    “Sixty-two per cent of recent transplants to Portland, Ore., said that the city’s bike friendliness was a factor in their decision to move there.” http://thirdwavecyclingblog.wordpress.com/2014/02/12/a-business-leader-speaks-out-why-separated-bike-lanes-are-important-to-a-city/

  • Sam

    Completely agree this is what attracts the best talent.

    This is why it’s harder to entice people from Europe to move here as their livability is better over there. Better public transport, better streetlife, etc. Even with Portugal, Spain, Greece, Ireland’s economies turning to custard, few of their brightest young talent would have wanted to immigrate here.

    Things may slowly be getting better.

  • JimboJones

    Just had a friend over on holiday from London, he moved there 10 years ago. He was shocked at hard it was to even cross a road here. We were walking down Maioro Street and he asked me how you could possibly ride a bike – he rides everywhere in London. He’s the kind of ‘talented’ person we need to attract, I think there were a lot of things he liked about being back, but the traffic, complete lack of cycling and PT infrastructure, and stupidly expensive houses seem to be putting him off the idea.

  • George D

    Which MP was today telling Auckland to stop building parks and pools? I forget.

  • JohnP

    This is really funny. Maybe someone should point out to Endeavour Insight that most of their descriptive words are not descriptive words- they are nouns and verbs. Seems to me all their list proves is people start their business in the town they live in as opposed to starting a business in a town you don’t live in. As for judging economic impact and policy by counting up words well I wish I had thought of that. All those silly analysts out there learning regression, data mining and multi-variate analysis- all they had to do was count words and not even know what an adjective is.

    • harrymc

      When I say “pedant” (which is a noun btw), I am describing a person who is so busy trying to make an irrelevant point that he fails see his foot in his moth.

      • harrymc

        oops! “mouth” – or maybe moth was ok?

      • nonsense

        Pedant comes from the latin’s gerundivus of pedo -avi -are. So it’s a bit of a verb.

      • JohnP

        ok so I will take my foot out of my moth just look enough to ask if you seriously think all we need to do is increase taxes and local rates and repeal anything that might appear to be business friendly and we will all achieve higher economic prosperity? Brave call. Most serious economists say growth comes first from capital increases or savings (including improvements in human capital in some literature) and from technology with augments capital. But anyway just ask people who started businesses and list words by number of times they use them. Some people don’t think that is light weight research at all!

        • conan

          “Most serious economists”

          A self approving phase right there. If they don’t agree with your summation then clearly they aren’t serious eh?

        • Bryce P

          We need to reduce spending on things the city doesn’t really need, rather than increasing rates. As evidenced in town last night, the city has embraced PT so we need to stop expanding existing roads and concentrate on PT investment for the next 15-20 years.

  • Phil,,

    Really???? Come on – lets look at cities where the really smart people hang out. London and New York.

    It may come as a complete surprise to you but the public transport systems in these two cities are awful. People would chop off their right arm not to have to travel on the London Underground every day and then give you their left arm to avoid the NY Metro. You may think it is some sort of utopia to start every day standing for an hour on the Piccadilly line or being mugged for your trainers in New York if you travel home late, but most of the workers in these cities would love to swap jobs and live in NZ. What they wouldn’t want to do is swap incomes and that is what attracts people to cities.

    Sure some companies can have head offices in San Francisco where its nice to live in Palo Alto but Google, Facebook, and HP as examples) don’t need to be in global hubs. Also I can assure you – if you work for these companies you are driving to and from the office.

    Most companies need to be in time zones that suit their customers and have access to a cheap and proficient work force. Auckland doesn’t offer either but as it is really the only city in NZ (the rest are small, flattened, and cold) it will continue to attract NZ’s finest even if they had to crawl to work. Attracting the worlds finest is never going to happen because we are in the wrong time zone and our taxes are too high.

    • Which just continues to show how little clue you actually have Phil.

      First Not everyone cares about income the same way you do, it might be hard to see that when you’re surrounded every day by people who only care about money but it doesn’t drive everyone.

      As for the Silicon Valley examples, many also have offices in downtown San Fran which workers clamber to be able to work in rather than have to travel to the valley. For those that do go to the valley (which is probably most), the various tech companies run huge fleets of private buses around SF then down to the campus’. SF just signed an agreement where those companies would pay to use city bus stops (as they were using them and clogging up city buses) and open up data to the city for planning purposes.

    • bbc

      I know quite a few people working for Google in San Fran and can assure you that none of them drive, they all take advantage of the free buses that Google provides such that they can actually get some work done. The other main location of Google in in Switzerland in Zurich, another paradise for PT, and a hell for people like you that appear to love cities like Atlanta. I’m also in contact with several people who work there and the high standard of living in Switzerland, combined with how liveable Zurich is as a city is one reason that drew Google there. The companies want to locate to places where people want to live, and the fact of the matter is the vast majority of people who want to work for Google would choose to work elsewhere if Google located them in a car only accessible location.

    • Peter

      “You may think it is some sort of utopia to start every day standing for an hour on the Piccadilly line or being mugged for your trainers in New York if you travel home late, but most of the workers in these cities would love to swap jobs and live in NZ.”

      How did you come to that sweeping generalization? I’m certain the vast majority of New Yorkers or Londoners have no opinion about living and commuting in New Zealand. I have lived in New York and ridden the NYC subway the past 15 years and wouldn’t trade its convenience for anything. Sure, sometimes during rush hour I might have to stand in a crowded subway car but it only lasts about 10-15 minutes, tops. Having 24 hour subway service is such a luxury in my opinion. I ride the #7 train from my neighborhood in the borough of Queens to mid-town Manhattan and have done so at all times of day and night. I have never felt in danger of being “mugged for my trainers.”

      So, just because Auckland is in the “wrong” time zone, you all might as well give up on improving public mobility. Such a nonsensical opinion.

  • Brendon Harre

    We will never get the sort of liveability environment people seem to want because we don’t give enough taxes to local government. People in NZ seem to have a misguided idea that all of these great amenities will come from planning rules. Wrong. If you want bike lanes, parks and public transport you have to pay for it. Another thing is kiwis seem to think because they have visited central Copenhagen or Amsterdam or whatever liveable city of the month that the solution is a tram or bike lane etc. What they haven’t looked at is the huge ring road motorways on the periphery that bulk traffic uses, trucks in particular. NZ actually has a deficit in both PT and motorways. Google map some towns and cities in NZ and compare them to say a German equivalent. If you want to look at a country with the same population density check out Finland.

    • Have you not noticed the enormous motorway encircling Central Auckland Brendon? Or the western ring route motorway. We have stacks of roads and motorways already, far more than a typical European region of 1.5m people. It’s not roads we are missing, but just about everything else.

      We also pay plenty in tax already, more than enough for our needs. Problem is both local and central government keep squandering it on expensive but futile projects to widen and duplicate roads we already have.

      Oh and I’ve spent a bit of time in Finland, Helsinki has those trams and cycleways, not to mention a commuter rail network and a proper metro!

    • JohnP

      Exactly. People visit a successful city with a wealthy population who are typically highly educated and entrepreneurial who can afford cycleways and fancy PT and they conclude all you need is the PT and bike lanes to be the same.

      • counterpoint

        “…who can afford cycleways and fancy PT…”

        The thing I don’t get about this comment is that in the New Zealand context, cycleways and “fancy PT” typically cost less than motorways. In the case of cycleways this can be by several orders of magnitude. Perhaps the very reason they can afford cycleways and “fancy” PT is less due to their education and entrepreneurship, and more due the fact they build less expensive and ineffective transport infrastructure…

        Just a thought

  • Brendon Harre

    Nick R my wife is Finnish and I have lived for 6 years in Espoo, next to Helsinki. 20 cents in the dollar of my PAYE went to local government and they built amazing highways, with fantastic bus lanes, there was also trains and bike lanes. I believe the greater Helsinki region (Helsinki, Espoo, Kaunianen, Vantaa) has more highways than Auckland and I gladly concede there PT system was many times better. Finland as a whole certainly has more highways in comparison to NZ, see my below article. But lets be clear Finland spends more on transport than we do and it is the locals who pay. My Finnish sister in law is visiting us in North Canterbury and thinks our transport system is rubbish. She also doesn’t understand the whole lifestyle block obsession.

    http://www.interest.co.nz/opinion/65197/brendon-harre-thinks-we-have-problem-poor-quality-and-inadequate-quantity-local-infras

    I am more pragamtic than say a Phil, if residents want bikelanes and PT and are prepared to pay for it, why not. What I am against is trying to ‘pay’ for it by restricting residential land supply. That transfers costs to the property-less and gains to the propertied.

  • Brendon Harre

    Alain Bertaud. Former Principal Planner World Bank.
    Urban planners have been inventing all sorts of abstractly worded
    objectives to justify their plans for our future cities – smart growth,
    livability, sustainability, are among the most recent fads.
    There is nothing wrong, of course, for a city to try to be smart,
    liveable, or sustainable.

    But for some reasons these vague and benign sounding objectives
    usually become a proxy for imposing planning regulations that severely limit the supply of buildable land and
    the number of housing units built, resulting in ever higher housing prices. In the name of smart growth or
    sustainability, planners decide that densities should be lower in some places and higher in others. Population
    densities are not a design parameter whose value depends on the whim of planners but are consumption
    indicators which are set by markets.

    Even the Communist Party of China recently declared that resource allocation is best achieved through
    markets; why can’t urban planners in so-called market economies reach the same conclusions and let markets
    decide how much land and floor space households and firms will consume in different locations?

    It is time for planners to abandon abstract objectives and to focus their efforts on two measurable outcomes
    that have always mattered since the growth of large cities during the 19th century’s industrial revolution:
    workers’ spatial mobility and housing affordability.

    As a city develops, nothing is more important than maintaining mobility and housing affordability.
    Mobility takes two forms: first, the ability to travel in less than an hour from one part of a city to another; and
    second, the ability to trade dwellings easily with low transactions costs.

    Housing mobility allows households to move to the location that best maximize their welfare. Affordability
    is the ability for any urban household to be able to rent a dwelling for less than a 25% of its monthly income,
    or to buy one for less than about three time its yearly income.

  • Brendon Harre

    Phil I suspect if it was local residents taxes that funded local transport then residents would very pragmatically choose the most value for money transport options. When someone else is paying -Wellington or those priced out of the property market, then value for money is not so important. Unfortunately transport can never be fully privatised. New trunk infrastructure is always planned and purchased by the state (Central or Local) using their power of compulsory purchase. This right cannot be handed out to private individuals to be freely used in the market place. Alain Bertaud discusses this well.

  • Phil,,

    I agree with you. A good argument exists to replace rates with poll tax. It should be a levy (tax) against people benefiting from the spending, not just a tax against investment/savings (home ownership)

    • Brendon Harre

      Are there any places where local or central government use poll taxes? They are not popular politically are they? and how easy would they be to administer? I would think that petrol and income tax going to local rather than central government would be easier to administer, while still capturing most of the beneficiaries. Everyone when applying for their tax codes would record which municipality they live in. Some of the petrol tax sold within a municipality would go to local government. Local government revenue would reflect growing economic activity. Poll taxes or rates because they are also paid by those who are economically inactive like the elderly do not necessarily reflect economic activity. I think this is an advantage because it incentivises Local government to support the local economy.

      I think Central and Local government should do a deal regarding housing and transport whereby responsibility and taxation power for transport is passed to Local government and the legislation empowering this should say the purpose is to maintain mobility and housing affordability. Mobility takes two forms: first, the ability to travel in less than an hour from one part of a city to another; and second, the ability to trade dwellings easily with low transactions costs. Note this means a low shallow property curve between the periphery to centre rather than the steep high one we have now. Allowing a city to build up and out gives this low shallow curve.

      Housing mobility allows households to move to the location that best maximize their welfare. Affordability is the ability for any urban household to be able to rent a dwelling for less than a 25% of its monthly income, or to buy one for less than about three time its yearly income

  • Phil,,

    Poll tax/council tax – call it what you will but in my opinion all households should pay tax to local authorities and it shouldn’t come from home owners in the form of rates. Why should a home owner subsidise people who choose to rent? Doesn’t sound fair to me.
    I have lived in countries where there is both regional and state tax, in my experience it favours the wealthy regions. I’m not sure it would be fair for NZ or popular outside of Auckland.
    As for ‘affordable housing’ I take your points and respect your opinion but I am opposed to subsidised housing and think everyone should pay market rates for houses. If you can not afford to buy then you rent, if you can not afford to rent you live with your parents or get 2 jobs. For me the state should provide emergency shelter and thats where it stops. That also means the state shouldn’t artificially interfere in the housing market – by for example – re zoning to make Remuera (as an example) more affordable by allowing cheap density high rise.
    Just my opinion.

    • They don’t, renters pay rates through their rent. You think I pay four sets of rates out of my own pocket as a gift to my tenants, out of the goodness of my heart? Puh-lease.

      Next you’ll be telling me that my partner doesn’t pay petrol tax when she fills the tank because it’s my name that happens to be on the ownership papers.

      Oh and if you don’t want artificial interference in the housing market then that is just excellent in my opinion. We can remove zoning regulations and leave the market to respond. However methinks Remuera might look a bit different if we didn’t interfere there.

      • Phil,,

        Nick, with all due respect you are wrong. Renters pay what ever the current market value is for the home at the time they negotiate the rent. The rates have nothing to do with it. I don’t rent property out in Auckland and think hey, I’ll charge $500 a week + $100 for the rates. I charge $600 because that’s the most I can get.
        You know this to be true but your brand of socialism just doesn’t want to accept it.
        Your analogy would be more correct if you expected Avis to pay your fuel tax because you rented a car for your girlfriend.
        So – why isn’t a council tax levied against every household fair?

        • Really Phil? Saying things like “you know this to be true” and then deciding I’m so e flavour of socialist, and I can’t accept the truth. That’s very weak argument. Try a little logic perhaps, and leave the “dirty socialist know it’s the truth but can’t accept reality” crap for talkback radio.

          We already have a council tax levied against every household, it’s call rates. Every household that lives in a dwelling pays it. Yes through rent. The rental market is a market. The market price of rent isn’t some random number, it’s an aggregate of market factors. Factors including the cost of supply.

          Do I really need to lecture someone who claims to be a trader on the function of markets?

          If the cost of oil production goes up the price goes up, all else being equal. Likewise if rates went up then rent would go up.

          You don’t set the market price of rent, the market does. The market responds, in part, to the cost of housing supply. Rates are a cost.

          • Phil/

            Oh Nicky – there you go – shooting yourself in the foot again!

            The costs of production have very little to do with the wholesale value of oil. It is not about adding up all the costs and getting a fair price per barrel. Its all about what the market will pay for the oil. And please – don’t even bother to try and argue that with me – Im the expert you are not.

            As for rates – complete rubbish. I charge the maximum amount of rent I can get regardless of what the rates are. But I would be more than happy to have a one off reduction of rental charges across the board in NZ if the Government ditched rates and started charging everyone council tax. Somehow I doubt you would like that to happen.

          • counterpoint

            “The costs of production have very little to do with the wholesale value of oil.”

            Fine. But this is a response to

            “If the cost of oil production goes up the price goes up, all else being equal.”

            Both of these things can be true, but is it really the case that if the cost of production goes up, the price of oil does not go up? Don’t forget that this isn’t a discussion about the cost of oil, so your “expert” opinion counts for nothing. This is an analogy about the component of rents which are comprised of rates. So the real question is do renters pay rates? And if they don’t, would their rental fee change were rates to go up? Cause if it did, it would seem as though they were, at least in effect, paying rates, wouldn’t it?

          • Right Phil, so if rates went up ten grand per house, you are saying there would be no change in the maximum you could charge, I.e. the market price?

            So there is zero market response to an increase in the cost of production?

            It’s quite simple, the maximum you can charge is the market price, by definition. If rent didn’t include rates but tenants had to pay it separately as a household tax, then the market price, and therefore the maximum you could get, would be lower.

            By the way, no one said anything about adding up the real costs. A little logic lesson for you: saying the cost of production is a factor in price is not the same as saying the cost of production is the one and only factor.

            But of course you’re the big expert so I’m sure you know this already.

    • Brendon Harre

      I currently live in Canterbury, a poorer region and I want to pay some of my petrol and income tax to go to my local or regional council to improve my internationally pathetic transport infrastructure and local amenities. 90% of my taxes go Wellington and 10% to Local government. I would prefer it to be say 80% to Wellington and 20% to Local government. I think many places if given the choice would choose more of their taxes to stay locally.

      I don’t get your subsidy argument. All I am asking is the introduction of more competition into the housing market by allowing the city to grow up and out. Would you argue reforming a market to break up a monopoly supplier is subsidising consumers because they get lower prices?

  • Brendon Harre

    Hi Phil re: “I would just add though that until ‘the revolution’ the 1 percenters (of which I am happy to admit includes me) will not rush to allow our property portfolios to lose half their value.”

    The value of your property portfolio is of no concern to me. The rules and institutions that make up the market should through the democratic system (no need for a revolution mate) serve the greater good not the 1%.

    I have come to see housing affordability as a rights issue. Places where it is a explicit right to build new houses do not have significant housing inflation. In effect due to increased competition from new housing, the market supply is elastic. So increases in demand translates to more houses rather than higher prices. That explicit right might be Germany’s right to build in their constitution or Texas MUD legislation that entitles communities to get together with developers and create new municipalities for the purpose of converting dirt into housing.

    Re whether this requires the intensification of Remuera. I don’t know. But if the good folk in Auckland decide to relax some of the local planning rules, it is still the right of property owners to choose to intensify or not. I suspect the much cheaper housing will come from the periphery of Auckland and also other towns and cities in NZ but it is only right that cities should be allowed to grow up as well as out.

    I think you should reconfigure your portfolio for rental yield not capital gain and you should assume in the long term rentals will be roughly 25% of your tenants income. If you don’t and there is some sort of crash in the future well it is not societies job to protect you.

  • Phil.>

    Hi Brendon,

    I dont believe in huge property portfolios (although I have quite a large investment in $ terms) because of the boom and bust nature of the property market. Money is too cheap to borrow and people should realise that a house that costs $200k to build shouldn’t ever be worth $500k. The property I have invested in is because of location. I tend to buy sea views in areas where you can not be built out or add intensification. A classic example of this would be buying an apartment in Romes Piazza Navona is a great investment because it is a finite market where as buying a house in Florida is a bad investment because if they need more homes they just drain another swamp.

    However I do not see housing affordability as a human right. Its a dangerous starting point with no end. I mean – do we then say car ownership is a human right? You may well laugh but I know many people who argue petrol prices should be subsidised by the tax payer because the right to drive is a basic human right (I dont agree with that and think petrol should have higher taxes).
    I dont like council housing because I think people need to pay their own way. Of course there are always exceptions and that’s why the council/govt needs to provide shelter in emergency situations rather than have people on the street. However I have no patience for 6 children families screaming out for welfare, the parents should have accepted they could not afford kids before they started popping them out. I believe in welfare as being a safety net – not a lifestyle option.

    I dont look for society to protect investors as I believe in accountability. For example I think the US Fed should have let the banks fail and have it sorted out in the private sector instead of tarp funds.

    • Brendon Harre

      Re: “I do not see housing affordability as a human right”. I don’t mean the government has a responsibility to provide a house for all (or some groups such as the poor) like some cold war Soviet state. I mean the institutions of society -planning rules, infrastructure provision etc, should assist not hinder, individuals to independently provide for themselves housing wise. This should be a legislated goal for Councils and transport providers. Alain Bertaud says something very similar without going as far as saying explicitly that individuals should have the “right” to be able to independently provide for themselves housing wise.

      In my opinion this should be how NZ society interprets the right to affordable housing.

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