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Location affordability in New Zealand cities – is greenfield growth really affordable?

Several weeks ago I attended the annual New Zealand Association of Economists conference in Auckland. Geoff Cooper, Auckland Council’s Chief Economist, had organised several sessions on urban issues, and as a result there was a lot of excellent discussion of urban issues and Auckland’s housing market. You can see the full conference programme and some papers here.

At the conference, I presented some new research on housing and transport costs in New Zealand’s main urban areas. My working paper, enticingly entitled Location Affordability in New Zealand Cities: An Intra-Urban and Comparative Perspective, can be read in full here (pdf). Before I discuss the results, I’d like to thank my employer, MRCagney, for giving me the time and the data to write the paper, along with several of my colleagues for help with the analysis, and Geoff Cooper for suggesting the topic and providing helpful feedback along the way.

The aim of the paper was to provide broader and more meaningful estimates of location affordability that take into account all costs faced by households. In my view, widely-reported sources such as Massey University’s Home Affordability Report have too narrow a focus, looking only at house prices. However, a range of research has found that transport costs vary between different locations depending upon a range of factors such as urban form, availability of transport, and accessibility to jobs and services. And transport costs are pretty large for many households!

I used two methods to provide a more comprehensive estimate of location affordability in Auckland, Wellington, and Canterbury. First, I used Census 2013 data to estimate household housing, car ownership, and commute spending at a detailed area level within each of the three regions. This allowed me to estimate variations in affordability between areas within individual regions. Second, I used household budget survey data to get a sense of how New Zealand cities stack up against other New World cities.

My main findings were as follows:

  • First, rents (a proxy measure for housing costs) tended to fall with distance from the city centre. However, commute costs tended to rise with distance – meaning that outlying areas were less affordable for residents once all costs are included. This was consistent with previous work on location affordability in New Zealand and the United States.
  • Second, international comparisons suggest that Auckland and Wellington have relatively high housing costs and that this may be driving some of the affordability findings. While this finding lines up with previous research that’s focused on house prices alone, it’s important to note that the location affordability estimates suggest that a focus on greenfields growth alone may not save households money.
  • Third, while I didn’t identify any specific policy recommendations, I’d recommend that (a) policymakers should consider all location-related costs when attempting to address affordability for households and that (b) further research should focus on removing barriers to increasing the supply of dwellings in relatively accessible areas.

And now for some pictures.

These maps show two measures of location affordability within Auckland. The left-hand map shows estimated housing costs (i.e. rents) as a share of median household incomes at a detailed area level. Broadly speaking, this map shows that expected housing costs fall between 20% and 30% of household income in most of the city, although some areas are relatively less affordable.

The right-hand map, on the other hand, incorporates expected car ownership and commute costs. Overall location affordability is lower throughout the city. Expected housing and transport costs rise to 40-50% in areas of west and south Auckland, as well as the entire Whangaparoa Peninsula. The most affordable areas for their residents tend to be in Auckland’s inner isthmus suburbs.

Auckland map 1 Rent share Auckland map 2 HT share

(Click to enlarge)

I’ve also combined this data into a graph that presents location affordability by distance from Auckland’s city centre. The bottom (blue) line shows housing costs as a share of median household income, weighted across all area units within each 2-kilometre concentric circle radiating outwards from the city centre. It shows that, on average, households spend a similar share of their overall income on housing costs in both close-in and outlying suburbs.

The top (red) line shows that combined housing, car ownership, and commute costs increase as a share of household incomes with increasing distance from the city centre. On average, households that live further out of Auckland spend more on location-related costs, as lower lower rents are offset by added commute costs.

Auckland H_T distance chart

The results for Wellington and Christchurch were broadly similar – although with a few interesting differences related to their urban form and transport choices. However, as this is the Auckland Transport Blog, I’m going to suggest that you read the paper to see those results. It’s long, but it also presents a lot of new data on housing and transport costs in New Zealand.

96 comments to Location affordability in New Zealand cities – is greenfield growth really affordable?

  • I’m sorry if this doesn’t refer specifically to Auckland’s problems but: we hear about telecommuting but how much is actually going on? How many people need to be physically at their employers’ premises? I have a feeling that many employers haven’t taken advantage of the possibilities. I have a friend who teaches people world-wide very successfully on line from my small village, and we haven’t even got cable broadband. The potential savings are great.

    • Fred

      Work from home has stayed pretty constant at around 7% in the last 3 censuses.

      • Thanks for that figure. There is also the possibility of satellite offices/factories in smaller towns, which would be cheaper. But management is always keen on centralisation.

        • I can tell you that after the Chch earthquakes, many professional firms had to split their staff over many locations within Chch. This was widely considered a disaster as it really cut down on the face to face time and meant that there was far less collaboration between employees.

          My firm was one of the few that managed to find premises large enough to accommodate all the staff. I know that many other firms were very jealous of that and all of them are desperately looking forward to having all their staff together again.

          Maybe there are some industries (more process driven admin services perhaps) where splitting stuff up all over the place works but for most SMEs in NZ I don’t think that is a long term solution. You are ignoring the human factor and the advantages of casual face to face encounters or being able to pop over and ask someone a question.

          Remember the new CEO of Intel has severely curtailed the use of remote working because she said it was cutting down on cross fertilisation of ideas. Telling for me it was a woman who thought that as I think it is often women who value the human contact more than men.

          • It does rather depend on the type of job, doesn’t it. And as you see, I am able to join in a discussion from my little old shack on a metalled road in the middle of nowhere (well, enewaR!) There’s Skype, too, for conferences. I think that many bosses like to keep a literal eye on their staff (e.g. Dilbert’s pointy-hair boss). As you say, there may be some businesses who can work this way but not enough do so. I’m thinking of the “shadow factories” in Britain in WWII which produced aircraft and engines away from the parent factories: they worked well, even without the Internet. But that was producton, not design. There’s also the possibility of having a fortnightly meeting when people DO all come together. And remember too that meetings can be a good way of wasting time!

          • conan

            Yahoo I think you’ll find. The CEO of Intel is a he.

          • You are probably thinking of the Yahoo CEO Marissa Mayer rather than Intel. She cut back on remote working early last year:

            http://www.theguardian.com/technology/2013/feb/25/yahoo-chief-bans-working-home

          • Sorry quite right, Yahoo!

            Robin, yes as I said some more process driven things such as call centres, manufacturing and admin back office stuff could be a candidate for moving out to satellites. As long as the people are willing to follow it, which apparently a lot of young people don’t want to do as they are flocking to the cities.

            However, NZ is generally a service industry company and increasingly a knowledge industry economy. There is no point in retail locating all their stores to where there are very few other people. There is no point in putting all the restaurants and cafes in the middle of nowhere.

            With knowledge based industries (like mine, law) the value of face to face communication and human relationships is immense – we are all still social apes at the end of the day. I am much more likely to involve other lawyers if I have spoken to them face to face. Clients don’t want to deal with someone on the end of a Skype call. They want to sit down and look you in the eye and be able to assess you as a person.

            I worked as a programmer before and there is some scope for working from home in that space. I do wonder though how many of the cock ups in scoping, specifications and implementation come from the constant striving to minimise human interaction and do everything remotely. Maybe fine again for some person in back office just banging out code mindlessly but solving human based problems means human interaction.

            Humans in cities have travelled to central locations for work for hundreds of years and I can’t see that changing any time soon.

          • Peter Nunns

            The example of Christchurch is an excellent one – essentially, we’ve just had a “natural experiment” in which economic activity has been decentralised. Some clever economist should take a look at the impact on productivity!

        • conan

          “But management is always keen on centralisation”

          I believe that the workers are keen on it too. The collaboration available and social aspect of working in one place certainly brings everybody back each day here.

          • As a small business owner, I definitely find I get a lot more done when I leave the home office and have to go somewhere else and work. Home is too distracting, even when no one else is there.

  • Geoff Blackmore

    What you didn’t mention is the actual cause of the issues: The conflict between spreading out the living area, but doing the opposite with employment, encouraging it in one very small area to a greater degree than elsewhere. This is the root cause of all of Auckland’s major issues, especially transport and housing demand, as you force more and more people to somehow get to their work place in the CBD every day, either by spending billions on transport links, or making them spend a lot more for a lot less to live close to work.

    Do your study again for an average, typical New Zealand town or city, say Napier, or Invercargill. What you’ll find is that pretty much every major issue facing Auckland is essentially non-existent.

    The New Zealand approach to development of its towns and cities is not actually a problem. It works and it works well. Someone in Napier will have cheap transport costs and a maximum ten minute commute no matter where they live.

    So your study is really about Auckland. Not New Zealand as such.

    • Fred

      You fundamentally don’t understand cities Geoff. They are all about agglomerating economic activity so people can specialise and become more productive. You’ve shown over years of commenting that you simply don’t understand why cities exist so it’s difficult to take your opinions seriously on issues like this.

      • An example of that would be “Silicon Valley”. But is that really desirable? Costs of real estate and transport go up and I feel it would be better to have a network of smaller centres. It’s also a more robust arrangement in case of natural disasters.

      • Geoff Blackmore

        More productive Fred? Rubbish! New Zealand’s provinces are drying up and industries closing down, and the gap between rich and poor is increasing rapidly. There is no benefit to ordinary kiwis from this process of closing everything down, and concentrating the administrators of the process into Auckland, where even then they pay a lot more just to get by whilst living in very expensive shoeboxes like happy little worker bees.

        Agglomeration benefits = a myth for the naieve and gullible. The only people who benefit are the off-shore multi-nationals who are increasingly dictating the direction of New Zealand.

    • John Polkinghorne

      Geoff, I find your attitude in this comment quite provocative. What, exactly, is an “average, typical New Zealand town or city”? Peter’s study covers the three largest cities, and large areas of hinterland around them, a bit over half of New Zealand’s population. Furthermore, the findings would generally hold true for smaller towns as well, although with smaller differences due to the smaller distances involved.
      You need to accept that there are a wide range of locations where businesses can set up around Auckland. It’s not like the central city is the only place, and gets some kind of massive favouritism. For starters, the predecessor councils which existed until four years ago wouldn’t have stood for it. And the proposed rules for Metropolitan Centres in the Unitary Plan, say, are very similar to those for the central city.

    • Geoff, If it is cheaper for companies and workers to be in the provinces why are they all moving to Auckland?

      Why aren’t thousands of Aucklanders selling their overpriced houses, buy one for half as much in Napier and living happily ever after?

      Why aren’t companies moving out of the Auckland CBD to Napier to take advantage of the cheaper rents (and possibly cheaper workers since they have lower living costs) their?

      Please explain why everybody is acting against their bests interests

      • conan

        “Please explain why everybody is acting against their bests interests”

        And detail exactly how you convince them (both the companies and the people) to move to the regions. Remembering that we generally don’t force people to do things against their will here in NZ.

      • bjfoe

        Even in ancient times it was more efficient for farmers to take their produce to the biggest nearby market – despite other options being cheaper or more convenient. With technological advances this centralisation has been accelerating and will only continue to do so

    • Peter Nunns

      If you had bothered to read the paper, you would have seen that I also examined Wellington and Christchurch, NZ’s other major urban areas, and found broadly similar results in all three cities. In addition, I gathered household budget data from 36 cities to understand whether NZ’s cities are exceptional compared with similarly-sized cities in Australia, Canada and the US.

      In other words, my paper goes to lengths to present a comparative perspective. However, comparing Auckland to a town that’s less than 1/20th its size is fundamentally absurd, which is why I didn’t do that.

      Finally, there’s a reason why Auckland is 20 times larger than Napier (etc), which is that there are real economic and social benefits to living in a larger city. Wages are higher, because firm productivity is higher and labour markets are thicker. Quality of life is higher, because there are more cultural facilities and social opportunities. There are costs, of course, but people vote with their feet, and they have been voting for cities all over the world for centuries.

      • Geoff Blackmore

        Wages are not higher, the same job in Auckland or Napier will pay the same. Auckland just has more. Your claim that quality of life is higher in Auckland is absurd. Air pollution, noise, congestion, high rates, high land costs, higher food prices, fast pace of life, etc do not improve life quality. In fact I can’t think of a single aspect of improved life quality on offer in Auckland. Most measures either have it the same or worse.

  • Sacha

    Previous posts have shown that three quarters of jobs in Auckland are outside the CBD, even when it’s defined broadly. And it has been explained many times that the CRL is not just about the CBD either.

  • Sacha

    Peter, any thoughts on how to price subsequent transport costs into the initial land value on which developers are basing their decisions about where to build?

    Our govt seems to have successfully spiked any chance of using development contributions for some of the amenity-building required alongside new sprawl.

    • Peter Nunns

      Hi Sacha – interesting question. I guess my first perspective is that we don’t necessarily need to build private transport costs in to house prices – in an efficient market, they should already be factored in. My analysis suggests that there is a trade-off between rents and commute costs – areas with lower rents tend to have higher transport costs.

      However, people might not necessarily _realise_ the magnitude of transport costs when they’re making location choices. In a way, that’s why I wrote the paper – to make the trade-offs apparent to people.

      Of course, this analysis doesn’t cover externalities associated with location choices, such as vehicle emissions. To my mind, those _should_ definitely be factored in to land prices via some policy mechanism.

  • Agglomeration benefits the majority of businesses, whatever their ownership structure.

    Whilst we are capable of building “a distributed city” made up of lots of small places, linked by great plumbing, which is to say transit and communication, this is on no ones radar in political terms.

    The reality is that trying to sustain unviable small places via subsidy or “regional development funds” alone, does not work, much as I appreciate this is painful for those who have a personal stake in these places.

    If you have a theory on how Telecom might operate from Napier, I would love to hear it.

    • The mystery of the the reply box, the above was for Geoff.

    • Geoff Blackmore

      “Agglomeration benefits the majority of businesses, whatever their ownership structure”

      At the expense of citizens. Auckland is the most expensive place to live in NZ, so clearly it has the worst structure in place. Most of the issues this blog regularly posts about are complete non-issues in most towns and cities in NZ. They are Auckland planning problems, not New Zealand ones. And of those Aucklanders, the ones living in the CBD have the highest costs of all. Massively high real estate prices for massively small spaces, and plate-size chocolate cakes seling for $140.00 at their local bakery, because the poor business owners are trying to cover their massively high rents.

      Put simply, the bigger a city, the more expensive it will be to live there. Agglomeration benefits are irrelevant to the residents, and that’s why it’s a failed system. A city is for the people who live there. Not the multi-nationals who want to use the concept of cities to further their profits.

      • conan

        Here’s the price list from the local cake shop.

        http://www.rocketkitchen.co.nz/products.php?dept=cakes

        Where’s the $140 chocolate cake?

        “Put simply, the bigger a city, the more expensive it will be to live there.”

        Because it’s so simple you’d be able to back that up with some facts eh? Maybe a scale of large cities around the world with the PPP adjusted cost of living as a comparison.

        “Agglomeration benefits are irrelevant to the residents”

        Except for those earning more than they would in the regions, or those with a function that doesn’t exist in the regions, or in a job at all due to the higher number of positions in a larger city.

        • But so what if things are more expensive in the city?, city inhabitants earn more too, or they simply wouldn’t chose to go there. Cities are not immune to the laws of supply and demand. Live where you like, but don’t generalise from your own prejudices.

      • Fred

        Back to subsistence farming then right Geoff? Because we’ll all be so much better off that way.

      • Sacha

        “Most of the issues this blog regularly posts about are complete non-issues in most towns and cities in NZ. They are Auckland planning problems, not New Zealand ones.”

        Yes, Auckland is the only world-scale city in this land. That means the way we develop can’t be like some sleepy seaside village or even a smaller town. If people preferred those latter options, then two thirds of NZ’s entire grown in coming decades wouldn’t be projected for just this one city, would it? We need to start building the infrastructure to support that growth now.

      • “Agglomeration benefits the majority of businesses, whatever their ownership structure”

        “At the expense of citizens.”

        Hello Geoff,

        I agree.

        The reason for concentrating humanity within the confines of defined geographic areas is that we’re like bees and work better that way.

        The reason people continue to live in less than ideal environments within these areas is that unlike bees, we are idiots.

        The infrastructure and plumbing ( transit and communication )problems in New Zealand are largely incompetence based, or atleast it seems by glancing around the world that cities can actually work better than Auckland, 99% of the time.

        All of Auckland’s infrastructure and planning problems will eventually reach other places either because Auckland does actually reach Wellington or because these other places stop shrinking and have to argue about whether railways actually work.

        The other problems facing Auckland which are entirely related to Plumbing but might be grouped under the word Housing, are more complicated.

        It may have been unwise to open the Auckland property market to the world, although it’s difficult to know for sure because we don’t record the data ( see incompetence )

        Almost anywhere else in Auckland offers better intrinsic amenity than the drained swamp, reclaimed land, ex garbage tip, pocket of earth by the motorway junction that we call the CBD.

        Unfortunately the design of transit systems in Auckland is abysmal and we appear to have banned intensification in the places that people would genuinely love to live ( see North Shore, see incompetence ).

        We also have a port that could really do with moving and really would free up some prime real estate, and take sustainable work to “the regions” ( see incompetence unbounded)

        My personal view is that the entire economic system is flawed and we’d be much better off with a resource based economy as described by The Venus Project and in the books of Ian Banks ( The Culture – if one ignores the war, explosions and death).

        We work work what we have, the answer is the city, implementations vary.

  • John Bower

    Peter, why is there a spike in the graph at 36km?

  • Thomas

    I’d love to see something similar done with student living costs and location affordability in relation to student allowance/loan and the amount of part time work needed to make ends meet. Could be of very practical use for students looking to identify which University to go to and where to live.

  • mfwic

    Seems to me the analysis is suggesting it is more cost effective to live further out and not go to the CBD.

    • Geoff Blackmore

      That’s basically it yes. Live and work in the suburbs is the cheapest option. A CBD-centric life, either living and working there, or living in the suburbs and working there, is more expensive, by virtue of greater demands being placed on a finite area (more congestion, more costs). Out here in Swanson I have the lowest living cost possible. If I moved to the CBD, my costs in every respect would double or even triple. Where in the CBD would I find a place for $115 a week as I do here?! No chance.

      • Genuine questions, Geoff: Do you actually enjoy going into the city, for work or pleasure? Do you appreciate all the diversity, amenity, and variety that is created when a large number of humans inhabit a relatively small space at the same time, qualities that do not exist in low-density suburbs? Do you even like cities? Cos’ cities gonna city.

        • Geoff Blackmore

          Not really, the Auckland CBD isn’t a pleasant place. Full of air pollution, noisey, and seemingly half the people seem to be smokers. Like most kiwis, I prefer the quieter urban life, with cleaner air. Love my night walks where I can see the stars too. I think city dwellers are somewhat insecure, in that they feel a need to surround themselves with people, bright lights and noise. Nature and being able to see the stars at night seems to be off their radar. They look in and down, not up and out. New Zealanders are outdoor people, which is probably why kiwis prefer the urban life, whilst in the CBD you’ll find has a much higher propertion of immigrants, especially asian. They come from overpopulated big cities where space is tight, and so do the same here. They stick with what they know, but it’s not my cup of tea. I visit the CBD maybe once or twice a year.

        • John Polkinghorne

          I’m very impressed with the “cities gonna city” line. Perhaps we should put this on a medallion.

        • ha ha ha ha.
          I was unable to pass up this.

          I would ALMOST be happy to have 80% of the human population eliminated at random
          If I could ensure the survival of my family, I’d be all for it.

          So I’d have to say I don’t really appreciate cities despite living in one.
          The noise irritates me, and humans pollute my headspace continually.

    • Loraxus

      Gosh, you are insisting on reading this in a way that supports your opinion! Yes, that would be the cheapest. But that’s not where the jobs are.

      Even if your job ISN’T in the core isthmus, it still is likely to be rather far away if you happen to chose to live (or be forced to live by our current policies) in Kumeu, or Flat Bush or Pukekohe. You may not have to drive 40-50km, but your commute is still likely to be 20-30km. Which is in my opinion is way too much to be driving in a car day-in, day-out, while fuel prices increase, and your life passes in traffic jams…

      • It’s worse than that L, dispersed living also always involves dispersed employment and education too, not hyper-localisation. Of course there are always some lucky, clever, or homebound souls who conduct their entire lives locally, but fewer not more than in a densely ordered place, simply because it is more possible when more things are nearby. The journeys made by those on the edges, on balance, are longer as their work, study, or client, or relative, is more likely to be in another dispersed location on the other side of the city, than either in the same edge place or in the centre.

        The centre is simply the centre because pushing things together makes them all more within reach, except of course for those that insist that driving is the only transport mode. Driving requires dispersal. So really campaigning for dispersal is simply a reflection of a previous movement choice. Motorway fanatics are always dispersists and visa-versa (current government, for example).

        Consider the new Christchurch. Geoff’s dream, a centre-less, hyper dispersed, car clogged and inefficient rat run of low rise clusters of single use ghettos. Lord knows why he doesn’t move there immediately; it’s the living embodiment of everything he relentlessly campaigns for on this blog: vapid, unvarying, all suburb with no urbs, hyperauto-dependent, in a word; dull.

        • Geoff Blackmore

          Nice try at turning the tables Patrick, but of course it’s you who hates the kiwi lifestyle, or as you put it “dull”. One wonders why you don’t pack your bags and go and live in Manhattan. Why do you actually live here if you don’t like it?

          Location does not determine travel distance per se, but rather choice of distance between living and work does. There are people in the CBD who travel further than I do here in Swanson. That’s up to personal choice as to where you choose to live in relation to work or study. In most towns and cities in NZ people live within minutes of where they work, simply because the entire town or city only takes minutes to get from one end to the other.

          Auckland, despite it’s size, still followed this method until the 1980’s. People largely worked and lived close by, with Auckland basically being a collection of towns rather than a large city with a core. Look at photos of the Auckland CBD as recently as the 1980’s – hardly any skyscrapers.

          But poor planning as royally stuffed the region, by craming hundreds of thousands more jobs into the CBD, which can only have two outcomes, both undesirable – more people commuting further, or more people trying to live in the CBD, which causes very high property prices for ever smaller property sizes, and people such as yourself screaming out for those sizes to get even smaller.

          In fact, I’m going to say that the sorts of issues that this blog regularly covers, are in fact brought about by the very thinking of people such as yourself. You are why properties are shrinking, becoming more expensive and why we need to spend billions of transport infrastructure.

          Napier (and most kiwi towns) have it right. Restrict development so that the town stays the same, and avoid all the issues this blog is always concerned about. No need for shoebox apartments, motorways and rail tunnels, the air quality stays clean, everyone has a ten minute trip to work, and not a transport-related blog in sight.

          • SDW

            Geoff I’m sorry, your logic (or lack there of) is so poor that my brain hurts trying to comprehend what you say. Your entire argument has to be premised on the assumption that there is no such thing as population growth (and hence employment growth so that your children can one day have jobs). The only way your argument has any plausability is if the government banned human reproduction and all internal/ external migration so that population levels remained exactly the same (until everyone dies off – what happens then??) and hence there was no need for development.

          • lefty

            You clearly haven’t lived in Napier or Hastings. Many people have longer than 10 minutes to work in these cities (it takes at least 20 mins on a clear run from Napier to Hastings), and as has been pointed out above the EXACT SAME EFFECTS are present: Housing in the central parts of these places, and around town centers is generally more expensive and smaller, while transport costs are lower, while housing further away from employment tends to be cheaper with higher transport costs.

            The good news is, though, that places like Auckland are incredibly diverse. If you want to live out in a suburb with lots of space but poor walking and commercial amenity then feel free! Just remember to take into account the fact that you’ll require a car, maintenance petrol etc. Others will prefer to not have that burden, and instead live in the center, close to work and amenity.

            The point of this article is that by not factoring in the transportation costs, we tend to favour greenfields development, as by that metric further away is better due to the lower housing costs, but when you do factor in transportation costs, infill housing is a better development option. Of course in general you do a bit of both, as some of us are fortunate in that we can be choosy.

          • Geoff Blackmore

            lefty, Napier can be driven across in ten minutes. I said nothing of inter city travel. The same effects are present yes, but on a much smaller scale that hasn’t become problematic, and the negative ones are kept contained through better planning. Working in the Napier CBD isn’t a burden to anyone. There’s no pressure to live in the CBD, because even the furtherest suburb is only ten minutes away, and transport links are uncongested. That would all change if you started building skyscrapers with thousands of people in them, so planning restrictions prevent anyone from doing that.

          • What the hell is this “kiwi lifestyle” you go on about? I am fourth generation NZer and I have no idea what you are talking about. Can you actually describe and how many people actually live that

            I think xenophobia and close mindedness are certainly closely allied with your mythical “kiwi lifestyle”. If your lifestyle is indicative of this “kiwi lifestyle” then there are very few kiwis who actually live it, considering we are one of the most urbanised countries in the world.

            I have seen more of what you call a rural lifestyle in Eastern Europe than I have ever seen in New Zealand.

          • conan

            “Can you actually describe and how many people actually live that”

            According to Geoff:

            “Like most kiwis, I prefer the quieter urban life”

            So ‘most’ kiwis. I’m sure there is a study or two he’s referencing.

          • Geoff is a time traveller: he’s commenting from the 1950s, so instead of being as stupid as his opinions make him sound, he’s actually very very clever to be able to pull this off. He’s a young fogey!

          • Geoff Blackmore

            “What the hell is this “kiwi lifestyle” you go on about?”

            House, section, lawns, space, the great outdoors. We don’t live in concrete jungles like Manhattan, and most of us don’t want to.

          • Geoff Blackmore

            “Geoff is a time traveller: he’s commenting from the 1950s”

            As opposed to your postings from the 1930’s. C’mon Patrick, you know you want to live in rows of concrete buildings beside tram lines on streets with no cars. Actually the 1930’s might be a bit too modern? 1900’s perhaps.

            Not such a bad thing, but quit trying to define our positions as being about time eras. My view isn’t 1950’s at all – it’s backing how 90% of kiwis live in 2014. That’s the part you keep forgetting – my view is shared by most kiwis, as proven by how they actually live in the here and now.

            But you haven’t answered my question. If you don’t like the typical kiwi urban life, that 90% of us live by, then why do you live here. Why not go to Manhattan, or somewhere that already lives the foreign lifestyle you seek?

          • Phil Hayward

            I would like to add to Geoff Blackmore’s argument, that low density sprawling US cities tend to function like 30 Napiers directly adjacent to each other. There are still agglomeration economies for total urban mass.

            I would also like to posit that the below is “Kiwi lifestyle” even if the artists concerned might not yet see contemporary urban planners as their enemies:

            http://www.youtube.com/watch?v=YFzkHfEG0a8

            Recloose – Mana’s Bounce – YouTube

          • Phil Hayward

            The list of which cities in the USA are happiest and unhappiest, HERE, is interesting:

            http://www.sciencedaily.com/releases/2014/07/140722103917.htm

            But I wonder why no comment in that article/executive summary, about the prominent happy, fast-growing, low-housing-cost cities?

            All the commentary is about declining cities with cheap housing versus attractor cities with expensive housing.

            There is an elephant in the room here.

          • Brendon Harre

            The elephant in the room is that the defenders of the status quo are contorting themselves with weird studies to avoid the fact that Auckland has unaffordable housing.

            If you want to find affordable housing use the interactive map found in this article.
            http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11188916

        • Hello Patrick,

          I would take Christchurch as an example of how not to do it, as that’s just conventional New Zealand planning lunacy.

          My thinking would be along the lines of condensed lumps of population, in pleasant places, linked by high speed transit like bullet train.

          In between these places, is nothing but space.

          People could live in any of these distributed lumps which together make up Lumps City and equally work or play in any other lump. No need for cars because the destinations are known as opposed to random which is what cars are good for.

          Transit from density to density, although each lump would have an optimal amount of detached housing style stock. The size of a lump would be capped in respect to this kind of housing, the idea being the lump is small enough and designed well enough to support walking, cycling, monorail style travel etc.

          The problems we have are in the main all about plumbing, what ways are there of cost effectively connecting large numbers of people so that agglomeration benefits flow without necessarily having these people in physical proximity at all times.

          New Zealand being thin, and having two coasts, it could definitely be done from a technical perspective, whether it’s feasible is another matter.

          There are certainly lots of alternatives to a conventional Blob City, although it’s really just a pipe dream as it would require actual competence in government.

          http://cities-matter.blogspot.co.nz/2011/06/alternative-to-compacting-auckland.html

        • Phil Hayward

          Life is what you make it. “Dullness” does not attach to “location, period” in an urban area.

          It is essentially elitist, anti-egalitarian, and oligarchical to centralise and concentrate amenities, force the urban land rent curve up and increase its steepness, and then sneer at and penalise the proles you both priced out and deprived of amenities. Geoff Blackmore is making good points.

          My childhood in a suburb was certainly not dull. My life has never been dull, and I have detested the main regional CBD on principle and do pretty much everything in my life, outside of it. Nurbies can sneer at suburban “soccer moms”, but why isn’t playing soccer, watching it, meeting other families, and having the occasional team barbecue, regarded by them as just as valid an example of vibrancy and interest in someone else’s life, as their CBD cafe and theatre culture, that would bore many traditional family suburbanites to tears?

          • Nick R

            Perfectly valid. However there are plenty of sports fields and soccer clubs in the inner city too, more than anywhere else I would hazard. Opportunities for barbecues too, both in public and at people’s homes. Much greater concentration of people. The centre, by simple geographic virtue of being in the middle, is the place with the greatest access to all parts of the region. It is closest to the most people, and the natural place for regional level facilities.

          • Phil Hayward

            Real Estate markets ration “location” according to people’s ability to pay. If you don’t democratically spread out amenities, there will be sorting “by income” of who gets to enjoy amenities and who has to do the most travelling.

            Furthermore, there is a feedback effect from providing amenities that require space, such as sports fields and schools. The more population you succeed in cramming into tighter housing, the more space you need to set aside for these public amenities in each location. This dilutes the “reduction in urban footprint” effect to such an extent that doubling the density at which people actually live in their housing; i.e. halving their land space consumption, only reduces the urban footprint 7%.

            Gordon, Ian. (1997) “Densities, urban form and travel behaviour”. Town and Country Planning 66(9), 239-241.

            However a doubled population for the given area does increase congestion exponentially, which more than destroys the 7% gains in shorter travel distances – even if the distances are shorter for most people. People “priced out” due to systemically high and spiky urban land rent curves, end up having to travel further on average. This is how the UK has the highest urban densities in the OECD and yet has the longest average commute times. The sacrifice is incredible, because to reduce their urban footprints as much as they have, they are cramming actual people into land space orders of magnitude more reduced than the impressive reduction in urban footprint indicates – and this small, cramped housing space is still systemically unaffordable.

            See my longer comments further down the thread.

    • Sailor Boy

      Actually, cheaper to live in the CBD and do everything here, my transport costs and rent are currently ,$250 a week.

      • Geoff Blackmore

        That’s nice, I pay $115 a week in Swanson. Transport is by foot, as everything I need is within walking distance. Your claim that the CBD is cheaper is untrue. Almost everything is priced at a premium there, unless it’s a chain store (Countdown, the Warehouse) which would have the same prices as in the ‘burbs. I went to buy a choclate cake slice at a CBD bakery once, and had my $3 ready (usually $1.50 to $3.00 in a typical urban bakery), but alas the slices were $6.50 each, and only half the normal size. Maybe three mouthfulls at most! If you bought the whole cake (only 30cm across) it would have set you back $140 !! I questioned the price, and pointed out that I was only person in the shop and the cake looked dry, and suggested they lower their prices. Last time I looked, the shop had closed down. Go figure!

        • conan

          In other breaking news, it’s cheaper to order a whole bottle of wine in a bar if you plan on drinking 5 glasses of wine. And businesses with poor products often don’t make it. Seriously, what is your point?

        • lefty

          Housing+Transport is cheaper on average within the isthmus suburbs. That’s what the data says – one presumes you’re not refuting the data, right? Don’t confuse your circumstance with the average.

          • Geoff Blackmore

            Transport and housing are both more expensive within the isthmus suburbs. Petrol is cheaper and house prices are cheaper, and rates are cheaper. The only times when outer suburbs are more expensive are when people choose to work far from where they live, which happens to be something that is encouraged by the unfortunate planning of more and more jobs in the CBD.

          • Geoff Blackmore

            That should read:

            Petrol is cheaper and house prices are cheaper, and rates are cheaper, in the outer suburbs.

          • Stu Donovan

            and yet Auckland’s city centre has had the most sustained and rapid population growth in all of the Auckland region! How strange!?! The only conclusion one can draw is that a reasonable proportion of people *like* living in accessible areas.

          • mfwic

            Lefty I haven’t had a chance to read the paper yet but does it really say housing and transport is cheaper within the Isthmus suburbs or does it say they are a smaller share of median income? There is a huge difference.

          • Geoff Blackmore

            [Comment deleted for violating User Guideline 6 and 8 (i) and well as potential racist insinuations]

        • Sacha

          “everything I need is within walking distance” – if only everyone were so easily amused.

          • Yeah how is the film festival out there in nowheres-ville?

          • mfwic

            Well since you ask Patrick we used to get films and concerts in our park when NSCC ran things. This year no concerts and one film, and I had already seen it. So yes there are more things in the CBD because the Council tries to kill off anything elsewhere

        • Nick R

          Geoff and his chocolate cake story again. Geoff goes to town on his once a year trip and picks the wrong bakery for his budget. Spends the next three years justifying his mistake.

          This is perhaps enlightening, if wrong. In the city you can indeed buy a $6.50 small slice of chocolate cake from the likes of Pandoro, if you want a very rich luxury desert. But you can also go to the likes of my local bakery, the Angkor bakery on K Rd, and get a plain bit of regular chocolate cake for $2. Or you can go over the road to the Hollywood bakery and have something similar for $3 with a place to sit and eat it. Or you could go to Alleluya cafe and get a wheat free vegan chocolate cake made from beetroot for about $8 (surprisingly good), if vegan peculiarities are your thing.

          The point is the intensity of retail and customers in the CBD leads to variation and specialisation. You can get cake of all varieties and prices, rather than being stuck with only what a small market can support. Geoff’s argument boils down to one of “bakeries with limit markets are good because they can only serve the lowest common denominator at the cheapest prices”.

          As for other commodities, I think Geoff is just plain wrong. Again my local supermarket, which is independent, I the CBD is the cheapest I have found anywhere in the region. Lim Chour sells chicken breast for $7 a kilo, two litres of milk for $2, fresh veggies far cheaper than any countdown. Those prices are attributable to the fact they have so many customers within walking distance and don’t have to buy land for car parking, meaning they are always busy with high turnover and have low overheads.

  • Sailor Boy

    Bullshit. There is no way that rental for an adult and transport costs are $115 a week. A car costs a miniminum of 10 a week in fixed costs, plus new tyres, oil, lights, petrol costs, window replacement, you have a history of lying about costs so I want some hard numbers if you are going to claim such outrageous drivel.

  • mfwic

    OK so I have read the paper and I think I understand it. By dividing by median income for each area you get to the conclusion that rich households spend a smaller share of their (larger) incomes on housing and transport. That shows up in the diagram as pale colours for Herne Bay, Orakei and St Heliers etc. So the first conclusion should read that it is better to be rich than poor. A bit like saying “let them eat cake” But we knew wealthy households spend a smaller share of their income because they spend more on other things like recreation, holidays, art and savings. I think it is the next bit you have suggested that looks interesting, are people at the edges paying too much because of the MUL? Are people in the middle over paying due to planning regs? (doesn’t look like it from your diagram). On p19 you suggest market failure as people choose to live in outer areas despite total costs. Maybe we pay a premium not to put up with too many people, too much traffic and too much crowding.

    • Peter Nunns

      Glad you read the paper and got some use out of it.

      I think you’ve highlighted the right questions, which are, essentially: “Do we care?” and “If so, what’s the underlying problem?” To my mind, a trade-off between housing and transport costs is not a problem – that’s just urban economics 101. Evidence that lower-income households are having trouble finding affordable locations _might_ be a problem. (Or it might just be evidence that life is hard on a low income.)

      That’s why I took a (brief, conceptual) look at the role that land use regulations might play in shaping affordability. Essentially, land use regulations could have several effects:
      1. They might restrict development in relatively accessible areas, reducing supply and increasing prices in those areas.
      2. They might restrict urban growth, preventing land prices at fringe areas from falling to the level indicated by transport costs in those areas.
      3. Some regulations might reduce the efficiency of public transport and active modes by constraining dense or mixed-use development, essentially forcing car ownership on households. Minimum parking regulations are especially notorious in this respect.

      • mfwic

        I was thinking more about it last night. Your method could be powerful for figuring out exactly what people do and the choices they make, but I am not sure how you step forward from the geographical description into policy. If housing + transport is high at the edges, is that the MUL or is it just preferences, and then what do you do about it? If it is cheaper in the centre, is that evidence that the status quo is good or does it justify dropping planning rules as some will claim. Will intensification change the result as more people (with lower incomes than the incumbents) come in and reduce the median income? It is always hard to measure success with ratios as they can go up or down due to the numerator or the denominator changing. Whatever we use has to be refutable, we cant claim a high ratio justifies action and a low ratio justifies the same action. Finally there is a lot of endogeneity here with people choosing where to live within their budget constraint and rents being set at the marginal revenue for each area. Your regressions might fail if median share of income (or one of its two components) determines how far from the town hall you have to live. That means you will need to find an independent proxy. Remember there is no way of correcting endogeneity in ordinary least squares, the maths simply fails.

    • Sacha

      “Maybe we pay a premium not to put up with too many people, too much traffic and too much crowding.” – yep those motorways are so empty at peak commute times. Feel the serenity.

      • mfwic

        It is called ‘revealed preference’ when people vote with their feet. They are putting up with peak congestion in exchange for a better life at other times for them and their family. Not everyone chooses where they live just to have an easy commute, some of us have other things going on in our lives.

  • Phil Hayward

    Of course transport costs affect RE prices.

    This effect is the same regardless of what the underlying property prices are.

    It is absurd to force up the cost of all property with a UGB and think you are creating opportunity for anyone to save money. They always could save the same amount of money anyway, by locating at a more efficient spot. It is just that BOTH options are now a heck of a LOT more expensive.

    Upzoning and building to higher densities at the more efficient locations ONLY results in lower housing costs at those locations if the urban land rent curve has not been inflated overall by something like a UGB. This is basic real life observation. I have had an exchange of emails with Geoff Cooper on this and he owes me a reply with an example of a city with a UGB imposed, where upzoning and building to higher density has resulted in more affordable housing than what it was before the UGB.

    I put this question out to all interested parties: proof, please.

    It is statistical and intellectual dishonesty to always look at housing costs in cross-section across a city under the status quo and say, “yes, household X at location A lives cheaper than household Y at location B, therefore everyone should live like household X”.

    What we need to know, are the housing cost options after the policies have taken effect. And it is betrayal of the public who are affected, to impose the UGB first and then blame NIMBYist opposition regarding upzoning, for the immoral house price inflation. Why did you impose the UGB without making sure the upzoning was do-able first?

    But in any case it is impossible that “housing” in the more efficient location will fall in “price” (of course it will be smaller than before) when there is a UGB, just because it has been allowed to be built smaller. It will always be a much higher price than the pre-UGB price, even as its size falls. I am simply going by real life observation of past RE prices by location in NZ cities when our median multiples were closer to 3; RE prices by location in US cities where the median multiples still are around 3; and RE prices by location in median-multiple-6+ cities.

    In an inner suburb in Auckland, new row-houses built now will not reach the market for anything less than double, in real terms, what a more traditional home with at least twice the space cost in 1990.

    If I get time I may critique the Nunns, Cooper and colleagues paper like I did the similar Mattingley and Morrisey one here:

    http://voakl.net/2014/02/21/guest-post-a-critique-of-k-mattingly-and-j-morrissey-journal-article/

    I say that anyone who has experienced hunting for their first home at an unlucky time and being shut out of an inflating market by prices rising faster than they could save a deposit/ future equity, would tell you that as the years went on, they were progressively “priced out” worst of all from the more efficient locations. It is infuriating to these people to have ivory-tower academics and bureaucrats tell them from on high, like a medieval papal theocrat, that “we are increasing your housing choices” and “saving you money”.

    • Thomas

      If not UGBs how do you suggest we attempt to meet the other goals these regulations are put in place for? Goals of climate change mitigation, reducing dependence on oil, protecting the land outside of the growth boundary and increasing efficiency of infrastructure.

      • Phil Hayward

        If you want to meet those goals, you apply fiscal incentives directly to the appropriate factors. Anthony Downs wittily says that using prescriptive urban planning to meet these goals is like adjusting the position of a picture on a living room wall by moving the house rather than the picture.

        Taxes on energy consumption, and the dreaded “user pays” for infrastructure, and road pricing, would all directly affect the factors we want to change, and there are dozens of different ways in which people could make the adjustments, rather than having an artificial barrier put up around them and being told, “there you go, now work out for yourselves who goes where, according to their ability to pay the now-systemically-inflated land costs”.

        Shifting the burden of taxation off structures and onto land is a no-brainer too. If we want people to build “up” and substitute private vertical cables, pipes, stairs, columns and lifts for public horizontal infrastructure, don’t tax it. Simple.

        This should have been the rationalist manifesto for urban policy since it was first published in 1964:

        http://www.masongaffney.org/publications/e3containment_policies.cv.pdf

        “Containment Policies for Urban Sprawl” by Mason Gaffney

        Note the choice comments about the vested interests in imposing “negative containment” (the term UGB hadn’t been invented then).

        • Thomas

          And I’d agree with getting rid of urban growth boundaries if the full costs of sprawl were realised in a pricing mechanism. However this doesn’t seem likely and the removal of the MUL without this mechanism is likely going to just exasperate energy, infrastructure and environmental issues.

  • Nick R

    …or the hospital?

  • Phil Hayward

    Commenting down here because the thread above has got a bit skinny:

    Consider the puzzling phenomena of a city like Liverpool, that could lose population for decades and yet remain unaffordable. The explanation has to be that a substantial portion of the population still does not have the size of property they desire. It is all very well to calculate an average size of dwelling, or space per person, in a given city, but above-average space will be consumed by many who desire it and can afford it, and the sacrifice of space therefore falls disproportionately on those who cannot afford what they naturally actually want.

    For all the claims that “people today want smaller housing”, a city like Liverpool is proof that housing of a certain average density (in Liverpool’s case, this is still about double Auckland’s), is still below people’s actual wants. When there is enough housing and sections large enough, the population decline will finally cause the prices to fall even if there is still a UGB. (Don’t dismiss the possibility that the Poms would order the outer suburbs destroyed and the urban footprint pulled back in…..)

    But it is even worse: the more population you succeed in cramming into tighter housing, the more space you need to set aside for these public amenities in each location. This dilutes the “reduction in urban footprint” effect to such an extent that doubling the density at which people actually live in their housing; i.e. halving their land space consumption, only reduces the urban footprint 7%.

    Gordon, Ian. (1997) “Densities, urban form and travel behaviour”. Town and Country Planning 66(9), 239-241.

    The sacrifice in housing space per person in the UK is incredible, because to reduce their urban footprints as much as they have (i.e. 50 to 80% compared to other Anglo first world cities and even to French ones), they are cramming actual people into land space orders of magnitude more reduced than the impressive reduction in urban footprint indicates – and this small, cramped housing space is still systemically unaffordable. Their de facto average “section” per household is close to 1/20 of an acre, and this is AVERAGE. This means that actual natural desire for space per household must be many times as much as this, if a city can lose nearly half its population over 4 decades and remain unaffordable.

    When you have greater democratisation of choice of space, you get much larger average section space per household than 1/20 of an acre. Now I am the first to agree that exclusionary large-lot mandates in US cities have pushed the average size upwards beyond what natural demand would be. But you can work out whether this effect is present in a low density city by checking how much the embodied raw land cost per square foot in a section, has been REDUCED in the case of the large-lot locations. In Auckland we definitely do NOT have 1/4 acre sections for $100,000 and 2 acre sections for $150,000, which is the kind of thing that indicates demand-exceeding large-lot mandates.

    What we have, are $400,000 1/10 of an acre lots inside the UGB, and $800,000 10-acre lifestyle blocks outside the UGB, not all that far apart from each other. This is regulatory distortion of a different kind.

    • You lose any rationality to your arguments by going on about the UGB only and never talking about all the restrictions on density. You act as if this blog is a huge supporter of the UGB – I have never read an article on this blog defending the UGB except in the context of loosening all restrictions on development including density controls.

      I would support abandoning any kind of urban limit as long as it was linked to abandoning all exclusionary zoning laws (minimum lot size, minimum set back, minimum parking etc).

      You may say that is politically difficult but that is beside the point. If you support removing controls on sprawl but not removing the just as onerous if not more so controls on density you are just asking to distort the market. There is no way of knowing the result will be what people want.

      Otherwise what you are writing is just arguing for sprawl and frankly looks very out of date and unconvincing.

  • Sam B

    Hi Peter, a question on the methodology: does the focus on transport costs as a % of income give a different result to what you’d get if you looked at transport costs in $ terms? E.g., from the maps you’ve posted, I can see people in Herne Bay spend less % of their income on transport than people in Manurewa. But I wonder if people in Herne Bay have a much higher average income than people in Manurewa, perhaps this drives the affordability results more than different transport costs.

    I suspect people in Manurewa do have higher transport costs, but I am not sure how it is possible to conclude this based on the maps presented in the post. Maps showing transport costs in $ terms might be enlightening. (disclaimer: I have read the blog post but not the linked paper which might have explained this more).

  • mfwic

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11300470
    Alan Bertaud says the urban village only exists in the mind of planners. Good to see a few foreigners being brought in to counter the ‘bow ties’ that Auckland Council keeps importing to inflict on us.

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