Why is Len talking tolls again

Two weeks ago John Key confirmed that the government would cover half of the costs of the City Rail Link and allow for main works to start in 2018. Immediately questions began about how the Auckland Council would cover its share of the expected $2.5 billion cost. Equally quickly Mayor Len Brown was once again raising the issue of road tolling, suggesting it was needed to pay for it.

The government confirmed yesterday it would pay about half the cost of the project, allowing work on part of the project involving a tunnelling machine to begin earlier in 2018.

Mayor Len Brown believes he has the backing of most Aucklanders to introduce higher road taxes and impose tolls to pay for the city’s half of the bill.

But Mr Brown told Morning Report road tolls were part of a range of transport funding options, and in the long term could not be overlooked.

“We know that we don’t have enough money through rates and borrowings, even if we sold things like the airport shares or the port shares, it’s still not enough.

“It is a critical issue with the growth of the city with the transport investment needs that we have and the City Rail Link in the end, with the $65 billion we’ve got to spend over the next 30 years, is only a small part of it.”

Mr Brown said he could not see any other way of raising extra revenue than with a motorway toll.

Quite why Len is suddenly raising the issue of road tolls again is odd for a few reasons.

Long Term Plan

Last year the council spent a lot of effort discussing the Long Term Plan – the 10-year budget. As part of that process they presented Aucklanders with a binary choice of either a programme of works that would build:

  • a basic version funded out of rate rises of 3.5% but that built very little over the coming decades.
  • almost every transport project ever dreamed up requiring lots of additional funding and still saw congestion predicted to get worse than it is today. To pay for the up to $12 billion extra that would be needed the council proposed either:
    • road pricing on motorways
    • a combination of additional rates increases and regional fuel taxes

The important thing though is that both versions of the transport plan included the funding for the City Rail Link. That means the project was never subject to the alternative funding options like Len is suggesting now.

LTP Basic vs AP networks

To realise either of funding options for the Auckland Plan option it would have required government approval and that didn’t happen. So instead the council ended up implementing a three-year interim transport levy of $99 for households and $159 for businesses with the money from it earmarked primarily for PT, walking and cycling projects. There is absolutely no reason why the transport levy couldn’t be continued in to the future which is enough to effectively fund a sensible middle option of something between the two original LTP transport plans.

Just coming back to the CRL, the council’s own LTP documents show the project already has funding budgeted for it over the next decade. It includes the expected contribution from the government – which the council correctly assumed would be on board by then.

LTP approved capital projects list

click to enlarge

ATAP

As you know the Auckland Transport Alignment Project (ATAP) is currently going on and is reviewing options and timings for future transport projects in Auckland (the CRL and East-West link sat outside of this). In the Terms of Reference it specifically mentions road pricing, saying they will consider (I’ve underlined the important part)

all land transport interventions, including roads, rail, public transport, personal mobility services, walking, cycling, technology, network optimisation and demand management (including pricing for demand management purposes)

In other words, as part of the process they’re looking at what impact road pricing could have but not as a revenue gathering tool like Len wants but as a demand management one. The distinction between the two are important and would likely lead to quite different looking systems. As the name implies a demand management tool is really about trying to optimise the use of transport networks we have by using road pricing to keep roads from becoming congested. We’ve long suggested that if implemented it should be introduced in a revenue neutral way, lowering rates by the amount raised from the road pricing. In our view doing it this way would separate a potentially very useful tool from the more politically fraught issue of raising more money as by tying the two together it’s more likely neither will happen.

Perhaps the biggest benefit of road pricing is that it changes the question from how much traffic do we need to accommodate to how much do we want to accommodate. With it, it will almost certainly change the priority of many projects and it would kill off many projects altogether. For example, spending billions to widen or duplicate a motorway because an (unreliable) traffic model says vehicle volumes will increase in the future likely becomes a thing of the past. Every silly project that is no longer needed means a less extra funding that needs to be raised, easing pressure on Aucklanders and the government.

Of course to really implement road pricing we really need a much more complete range of good quality alternative options but if we know we’re going to do it in the future it should allow us to prioritise what is needed before that happens.

 

In conclusion, the council’s plans have the CRL clearly in the budget even if we had stuck with the no additional funding option. As such it seems that Len was perhaps trying to reignite the debate about road tolls from last year in a bit to push once again for a more build everything approach. But given the ATAP process is well under-way it seems the best option right now is to wait and see what comes from that.  The only other option for why he would suggest it is perhaps to keep the idea in the government’s head so they know the issue hasn’t gone away.

AWHC: Where Does all the New Traffic Go?

The Additional Harbour Crossing as currently proposed is a pair of tunnels containing six traffic lanes between the motorway at Esmonde Rd rejoining it at Spaghetti Junction [The CMJ] in the city. The publicly available schemes also show additional rail tunnels between Akoranga and Wynyard Quarter, but no connecting network for any trains to actually use. It is clear to see the appeal for NZTA of straightening and simplifying SH1 past the bridge, but the outcomes for the city are much less certain. Below for example is version T1:

AWHC T1

Clearly this or the other versions that date from 2010 are not the current versions NZTA are developing now, but until new versions are released these are still worth looking at in some detail as neither the various physical constraints or the overall aims that drive these options have changed. The options can be seen here.

Considering these there are several high altitude observations I think are important to begin with:

  • This will be the most expensive urban transport project ever undertaken in NZ; claimed to be $4-$6 billion. Two to three times the cost of the CRL.
  • Not least because of the massive cost it is extremely unlikely that both sets of tunnels and systems would be undertaken at the same time. They will be staged; one will precede the other.
  • The road scheme is essentially a SH1 bridge bypass, and therefore optimises through traffic, however it does not make any new connection that is not currently available nor in fact any increase in capacity on SH1.
  • There is little spare capacity in the CMJ for additional vehicles so the new connection will remain the current three lanes north and a reduction from four to three lanes south.
  • Essentially the bridge becomes a massive on/off ramp for city traffic and unless and until the rail tunnels and line are built more buses on bus lanes across the bridge will be the PT part of the project.

Here’s the set of variations currently available for the city end, all versions involve four tunnels under Victoria Park [3 new ones]:

AWHC Tunnell Options

All schemes also involve massive new interchanges on new reclamations at the North Shore end with flyovers and multiple connections between crossings, not unlike the new interchange at Waterview currently being built. Like the outcomes for traffic on North Shore local roads, the impacts of this project will be neither small nor all positive north of the bridge. However for this post I just want to focus on the city-side implications.

Assuming the road crossing is built first, which is consistent with assertions by politicians and officials with phrases like it will be ‘future proofed for rail’, as well as the lack of any real work yet on a rail crossing, it is worth asking exactly where will the new traffic enabled by the extra capacity across the harbour go once in the city?

Because the new crossing plugs directly into the CMJ, three lanes in and three lanes out, and because there are no planned increases in capacity through the CMJ, nor any space for any without further massive tunnelling, in effect the new capacity will be all on the bridge, so coming from the Shore this new traffic will all have to be accommodated by just three off ramps [same in reverse heading north]:

  • Cook St; with new direct connections through Victoria Park
  • Fanshawe St, especially for buses on new bus lanes
  • Shelly Beach Rd, and then on to Jervois and Ponsonby Rds.

None of these exits can accommodate any increasing in traffic well, or without considerable disbenefit, especially if that increase in traffic is large.

  • Cook St is pointed directly at the heart of the city, so this contradicts policy of reducing vehicle volumes in the city centre and is likely to infarct daily at the peaks as Cook St is close and perpendicular to Hobson and Nelson Sts which serve the Southern and Northwestern motorway flows. Gridlock is likely at the controlled intersections unable to handle large and peaky traffic volumes to and from these motorways. Additionally land use in this area is changing and intensifying making it even less suitable for the high speed motorway offramp it already hosts.
  • Fanshawe will have reduced capacity for general traffic as a multilane Busway will be required to take the increased bus volumes from the bridge, and anyway is already at capacity at the peaks.
  • Shelly Beach Rd is a narrow residential street not suited to the high volumes and high speeds it already suffers from the bridge now. Furthermore there is no benefit and little capacity for the streets beyond Shelly Beach Rd, particularly Jervois and Ponsonby Rds for a large increase in vehicle volumes.

Nonetheless, here are the forecasts they have come up with, Shelly Beach Rd with a 63% increase, is basically filled with bridge traffic by 2026 and the new crossing:

AWHC Forecast Daily traffic flows

20,300 additional cars modelled for Fanshawe + Cook St with the AWHC option (assume that is all day on a weekday?). Even at the best sorts of turnover that would require around 10,000+ new carpark places. The downtown carpark has 1890 spaces. So where exactly do we put six new downtown carpark buildings? And what six streets get sacrificed to feed them?

20,300 cars carry perhaps 25,000 people. The CRL at capacity will carry that entire amount in 40 minutes. As could a North Shore rail line of similar specification. If the net outcome of this project is to take 20,000 commuters to midtown, why not do it with rapid transit at a third the cost with none of the traffic congestion?

“The significant increase in traffic movements conflict with many of the aspirations outlined in current Council policies, strategies, frameworks and master plans.”

P 65 Additional Waitemata Harbour Crossing Network Plan, NZTA, 2010.

Obviously these higher traffic volumes are not good for every pedestrian, resident, and general city user in these areas but there is one other group that this situation in particular is going to make miserable, and that’s the motorist. There is a word for all this additional driving everywhere on city streets: congestion. Yup this increase in capacity across the harbour may speed that part of the journey but it’s going to make arriving anywhere in the city in your car much more hellish than it is now. And don’t even think about finding or affording somewhere to park.

What NZTA’s consultants say about this:

AWHC City exits

The increased traffic flows through St Marys Bay on both Shelley Beach rd and Curran St look to lead to particularly poor and unfixable outcomes:

AWHC Local Roads

It seems optimistic to say that because there are cafes, and strongly increasing pedestrian volumes, on Ponsonby Rd, that drivers won’t try to drive there, especially if other bridge exits are controlled or too busy. After all the first rule of urban traffic is that it will expand to wherever it is allowed to go. So, in the end, taking measures to dis-incentivise drivers to use these exits, is the consultant’s advice:

AWHC City Streets

It does seem kind of odd to spend $4-6 billion to increase capacity across the harbour only to then introduce other measures to try to stop people using it.

And it won’t be just parking, there’s also likely to be tolls, it appears the model says they can pretty much eliminate the traffic problem with an $8 toll!:

AWHC Tolling both crossings

If only there was a way to enable more trips without inducing more and more cars to also be driven into the crowded city streets. After all the City Centre has been growing strongly without adding more cars most of this century:

CBD Transport Change

In fact it looks like we are already at or even above the limit of desirable vehicle numbers in the city, and future developments like replacing car access to Queen St with Light Rail are likely to make even current numbers face pressure.

Additionally there is an issue with bus volumes as well as car numbers on the city streets, even though the New Bus Network, the CRL, and Light Rail, if it happens, will reduce bus numbers from other parts of the city, there is certainly a limit to the numbers of buses from the Shore that can be comfortably accommodated too. Below is the predicted year of maximum bus capacity at major entry points to the city. The role of the CRL in reducing bus number pressure from the Isthmus is obvious, so why not do the same thing for buses from the Shore?

AWHC Year of Buslane max capacity

So perhaps the answer is to reverse the assumed staging and build the rail Rapid Transit tunnels first, leaving space for the road crossing to come later. This certainly looks physically possible in the maps above. This would enable all of those possible trips across the Harbour that NZTA identifies to still be served but without any of the traffic disbenefits that so clearly dog the road only crossing. In terms of people capacity two rail tracks can carry twice the volume of six traffic lanes. Furthermore it can be built without disturbing the current crossing and its connections. And rail crossings have proven in the past to be good alternative routes in an emergency.

This would add the real resilience of a whole other high capacity mode across the Harbour instead of simply more of the same. It would make our Harbour infrastructure more closely resemble Sydney’s where most of the heavy lifting in terms of people numbers is done by Rapid Transit, as shown below. We already have ferries, buses, and cars bringing people across, isn’t it time we added the particular efficiency of electric rail?

Sydney Harbour am peak

It seems particularly clear that whatever we add next really can’t involve trying to shove ever more vehicles [cars and buses] onto our crowded city streets; that will simple hold everyone up.

All the information above was gleaned from the work done some six years ago for NZTA, from here, and Auckland has moved on a great deal from where it was then. Among other things that have been proven recently is that when we are offered a high quality rail system we will use it. We are also discovering the value of our City Centre as a place to live, and work, and just be in, and how this is only possible to continue this improvement with fewer cars on every street. We certainly believe that there are more options for a far greater Auckland than the simple binary ones studied above: the road crossing ‘future proofed’ for rail, or the ‘Do Minimum’ which is nothing.

So we have asked, as part of the Auckland Transport Alignment Process, for a Rapid Transit crossing as the next additional crossing to be modelled too. So we can compare the status quo with the road crossing, and with a Rapid Transit crossing separately. Additionally we know that AT are now working on how various rail systems could work so in time there will be properly developed rail options to compare with the road one.

There is time as well as the need to get this right, the Western Ring Route will begin to become more complete next year with the opening of the Waterview tunnels, and that whole multi billion dollar system is of course an alternative harbour crossing system and will alter both the performance of  both the Bridge and the CMJ. Similarly decisions about AT’s proposed LRT system too has a bearing on options, as will the opening of the CRL next decade. Not least because the addition of these high quality systems will make movement through the city without a car much more common, as is the case in many overseas cities of Auckland’s size and quality.

The road crossing looks very much like an extremely expensive ‘nice to have’, that duplicates and tidies up the State Highway route, something to add when the missing alternatives have been built and there is spare budget to spend on duplication. Because on balance the road first additional crossing proposal really achieves little more than this:

AWHC 'City Roads' image

end.

Houston and the fallacy of “roads first” transport policy

Over the last 50 or 60 years, the United States, Australia, New Zealand, and a number of other countries have pursued a “roads first” approach to transport policy. There have been significant public investments in (generally un-tolled) roads, and relatively few investments in competing transport modes.

It’s hard to justify this approach based on preexisting travel patterns. Take Auckland as an example. According to Paul Mees [Transport for Suburbia, p. 21], in 1954 Auckland’s public transport network “accounted for 58 per cent of trips by motorized modes, private transport only 42 per cent. When walking and cycling, which were not surveyed, are taken into account, it is likely that fewer than a third of daily trips were by car.”

However, from this date onward roads – not public transport, and certainly not walking or cycling – have dominated transport spending. Spending on a new system of motorways and arterial roads was considerably higher than spending on other modes that carried more journeys. In other words, public spending to enable car travel did not respond to existing demand – it was intended to shape future demand. (And in doing so, change the shape of the city.)

Another potential justification for disproportionate spending on roads is that it’s just what people wanted. Cars were invented and then cheaply mass produced, people wanted to use them to travel everywhere, so transport agencies had to build more roads.

There is some truth to this. Cars are very convenient for many journeys. But it can also be convenient and cost-effective not to own a car. PT tends to be cheaper than driving to places where you have to pay for parking, and cycling is often quicker than driving, and more enjoyable if there are enough safe bike lanes.

But this argument also ignores other policy factors that shape transport demands. In particular, planning regulations enacted and progressively tightened throughout the 20th century have tended to:

  • Make it more difficult for people to live near where they work, by zoning different areas exclusively for different uses
  • Discourage people from living at medium or high density by limiting building heights and setting minimum lot sizes for dwellings
  • Subsidise the ownership and use of cars by requiring all new buildings to have a significant amount of on-site parking.

But what, then, should we make of Houston, which lacks a zoning code but nonetheless has ended up with lots of driving, low public transport ridership, and a low-density urban footprint? Is Houston evidence that in the absence of planning regulations that distort people’s location choices, people will choose to live at a distance and drive to get around?

Source: NASA Earth Observatory

Houston from space. This image is 100km across. Source: NASA Earth Observatory

In a word: no.

It turns out that Houston is not actually as unregulated as people make it out to be. While the city lacks a comprehensive zoning code that rigorously separates different uses, several other planning regulations (and similar measures) have distorted its urban form and transport choices. A 2005 article by law professor Michael Lewyn identifies four important ways in which planning has influenced transport outcomes in Houston:

  1. Houston enforces a byzantine and quite restrictive set of minimum parking requirements (MPRs). As I discussed last year, these include a parking requirement for bars that defies all concepts of prudent regulation. These requirements make parking cheap, and walking to the shops hard.
  2. While Houston doesn’t formally limit building height, it does establish a minimum lot size of 5000 sq ft (or around 460m2) throughout most of the city. This discourages PT, walking and cycling by increasing the distance between dwellings and discouraging space-efficient typologies like terraced houses and small apartment buildings.
  3. Houston requires streets to be wide, blocks to be long, and buildings to be set back a considerable distance from arterial roads. All of these policies make it dangerous and unpleasant to walk there.
  4. Lastly, new developments in Houston make extensive use of private covenants that restrict uses and building designs. These agreements often simulate zoning, with the result that Houston has similar levels of racial, income, and housing segregation to (zoned) Dallas. Houston has chosen to imbue private covenants with the force of public authority – the city will pay to enforce them even if the people subject to the covenant would rather not.

As a result of these policies, Houstonians cannot make free choices about where to live, where to work, and how to get around. Their decisions are strongly influenced by a suite of planning regulations that, as in many other cities, conspires against density and against non-car travel. Houston’s heavy use of the car is not a natural outcome, but one that has been engineered by policy.

Seen from this perspective, “roads first” transport policies seem less like an exercise in meeting demands, and more of a component of a large social engineering programme.

The results are not necessarily stellar. While the city is known for low house prices, Todd Litman points out that Houston is relatively unaffordable for its residents, compared with other large US cities, once transport expenditures are factored in:

Litman US city housing and transport costs chart

Furthermore, Houston’s commuters experience more hours of delay in traffic than most other US cities. New York, on the other hand, looks pretty good. Although it is large and congested, many commuters choose to opt out and take the subway instead. In Houston, they lack that choice:

Litman US delay hours per commuter chart

What do you think would happen if we tried to facilitate choice instead?

Transport technologies!?! Part 2

This previous post considered wider socio-economic factors which might shape the development/deployment of transport technologies, namely 1) denser cities, 2) policy settings, and 3) demographics. In this post I now discuss some more specific issues that are relevant to transport technologies, specifically:

  1. Economies of density
  2. Costs: Fixed versus variable
  3. Complements versus substitutes
  4. Conclusions: The Spruce Moose?

The takeaway message from this post is that the future is complex and uncertain. D’uh … read on for enlightenment!

1. Economies of density

The Prime Minister’s recent speech, in which he announced funding for the City Rail Link and the East-West Link, is an example of how policy settings can respond to wider socio-economic factors, such as population growth. Auckland’s rapid growth means that public investment in underground passenger rail stacks up more now than it perhaps has done in the past. As a result changed, Auckland’s transport network is set to change in a rather profound way.

Why has Auckland’s growth helped make the case for the CRL? Well, passenger rail has relatively high fixed costs. This in turn means that passenger rail experiences so-called economies of scale (or more accurately density). The phrase “economies of density” is used to describe situations where marginal costs are below average costs. This means that average costs fall as demand increases. Fixed costs like rolling stock and train stations all contribute economies of density in passenger rail.

 

Last week saw another example of “economies of density” in the context of New Zealand’s transport system, although this time the investment originates with the private sector. Emirates announced that – from this March – they will begin direct flights between Auckland and Dubai (NB: Apparently Qatar Airways is considering similar moves). Direct flights to Dubai will shave approximately 3 hours off travel-times between New Zealand and a number of destinations in the Middle East and Africa.

 

Economies of density lead to virtuous/vicious cycles: Higher demand begets lower costs, which begets higher demand etc (and vice versa). That’s why they are sometimes called “positive feedback loops”. Domestic air travel in New Zealand provides a nice example of virtuous cycles at work. Here, a combination of falling fuel costs, higher visitor numberslarger and more efficient planes, and competition has seen airfares fall (NB: I’m waiting on updated inflation data before making a more definitive statement). Many transport technologies, especially those where passengers share vehicles and/or facilities, tend to experience economies of density.

Private vehicles also experience economies of density to some degree. High levels of car ownership, for example, makes it easier to find a petrol station when you need one. The key difference between private vehicles and other transport technologies, however, is the degree to which road networks experience congestion. Beyond critical levels of demand, traffic congestion increases rapidly, i.e. congestion is a convex (upwards sloping) function. Congestion externalities are an example of dis-economies of density, and it’s one that is apparent in most cities of Auckland’s size and larger.

Congestion externalities are also an issue that things like driverless and/or electric vehicles do not resolve. Road pricing does solve congestion, although this is achieved by suppressing demand. So when people argue that electric and/or driverless cars will reduce demand for PT I’m somewhat sceptical, because these technologies don’t seem to change the fundamental dis-economies of scale that afflict urban road networks.

And when one thinks of the growth that Auckland will experience over the next 20 years, then economies of density are actually rather important. Perhaps more important than new technologies themselves …

2. Costs: Fixed versus variable costs

Our previous discussion noted that economies of density/scale arise in the presence of fixed costs. In this section I want to distinguish more carefully between fixed and variable costs. One useful way to think about transport costs is using a matrix which has “fixed/variable” versus “private/public” dimensions (NB: The latter is not relevant to this discussion, but can be for discussions of transport pricing more generally).

Cost table

 

Of course, such distinctions involve some arbitrary judgements. Parking for example, is both a private and a public cost. I’ve categorised it as “public” simply because a proportion of parking costs are subsidised by society. Despite the need for such judgements, I think this type of cost matrix is quite useful for classifying costs and subsequently analysing how changes in transport technologies (or policy settings for that matter) might impact on demand.

Using this framework (and a bunch of heroic assumptions) I have constructed the following graph to illustrate how the costs of cars compares to taxis and public transport, and how costs vary with distance measured in kilometres travelled per annum. PT fares are capped at the price of 12 monthly passes at $220 per month).

C1 Total private costs (c)

 

Here we see that cars become cheaper than taxis for people who are travelling more than 2,500 kilometres per year. Of course, the orange line is just one possible instance of the cost curve for cars. Depending on their preferences and circumstances, some people may opt to buy a cheaper car with higher operating costs, which would reduce the intercept but bump up the slope of the orange line. Nevertheless, the general point remains: For people who travel a lot, owning your own car makes more sense than using taxis.

Now consider a future scenario where electric driverless vehicles (“robot cars” for short) are available. How might they impact on these cost curves? Well, let’s assume robot cars cost 50% more than conventional cars; are 50% cheaper to park; and cost 25% less per kilometre to operate/maintain than conventional cars. When robot cars are used for taxis, they remove the need for a driver and increase higher utilisation. For the sake of the argument, let’s assume that the cost of using taxis drops by 50% with the advent of robot cars.

Under these assumptions, the cost curves presented above can be re-calculated as follows.

C2 Total private costs (future)

 

In this scenario taxis suddenly become cheaper than private cars for people who travel less than 10,000 kilometres per annum. By way of comparison, that’s slightly more than the average New Zealander travels per year. By pushing up fixed costs but reducing variable costs, robot cars seem to dramatically increase the scope for cheap taxi services to meet the demand for car travel for a wider range of households.

So consider this “what if” scenario: What if the primary impact of robot cars was to reduce the cost of taxis? In such a scenario would we need more or less PT? This leads me nicely onto the next topic …

3. Complements versus substitutes: A or B versus A & B?

When a new transport technology hits the market, one of the key questions we should seek to answer is whether it will complement or substitute existing technologies. The answer is not always obvious, but it is always important.

To provide an example, consider whether taxis increase or decrease demand for public transport. Many people think taxi’s compete with public transport, i.e. the two are substitutes. Rodney Hide, for example, had this to say on the matter (source; emphasis added):

[Uber is] … a whole new way of doing business. It disempowers bureaucrats and puts customers and drivers in charge. I love it. The public transport of the future won’t be clapped-out trains but driverless cars and Uber. It may happen much quicker than we now can possibly imagine. We won’t own a car. A driverless car is always just a minute away, ready to whisk us to our destination.

According to U.S. researchers, however, taxis are complements for public transport. This article provides a nice synopsis of relevant issues, while more detailed analysis is available here. The last report identifies “primary factors” for taxi demands, including 1) the number of workers commuting by subway and 2) the number of households that don’t own vehicles. Of course, places like New York have some attributes which are – for better or worse – not relevant to the New Zealand context …

 

Given that Auckland doesn’t have the density or subway system which exists in NYC, could Rodney be correct with his crystal ball-gazing? The answer, I think, is both “yes and no”. More specifically, taxis will compete with public transport in some places, while complementing it in others.

I think this article puts the distinction rather nicely when it says:

It is likely that these [taxi] services will just exacerbate the differences that already exist in the quality of public transit in different areas.  The localities that invested and ran their systems well won’t be as impacted.  In the areas where frustration is higher, the problems will surely become worse when revenues and ridership decline.  And the biases and history that impact why certain systems are the way they are will become more apparent.

The complements versus substitutes issue is relevant to many debates about new transport technologies. Some people seem convinced not only that driverless cars are imminent, but that they will drag people away from PT. I’m personally not so sure.

Conclusions:  “The Spruce Moose”?

One of my favourite Simpsons episodes starts with Mr Burns opening a casino. At the end of the episode, when the whole sordid venture is crashing down, an increasingly erratic Mr Burns pulls a gun on his ol’ mate Smithers and orders him to get into the model bi-plane affectionately known as the “Spruce Moose”.

maxresdefault

 

While hilarious, the behaviour of Mr Burns is not something we should emulate when it comes to transport policy. History is littered with unfortunate examples of politicians picking winners well in advance of demand. Indeed, such attitudes gave us 50 years of motorway building in Auckland, replete with well-documented examples of optimism bias and strategic misrepresentation. My point? Let’s not hold a proverbial gun to our own heads and over-commit to any particular kind of transport technology. Instead, let’s embrace the transport technologies we have, and be passionate about using them more efficiently, while keeping tabs on new transport technologies as they evolve.

There is no doubt that we live in exciting times: New Zealand is growing and seems to be experiencing economies of density, at least in the transport sector. Costs of air travel are falling, while other technologies, such as passenger rail, are more viable than they have perhaps been in the past. Robot cars and trucks seem likely to emerge onto the scene at some point, helping our car fleet to become smaller, quieter, cleaner, and generally more efficient than it is currently.

Meanwhile, rapid developments in telecommunications (which I intend to discuss in a later post) are changing the way that goods and services are delivered. This change is occurring at astounding speeds and in amazing ways. In a few years Uber has grown to become one of the world’s most valuable transport companies. In Europe, a start-up called “Blah blah car” has raised hundreds of millions in venture capital to expand its business, one which is already moving millions of people around the continent at very affordable prices. I can book any one of 5 trips from Amsterdam to Brussels tomorrow for about 10 Euro.

In such a dynamic and rapidly changing environment it’s hard to know what to do. And that’s kind of the point: There’s a risk that we over-adjust to new technologies, just like the motorway builders did in Auckland 50 years ago. What I would do, however, is ask some hard questions “around the edges” of what we are currently doing. And perhaps consider delaying some projects slightly in light of the uncertainty.

Indeed, when it comes to the CRL, my main criticism of the National Government’s requirements for accelerating funding was that similar conditions were not also attached to other large transport projects. Appropriately specified triggers would seem to be useful adjunct to existing benefit-cost analysis and provide a more precise understanding of when work on a particular project should go ahead (NB: Of course there are other factors to consider, such as interest rates).

In an upcoming post I will talk more about emerging technologies for non-car transport modes; that stuff is so exciting it deserves its own post.

Aging gracefully?

This month, my grandma moved into a retirement community. In some respects, it’s a significant change for her. After 95 years living in standalone houses, she will be moving into a small, sunny apartment. To do that, she’s had to downsize significantly – donating furniture, giving away belongings, and simply leaving some things behind. (The cycad that my parents gave her decades ago; the lemon tree that I’ve greedily harvested for years.)

Grandma's new neighbourhood.

Grandma’s new neighbourhood. Wish we built places like this for young people too.

But in other respects it’s not such a big step. She’s not moving far – only from Takapuna to Milford. Because there are retirement apartments sprinkled around Auckland, she is able to downsize and stay in the same community. (As John P’s excellent RCG/Transportblog development tracker highlights, there are many more such developments in the works.) That means that she can maintain all of her social ties and everyday habits – same church, same lunch groups, same healthcare facilities, and same proximity to family.

So I’m not worried about Grandma. But it’s making me wonder what’s in store for my parents, who are now in their early 60s.

They live, as they have done for most of the last two decades, on a large section on the edge of one of the San Francisco Bay Area’s many excellent regional parks. It gives them plenty of space to run a business and pursue their hobbies, like my mom’s wine-making and my dad’s shed Ponzi scheme. (He builds workshop space to house the lumber and tools that he will need to build more sheds.)

But it’s not exactly convenient if you can’t drive. (Or bicycle – they’re now spending more time on electric bikes.) Their house is at the top of a rather steep hill, the sidewalks are pretty patchy, and the nearest stores are three kilometres away. There is no bus service anywhere in the vicinity. Things are very spread out in the California suburbs.

While my parents are fit and vigorous, the fact is that at some point in the next two or three decades, they won’t be able to drive. At that point staying in place will no longer be an option. And if they don’t plan ahead, possibly by moving to a more accessible location before they absolutely need to, it could be a difficult change.

I suspect that they are not the only ones facing this dilemma. Many Baby Boomers will not be able to age in place. The post-war sprawl suburbs where they have spent their adult lives are not suitable for people who can’t drive.

There are three main problems with aging in a typical post-war suburb. Fortunately, all can be corrected or ameliorated – but doing so will require us to do some things differently.

The first is a transport problem: street networks and transport choices. As I highlighted in a post last year, designing neighbourhoods primarily for cars – with a hierarchy of cul-de-sacs, collector roads and arterials – don’t work for other transport modes. You can’t run efficient, usable bus services through these neighbourhoods, and it’s slow to walk anywhere. Furthermore, as shown the following image illustrates, changing that is hard due to the fact that you’d need to re-route street patterns:

Sprawl repair manual subdivision rebuild

A related issue is the quality of sidewalks, crosswalks, and other pedestrian infrastructure. In suburbs where most people drive, these tend to be in poor condition or simply non-existent. I have full use of my legs but still find this exasperating. I can only imagine how difficult it must be for people with limited mobility.

Poor transport choices often coincide with segregated land uses. Because older people tend to be less mobile, regardless of mode, their lives can be better when distances to retail and social destinations are short.

Unfortunately, a second issue that will face aging boomers is that post-war zoning codes have generally mandated rigid separation of residential and commercial use. Houses go in one place; shopping and work goes in another.

Here’s an illustration from Pakuranga and Howick in Auckland’s Unitary Plan. The bright pink areas are “centre” zones that allow both residential and retail. Most of the rest – the cream and orange colours – is exclusively residential. While the cream areas are undoubtedly nice beachfront property, people living in them will face constraints as they grow old.

Unitary Plan Howick

However, this isn’t the only way to build a city. When I was visiting Paris in December, I was struck by the vibrancy of retail options on just about every block in the city. Due to the fact that Paris lacks single-use zoning, it’s possible to get most of life’s daily needs – groceries and company, in particular – met without walking more than 100 metres.

Typical Paris neighbourhood shops (Source: Wikipedia)

Typical Paris neighbourhood shops (Source: Wikipedia)

That leads on to a third issue for aging boomers: a lack of housing choices for young and old people alike. Post-war planning has embraced “exclusionary” zoning policies such as large minimum lot sizes or tight controls on multi-family dwellings. Unless these policies are unwound, they will have two negative impacts for aging boomers who are seeking to age in place:

  1. A lack of neighbourhood density means that local retail and social facilities are not economically viable. Mount Eden, where I live, is a great example of how a mix of housing choices can enable vibrant local retail opportunities. The much-derided 1970s “sausage flats” mean that there is a sufficient critical mass of customers within walking distance. This creates positive spillovers for people living in the suburb’s standalone houses.
  2. A lack of options for downsizing in place will force people to leave their communities as they age. Retirement homes alone are not a solution to this problem, as some people may prefer to move into a smaller dwelling before they need of aged car. A greater mix of apartments, terraced houses, and units are important for filling this gap in the market.

Comprehensively addressing these three challenges will obviously take a long time. The built environment is persistent, and as a result many of the places we built in decades past will continue to look and feel the same for a long while.

However, I would argue that people who are middle-aged today have a strong incentive to vote for change. Retrofitting the suburbs with better transport choices, more housing choices, and more social and economic opportunities will benefit people of all ages. But it is likely to be especially beneficial – and urgent – for people in their 50s, 60s and 70s who will soon face some hard choices about where to live. It will offer them the best chance of aging gracefully, rather than facing disruption in old age.

What do you think is important for a happy retirement?

Links: Key’s Auckland Infrastructure Annoucment

Shortly Prime Minister John Key will be delivering his State of the Nation address at a luncheon being held by the Auckland Chamber of Commerce. It’s been widely expected that he’ll announce the government agreeing to start the main works on the City Rail Link in 2018 – in line with when the council/AT wanted to start them – instead of 2020 like they had announced when they supported the project in 2013. I’ll actually be at the event and trying my best to cover it live on social media so follow us twitter for the latest updates.

Aotea Station Design Platform Oct - 15

But it won’t be the only announcement with Key saying:

“As New Zealand’s largest city, our biggest commercial centre and the main gateway for international tourists, we all need Auckland to succeed.”

He said the Government was already putting billions of dollars into Auckland as it grew and he would highlight some of the priorities for the year ahead.

“It’s a speech that looks very heavily at infrastructure projects, not just in Auckland, but it does look at those issues and gives the Government perspective on next steps.”

….

“We are spending billions and billions of dollars as a Government on infrastructure. So the announcements we make tomorrow will ultimately mean the Government increases even further its expenditure on infrastructure. We are doing that because that infrastructure underpins the efficiency and competitiveness of our economy. We are not doing this because we need to stimulate the economy per se.”

Mr Key said housing in Auckland was a focus for the Government, but it was not the main issue of his speech. “We are saying we need to build more houses faster. It is our expectation the demand in Auckland is going to continue, that the growth in the Auckland population is going to continue and we just need to build a lot more houses between now and the next five to 10 years.”

It’s also been rumoured that he’ll make comments on the East-West Link, Additional Waitemata Harbour Crossing and Penlink. Further while he says housing won’t be a main issue of his speech I suspect that other aspects of infrastructure provision such as funding for water infrastructure that would enable more housing to be developed more quickly might be.

I imagine we’ll see media reports of the announcement coming in fairly quickly after the speech so the main purpose of this post is for somewhere to discuss what’s announced – I’ll have a more detailed analysis tomorrow.

Of course with the CRL getting so much attention it begs the question how many times will the media or some media commentator refer to it as a loop, suggest it’s just about trains going around in circles or that it’s just about Len Brown wanting a toy trainset.

Anyway it should be an interesting few hours. Keep an eye on our twitter account for the latest updates.

The Herald and Housing Affordability

The media are once again going off on the topic of housing affordability, after the release of the latest report by Demographia saying that Auckland is one of the most unaffordable cities in the world.

A survey of the median house prices around the world has revealed Auckland to be among the five least affordable cities to buy a house. The annual Demographia survey, released today, compares prices to incomes in 367 cities. Auckland is one of the worst in the world due to extremely high house prices coupled with moderate wages.

We’ve often talked about the issues with how Demographia produce their results. They take an overly simplistic view of the discussion, and exclude important factors. But while the scale of the issue is likely wrong, that doesn’t mean the general outcome – that housing affordability needs to be improved – isn’t correct.

We also disagree with their proposed solution of unfettered greenfield development. For Demographia, it seems that opening up greenfield land is always the solution, regardless of the question being asked. While land supply is an issue, they like to conveniently ignore the impact of planning regulations on existing urban land that prevents development across most of Auckland. They also like to ignore the cost to tax and ratepayers of providing the infrastructure needed to enable that greenfield development. For example, based on Auckland Transport’s figures it will cost about $67,000 per dwelling to provide the roads needed in the major new greenfield areas that are proposed.

Future Urban Land - North Transport Networks

Many people may want a home with a large backyard on the fringe of town, but many just want a home. A lot are prepared to forgo a large backyard for the added amenity of living closer to the city or other urban centres – but they are unable to do so, as so much development has been restricted.

This brings me to the main point of the post, the media (especially the Herald) who want to have it both ways.

While today they’re lamenting house prices, the Herald has spent much of the last few years championing opposition to one of the key tools that will help address housing supply, the Auckland Unitary Plan. From when the draft plan was released almost three years ago, they’ve given countless space to those opposing any change in Auckland. They’ve deliberately misled the public and recently they’ve even become so absurd as to call two-storey townhouses “Highrise” in their bid to whip up fear and anger over the plan.

Of course politicians of all stripes shouldn’t escape blame. Whether they’re also trying to whip up fear, generally oppose change or just have it happen in some other neighbourhood they are as much to blame. They also seem to me to have less desire to actually fix problems. After all, which of them are really going to stand up to house owning voters and say they’ll enact policies which could result in existing house prices falling or at best stagnating for many years as a result of changes.

Regardless of what you think the solutions are, it still feels like we’re some way off any real changes happening.

On a related note: I suspect we could see John Key include housing announcements in his announcement on Wednesday when he also announces support for the CRL to start in 2018. There have been suggestions the government have been talking to the council and CCOs like Watercare looking at what other big infrastructure projects could be brought forward to help speed up housing supply.

Building a better city: Policies and perspectives (part 2 of 2)

This is the second and final post discussing some broad ideas for building a better city. The first post discussed the dynamic nature of cities and argued that a focus on appropriate pricing and incentive mechanisms was important to managing urban ills without stifling beneficial change. This part discusses how we might identify policy areas in need of improvement, and why we should care about efficient policy.

2. Cost benefit analysis is important for identifying opportunities to improve policies

Over the last 170 years, New Zealand cities have been shaped by a wide range of policies, ranging from planning regulations to public investments to government land-holdings to tax and subsidy policies. Many of those policies serve (or served) a useful purpose, and most are good intentioned. But it’s almost inconceivable that all of them are efficient. Cities are dynamic places, and policies put in place in past decades can easily become outmoded and begin to distort prices and limit people’s choices.

Fortunately, as I have tried to suggest in the previous post, we’ve got more policy alternatives than we think. We don’t have to use yesteryear’s solutions to solve next year’s problems. But how do we know what we might have to change?

In my view, cost benefit analysis, or CBA, has an important role to play in identifying which policies are good and which need to change. If you want to learn more about CBA, you can delve into the technical guidelines published by organisations like the Treasury and the NZ Transport Agency. But CBA is not really as complicated as the tedious official guidance makes it sounds. It boils down to a rather simple question:

“This policy has some benefits and some costs. Do we expect the benefits to exceed the costs?”

If the answer is no, perhaps we should do something different instead.

Cost benefit analysis can be applied to a wide range of policy questions. It’s commonly applied to evaluate public investment options – that’s what NZTA uses it for – and less widely used elsewhere. But the principles can readily be extended to a wide range of urban policies. In a paper I wrote for this year’s NZAE conference, I looked at a couple of approaches to evaluating the costs and benefits of planning regulations. I found that analysis of property sales could be used to identify cases where planning rules distorted prices and prevented people from making useful investments – as well as cases where planning rules could provide benefits by managing localised externalities.

Here are a few good examples of how CBA can help in making better decisions.

Back in 2009, the new National-led Government worked with the Green Party to design and implement an insulation and clean heating subsidy programme. In the first four years of the programme, roughly 180,000 homes were insulated and heat pumps were installed in around 60,000 homes. A cost benefit analysis undertaken in 2011 (Grimes et al, 2011) found that the project’s benefits exceeded the costs by a factor of five:

The overall results suggest that the programme as a whole has had sizeable net benefits, with our central estimate of programme benefits being almost five times resource costs attributable to the programme. The central estimate of gross benefits for the programme is $1.28 billion compared with resource costs of $0.33 billion, a net benefit of $0.95 billion.

This finding provided a strong rationale to extend the programme to 2016 and trial a rental warrant of fitness programme to improve home weathertightness and safety performance in selected NZ cities.

A second good example is the Ministry of Transport’s recent analysis of the economic performance of state highway investment. I reviewed their analysis in a series of posts last year (parts 1, 2, 3, 4). Among other things, they found that the economic efficiency of road spending had fallen since 2008, with projects with low benefit-cost ratios being selected over projects with higher BCRs.

MoT state highway BCRs 2005-2012

This is a valuable finding that should be taken seriously by policymakers and the public. It suggests that there may be opportunities to significantly improve the value that we are getting out of transport investment. That being said, it also suggests that policymakers have chosen to take a more optimistic view about project benefits than indicated by conventional CBA procedures. Sometimes this is warranted – it’s difficult to accurately account for some benefits – and sometimes it’s not.

This reminds me of a third example. I was struck by recent comments by Wellington’s Deputy Mayor about the city’s new publicly funded convention centre and film museum:

Deputy Mayor Justin Lester said the museum would become New Zealand’s most significant man-made attraction and an international draw card.

“It’s a little bit when Disneyland first opened in California, but in a Wellington context… In the 150th year since Wellington became New Zealand’s capital, there are only a handful of moments that rival the significance of this announcement.”

I haven’t read the business case, so I don’t know what assumptions were made to sell the project. But if the financial and economic forecasts require Wellington to become the “Disneyland of the south”, I would be very nervous.

This leads on to a very important consideration when using CBA results: To get the real story, it’s important to dive into the data and calculations that sit behind the headline figures. In some cases, people make claims about projects that are not backed up by their analysis. For example, they may require unlikely things to happen in order for the hypothesised benefits to materialise. In these cases, a properly-done CBA should also provide you with a means of understanding the risks inherent with the policy.

3. In an efficient city, there is time and space left over to lead a good life

But why is efficiency important? At the start of this post, I argued that good urban policies facilitate agglomeration economies in both production and consumption. This, in turn, enables cities to succeed in attracting new businesses and new residents. (The alternative of urban stagnation or economic decline is not really very appealing.)

Or, as Stu argued in a post last year, efficient urban policies provide us with an abundance of good things. Efficient urban planning policies allow us to have abundant, affordably priced housing, without sacrificing public goods. Efficient transport policies enable us to have abundant access. Good management of public assets allows us to combine a productive economy with a good supply of public goods.

Furthermore, generally prioritising efficiency in our urban policies means that we will have more resources left over for all the non-economic things that make life beautiful and enjoyable. For example, allowing people to use land efficiently by building more housing in areas that are accessible to jobs and amenities will also allow them to avoid commuting long distances to sprawlsville. This in turn frees up time to spend with the ultimate in non-economic investments – children and families.

Last December, I saw how things could be a little different. It was the first day that LightPath / Te Ara I Whiti cycleway was open. (Incidentally, I think it should be called PinkPath.) I skipped the mass ride organized by Bike Auckland in favour of a drink elsewhere, but checked out the new cycleway on the bike ride home.

Now, I wasn’t extraordinarily enthusiastic about the project. It seemed to be too far over to the west edge of town and so I wasn’t sure how many people would want to use it. But it has surprised me. I’ve been up and down it eight or ten times since then, and there are always people out on it, even at 10pm. They are having fun cycling – a relatively new concept for Auckland.

LightPath - Vaughn Davis

PinkPath was designed to be fun to cycle on and fun to see from a distance. It sends a message: “Auckland will give you new choices about how to travel. Rock up on your bike.” It didn’t cost much – less than 1% of Auckland’s annual transport budget and a disused motorway off-ramp. But that money and space can easily be consumed by inefficiency elsewhere in the system.

Which leads me to my conclusion: the good things in life are not necessarily expensive, but they can easily be crowded out by bad urban policies. So get the prices right, do some CBA, and live a better life in a better city.

Building a better city: Policies and perspectives (part 1 of 2)

This is the first half of a two-part series of posts. It summarises a few ideas that have been banging around the back of my head for a while – basically, an attempt to answer the question: “What can economics do for cities?” In this part, I discuss a couple of important concepts: agglomeration economies, which underpin cities’ existence and ongoing success, and the potential role of pricing mechanisms for managing urban ills.

What do cities do?

Cities mean different things to different people. They are places to work, places to play, places to invest, places to consume, places to conduct politics, places to realise one’s individuality, places to blend into the crowd. (And many, many more things beside.)

In fact, one of the features of a successful city is that it can mean different things to different people, and attract and retain them for different reasons. Cities exist because they are efficient and diverse.

Economists use the term agglomeration economies to describe the advantages of urban scale and density. If you operate a business, locating in a city will allow you to access more workers, more customers, and more new ideas. But even if not, an urban location still offers advantages – more restaurants and retailers, a larger dating pool, better access to education and healthcare, and more choices about how to work, live, and get around.

New research from the Netherlands finds that agglomeration economies in both production and consumption are important, albeit to a different extent in different cities. Furthermore, ignoring agglomeration economies is a risky proposition for cities:

As history has shown (see, for example, what happened to Detroit or the decline in the population of Amsterdam and Rotterdam referred to above), current successes provide no guarantees for the future. This is what Gibrat’s law tells us, growth is independent of current size. Future growth is therefore largely independent of past success. The chances for policymakers that try to row against the tide are small. A successful policy requires to ‘go with the flow’. Large investments in infrastructure in a declining city do not satisfy any real demand but lead to large financial burdens for the local population, making these cities even less attractive. However, policy can make a difference in growing cities. In order to remain on the short list of hot spots, policymakers in these cities have two margins to work on.

  • First, the city has to be attractive for innovative entrepreneurs and enterprises to locate their business.
  • Second, the city has to be an attractive choice for high-educated top talent as a place to live in.

In other words, urban success is a dynamic process. Cities can’t stand still – they must be capable of attracting new people and generating new ideas and opportunities. Simply identifying some things that people like about a city and then freezing them in amber is a recipe for long-term urban failure.

1. Incentives and prices matter, so it’s important to get them right

We need change, but we don’t necessarily need change at all cost. Most development is good, but some has deleterious side-effects. A new factory may contaminate local air and water quality. A coal-fired power plant will damage our climate. A new subdivision may pump traffic onto congested roads. A new retailer may attract more people to park on already-crowded streets.

Policy responses to these challenges can heavy-handed and inefficient. While negative (and positive!) spillovers are abundant in cities, some cures may be worse than the disease. A good example is minimum parking requirements, or MPRs, which require new developments to provide a defined minimum amount of parking. The aim of this policy is to prevent parking from spilling over onto neighbouring streets and properties.

Unfortunately, MPRs tend to be both inefficient and ineffective. They are inefficient because (a) there is usually poor evidence for choosing minimum ratios, meaning that many businesses and households are compelled to purchase more parking than they need and (b) they tend to be more costly than alternative approaches to parking management. Furthermore, they are often ineffective, as people continue to complain about a lack of parking even in places where MPRs have led to a major oversupply.

Better pricing is often a better alternative to blunt policy instruments. As any economist will tell you, if you want less of something, put up the price! This approach is applicable to a wide range of policy areas, especially in cities. For example:

There are several important advantages to using prices, rather than regulations or construction, to discourage negative spillovers. First, pricing respects people’s ability to make good choices. If we had a carbon tax, it wouldn’t prevent someone from burning petrol or farming cows. But it would make them pay the full social cost of those choices.

Second, prices can change in response to new information. AT’s new parking policy is a good example of this – they will monitor demand for on-street parking and tweak the prices up if occupancy is too high. This reduces the risk of screwing things up due to forecasting errors.

Third, and most importantly, prices provide governments, businesses, and households better information, which can enable them to make better decisions. Over time, this will result in significant dynamic efficiencies. For example, congestion pricing will help transport agencies plan infrastructure upgrades. Rather than having to guess whether people will value expanded roads – which frequently leads to errors – they will be able to measure the actual value that people place on travel.

Tomorrow: Part 2.

Transport technologies!?! Part 1

As the new year kicks off, it seems like an appropriate time to reflect on some wider trends – as Patrick recently did in this excellent wrap-up of the year just gone. Looking forward, one of the most exciting trends relates to how technology will impact on how we travel. This post marks the first in what I hope to be a long-running series on transport technologies. In this initial post I want to focus on wider factors that might shape changes in transport technologies.

Some people may find this strange. After all isn’t technological change a random gift from the gods, i.e. something which emerges from the ether without any particular rhyme or reason? Au contraire. Technological change doesn’t occur in a vacuum; it arises from entrepreneurial people and businesses anticipating people’s wants and needs. And just because a particular technology is developed doesn’t mean it will find a market and become widely adopted.

For this reason, before we try and portend too much about future transport technologies themselves, I think it is useful to step back and think about the process through which technological change occurs, and in particular the factors that capture the attention of entrepreneurs and/or shape the market for new technologies in other ways. The following sub-sections identify three factors, namely 1) Land use; 2) Public policies; and 3) Demographics, which I expect to direct the arrow of technology change in coming decades.

You may be able to think of others, and I’d be interested to hear what they are.

1. Land use: Denser cities favour space-efficient transport modes

Why begin a conversation about transport technologies by talking about land use? Put simply, the demand for transport (especially when measured in terms of passenger-kilometres travelled) is strongly dependent on the choices people make about where to live in relation to where they want to be. Land use also impacts on the relative effectiveness of different transport modes. For example, when average trip distances are short, then walking and cycling become more viable and vice versa. Hence, trends in land use are likely to have a bearing on the scale and composition of future travel demands.

What is happening to land use in New Zealand? Two over-arching trends emerge from the data: 1) urbanisation, i.e. more people are living in cities and towns and 2) densification, i.e. the dense areas of our cities are growing the most rapidly. The first trend is well-established and has persisted for the best part of a century, so I won’t cover it here. The second trend, however, is not well-understood in some quarters. David Seymour, for example, was recently quoted by The Herald as follows (source):

I don’t believe in 50 years time when we’re a society with vastly more sophisticated transport that people will be as attracted to living so intensely,” he said. “As transport technology improves, as it has for the last 200 years, people will say that’s great and travel farther and faster and we’re going to consume more space,” he said.

Seymour’s forecast runs contrary to observed land use trends over the last two decades or so. The table below is extracted from a paper written by my colleague Peter Nunns, which summarises densities for New Zealand cities in the period 2001 – 2013. We find that most cities that are growing have also experienced increases in density in this period, with Auckland leading the pack with a 33% increase in density.

Densities

I should point out that this table uses “population-weighted densities”, which measures the density at which the average resident lives. Population-weighted densities are a more  accurate indicator of urban density than the more-commonly cited “average density”, for reasons Peter discusses here.

The following two graphs provide strong evidence of how density is changing in Auckland. The first figure shows population growth in Waitemata compared to other parts of Auckland. The second figure then shows population growth in Auckland’s city centre from 1996 to 2015, in which time the population of the city centre grew at an average rate of ~12% p.a.. This is approximately six times higher than the Auckland average, which in turn is higher than the New Zealand average.

Auckland LB Population Change - 2015 2

City Centre Population - 1996-2015 2

It’s reasonable to suggest that where density increases, then we can also expect the value of land to increase – holding other factors constant. Research by Arthur Grimes into land values in Auckland suggests that the “pull” of Auckland’s city centre has indeed increased in the last two years (source).

And where space becomes more valuable, then one might reasonably expect space efficient transport modes to become relatively more attractive. A paper aptly titled “The Future of Motorized Transport” had this to say about the relative space efficiency of different transport modes (source).

Land use per mode

This analysis suggests that, on average, cars require ten times more space than the next least space-efficient transport mode (buses). In my opinion, this seems to indicate that where density increases, and space becomes more valuable, then cars will be placed at an significant disadvantage compared to other transport modes.

Is my hypothesis borne out by data on people’s transport choices? While we can never be sure, I would cautiously answer “yes”. The following figure, for example, shows how the total number people accessing the city centre using cars or public transport has changed in the period from 2001 and 2014.

Basically, all of the growth in travel demands to Auckland’s city centre over the last 15 years (plus some) has been met by public transport. Moreover, the following figure shows total public transport patronage in Auckland since 1920. While much hooplah has been made of recent patronage growth, this figure shows how PT patronage in Auckland has actually been growing at a decent pace since the early 1990s, which is around the same time that the population of central areas started to grow. Coincidence? I suspect not.

1920-2015 Auckland Patronage 1

Is Auckland unique in terms of its land use trends? After all, what matters most to technological development is not what’s happening in Auckland but the general trends that are happening globally. It’s hard to say conclusively, and I don’t have time to do a detailed survey in this blog post (please let me know if you know of one). However data does suggest that Auckland is not *alone* in terms of the land use trends that it’s seen over the last two decades or so. For example, here’s what a recent publication had to say about trends in the value of land in Amsterdam (source): “The price of land in the Amsterdam city centre is 200 times as high as that in the countryside … this price difference more than doubled between 1985 and 2007.

Now at this point you might not be convinced by my dot-joining between density, land values, and transport outcomes, and for quite understandable reasons: Not all of the transport outcomes illustrated in the preceding figures will be caused by trends in land use. You might argue that changes in travel demands are likely to reflect a myriad of other factors, such as policy changes and demographic trends. And I think you’d be correct, which brings me to my next two points …

2. Public policy: Slowly recognizing the need for change?

The preceding section argued that trends in land use in Auckland have increasingly favoured space-efficient transport technologies. This raises the question of whether policy-makers have been responding to these trends? The answer, I think, is “yes, albeit rather slowly”. The key point I want to make in this section is that future trends in travel demands will be impacted by shifts in public policies which are already underway. Hence, it is useful to understand these shifts because they are relevant to the question of which technological developments are adopted by people with the most vigour.

Parking is perhaps the most notable example of policy change in the Auckland context. So-called minimum parking requirements, or “MPRs”, were removed from Auckland city centre in the 1990s. For those of you who haven’t heard of MPRs, they are regulations imposed by Councils which require new developments to provide a certain “minimum” amount of parking. The amount is based on predictions about the peak demand for parking at each individual development.

Of course, if you provide a lot of free parking then you are providing a large subsidy to people who drive, and at the same time reducing the density of development. In this recent post, Peter discussed the removal of MPRs in terms of the proposed Commercial Bay development at the foot of Queen Street. He comments as follows:

… if those MPRs still applied to the city centre, Commercial Bay would have required over 2,000 carparks. That’s seven times as much parking as the developers actually want to build … According to Precinct, Commercial Bay will cost $681 million to build. If MPRs required the development to include another 1,750 carparks, at a cost of $30-50,000 apiece, it would add $50-90 million to the cost of the project. That suggests that MPRs would impose a “regulatory tax” of  7-13% on downtown development.

In a nutshell, removing MPRs can be expected to both 1) increase the costs of owning and operating cars and 2) enable more intensive development. For this reason, the Unitary Plan proposes to remove MPRs from areas where they are considered likely to do the most damage, as illustrated by the red areas in the figure below (source).

MPRs

* This map is slightly out of date due to recent changes.

I note that Auckland is not alone in rolling back MPRs: Many cities in New Zealand and overseas are moving in a similar direction. Basically, it seems likely that the size of the red blobs in the figure above will grow over time. In this context, it seems reasonable to suggest that parking policies will increasingly shift in a direction that is, by historical measures, not as favourable to individual car ownership and use.

What other policy shifts might change the way we travel in the future?

The recent “Paris Outcome” on climate change and carbon emissions is an obvious one. Given its multi-lateral nature, the Paris Outcome seems like a policy that might impact on global trends in transport technologies. Personally I think the transport technology game-changed in Paris; our transition to a low carbon economy needs to start immediately and be complete by the middle of the century if we are to avoid catastrophic climate change.

Congestion charging is another potential policy shift. It involves charging differential prices by time and location so as to keep vehicle demands within the available road capacity. Over time, congestion pricing is becoming more attractive as the benefits of adopting such a scheme increases (due to Auckland’s growing population), while the costs of doing so decreases (due to improvements in technology). Congestion charging is supported by the likes of this Blog, the Auckland Council, NZCID, and the Productivity Commission.

The general point I want to make, however, is that public policies are changing in response to wider transport and energy issues. Unfortunately I think it’s all-too-common to focus on how policy should respond to technology, without thinking also about how technology might respond to major policy settings. Widespread adoption of policies associated with parking reform, the Paris Outcome, and congestion charging will change the way we use existing transport technologies in the near future, while also changing the incentives associated with new technologies. There is a mutual dependence between policy and technology that operates in both directions.

The final factor I want to discuss is the question of demographics, i.e. what the hell is New Zealand’s population going to look like in 30 years?

3. Demographic trends: Which horoscope do you prefer?

Demographic trends are increasingly difficult to predict, hence I prefer to talk in terms of “scenarios”, rather than defined outcomes. The two key demographic attributes are size and age.

To highlight how uncertain these projections are, just consider that barely 5 years ago New Zealand was effectively staring down the barrel of a major demographic problem: We’d done so well at exporting young people to more exciting cities overseas that our population growth was slowing and our demographic profile was becoming increasingly imbalanced. This was all occurring at the same time as the first of the baby-boomer generation were entering into their retirement, with all of the associated fiscal costs this implied. Back in 2011, Natalie Jackson from the University of Waikato’s (excellent) NIDEA research group had this to say on the issue of demographics (source):

As elsewhere, New Zealand’s population is ageing. As elsewhere, this ageing has two main drivers: increasing longevity, and declining birth rates, both outcomes of the Demographic Transition. In New Zealand’s case, however, the population is also ageing ‘prematurely’ from another cause, the legacy of net migration loss at young adult ages (typically 20-24 years) which New Zealand experiences in most years, and at 15-19 and 25-29 years in many other years as well. The loss, compounded by the falling birth rates at the time each cohort was born, has created a deep bite in today’s age structure across ages 25-39 years. This bite is not only driving up the median age faster than would otherwise be the case, given that New Zealand has the highest birth rate in the developed world, but has enormous implications for the country as it faces the retirement of its baby boomer generation.

Around the same time, economists working at the NZIER published a separate working paper titled “The Flight of the Kiwi”. This made the following comments on net migration between New Zealand and Australia, which was accompanied by the figure below (source):

If economic growth for the 2010-2025 period in New Zealand and Australia were to be at the rates currently projected by the OECD, then we should expect a net 412,000 people to emigrate between now and 2025. This is the equivalent of the whole population of Wellington, including the Hutt Valley and the Kapiti Coast, moving to Australia.

Actual versus predicted migration

Fortunately, subsequent events have ensured these demographic predictions have not materialised. I can’t shake the feeling, however, that this owes more to Australia’s relative misfortune (due to the collapse in global commodity prices) than it does to New Zealand’s good management. And despite New Zealand’s economic performance relative to Australia’s being about as good as it gets, we still only achieve a net migration gain between the two countries of a couple of hundred people p.a. This suggests that if/when Australia gets on top of its economic/fiscal challenges, then the net outflor might return to the sorts of levels predicted by the NZIER.

Personally, I think volatility in population and demographic statistics is something we need to get used to. In gneeral, New Zealanders seem to be a relatively mobile, skilled group of people who are benefiting from the opportunities afforded by an increasingly globalised world. As such, movements of people appear to be increasingly sensitive to relative socio-economic performance. When New Zealand is not performing well, then tends of thousands of us are likely to take our leave and head offshore (mostly to Australia), and vice versa. This is good for them and generally good for the receiving country. I doubt that it’s good for New Zealand, given the aforementioned demographic issues we face.

This has led me to consider two rather divergent population/demographic scenarios for New Zealand:

  1. The home-coming queen” – New Zealand’s socio-economic performance exceeds that of the countries with which we compete for people, such that fewer people depart while more New Zealanders currently living overseas decide to return home. As a result, New Zealand experiences strong population growth of 2-3% p.a., which helps to grow the workforce and mitigate the demographic imbalance introduced by the baby-boomers; or
  2. The gerontocalypse” – New Zealand’s socio-economic performance lags behind that of the countries with which we compete for people, most notably Australia. Young and/or mobile New Zealanders depart en masse, and population growth to fall to approximately 1% – almost all of which occurs in Auckland. The growth in the workforce is unable to offset increasing costs of health and super, but necessary policy reforms are opposed by baby-boomers. As a result, tax rates rise, further exacerbating the exodus.

The transport implications of these two scenarios are obviously rather different. The “home-coming queen” scenario might require increased transport investment, especially in the upper North Island where most of the population growth is likely to occur. It might also require different types of transport technologies, such as driverless metro systems and/or and inter-city passenger rail between Auckland and surrounding urban centres, namely Hamilton, Tauranga, and possibly even Whangarei. It might a new tunnel under the Kaimai ranges, or Auckland and Tauranga ports to merge into one “super-port” located midway between the two cities. I don’t know.

In contrast, the “gerontocalypse” scenario would be associated with lower economic growth, and lower socio-economic well-being generally. In terms of transport, we’d expect transport budgets to come under pressure. Some roads may need to be closed or sold off, and/or road user charges might need to rise simply to fund maintenance of the existing network let alone new investments.

I don’t know which scenario is more likely, but I know it’s important to discussions of transport technology. There’s a big difference between what technologies might work for a country of 5 million versus a country of 10 million, where most of the growth is located in and around Auckland, Hamilton, and Tauranga.

Without having answers to such question, it’s hard to frame discussions of which transport technologies might need to be adopted in the future. Dare I say it, perhaps this raises the need for some strategic thinking at the national level about demographic/population changes? It seems like National is betting on our ability to attract young people as a means for mitigating the rising costs of health and super associated with an ageing population. If so then that’s fine – but it would be useful to know this such that it can inform discussions of transport technologies, and the appropriate policy responses.

4. Conclusion

Discussions of future transport technologies often occur within a “transport silo”, where the interaction with wider socio-economic factors is downplayed. In reality, the development and adoption of transport technologies does not happen in a vacuum but is instead shaped by prevailing socio-economic factors. Current trends in land use and public policy, for example, indicate that transport technologies which are space and energy efficient are likely to have a comparative advantage in the future. Demographic outcomes are something of a wild-card. Whether New Zealand is able to address its demographic imbalances, and more specifically maintain socio-economic performance at levels comparable to the countries with which we compete for skilled migrants, may have a large bearing on the transport technologies needed over the coming decades.