This is a guest post from reader Isabella
Have you ever wanted a government organisation to be less opaque?
Or thought “if only we could get the data on that…”?
Or admired some gorgeous datavis and wanted more?
Now’s your chance! Get your ideas in BY WEDNESDAY 24TH to shape New Zealand’s Open Government Action Plan.
This dull-sounding document is important: it’s the plan for the work in local and central government to open up publicly funded data for reuse, and to open up government processes for better accountability, transparency and creativity. There’s more every year, and it’s getting better and faster. Help steer it!
Transportblog readers, bloggers, commenters and all – this is you.
We need people like you to be able to see into government’s decision-making processes and subject them to the praise, censure and improvement they deserve.
We need people like you to be able to get data on things that matter and turn them into insightful information and juicy, juicy knowledge. So…
- If you’ve ever had an idea for how the government – local and central – should be more open, go here and tell ’em.
- If you’ve ever had an idea for a neat open data project, go here and write it down.
- If you’ve ever known anyone else who’d have these ideas, send them here and tell them to write.
And do it soon! the engagement is only live til end of Wednesday 24th. (though you can be involved longer term – see here)
Want some background?
“The Open Government Partnership (OGP) recognises that government can be more effective when citizens are aware and involved in building an open society. The focus of the partnership is on developing a two-year National Action Plan between citizens and government, and the government is currently running a process to develop New Zealand’s second plan. One of the guiding principles for the plan is the innovative use of technology to be more transparent
The Open Government Partnership (OGP) is an international programme where the governments of 70 countries have committed to becoming more open, accountable and responsive to citizens.
New Zealand joined the OGP in 2014 and is now developing its second National Action Plan (NAP) to identify the best approaches to open up government and data, over the next two years.”
The demolition of the Downtown Centre for the start of the CRL and the replacement of this 1960s structure by Precinct Properties’ Commercial Bay office and retail development is an important moment for Auckland on many levels.
Along with the obvious boon of the actual beginning of the CRL there is also something deeply symbolic here. The entire conception of the previous building was anti-urban, it was a suburban mall stuck right in the heart of the city. I have always been struck by the semiotics of this backwards invasion; instead of the usual order of things, where a smaller centre tries to present its developments as a new sophistication by reference to a bigger more glamorous centre, this whole building seemed to represent an inversion of this idea; determinedly aiming to be nothing more than a little bit of Lynn Mall in the city.
But then it comes from that peculiar age in the history of city making; the second half of the 20thC, when, uniquely, dispersal and edge took over from concentration and centre as the formula for commercial success. See here for a fascinatingly detailed history of this development by architect Malcolm Smith, it is clear from this that it was extremely hard in those times to make such a location work, the city centre had just lost its mojo. To see how this came to be so in what now is so obviously such a valuable location, it is important to understand the historical context in which this development took place. This is well summarised on Auckland’s Wikipedia page (source).
The relocation of industries to outlying suburbs became especially pronounced in the 1950s, partly due to incentives made by council planners to create industrial areas in Penrose and Rosebank Road (amongst others) and thus rid the inner city area of noise, pollution and heavy traffic. This was mirrored by the development of suburban shopping malls (the first being LynnMall in 1963)which enticed retailers to vacate the inner city as well. Attempts by the council to halt this pattern by constructing numerous public car parking buildings met with varying success. The rise of suburban supermarket and mall shopping that was created in places such as Pakuranga from 1965 onwards has been added to by the appearance of Big Box retailers in places such as Botany and the North Shore.
It really is a perfect example of this zeitgeist, from its introverted retail pattern [blank walls to the street; its formation it actually consumed a city street], car parking orientation [Downtown parking building and airbridge], clunky sub-modernist massing, right down to the hideous 70s baby-kaka colour scheme.
And now, it is my contention, its demise is also a perfect expression of the new zeitgeist; the return of the city. The inversion of the pattern in play at the time of its creation.
Which, as the name suggests, is simply a return to the timeless urban pattern of the preeminence of proximity and concentration: Where the centre is by definition the busiest and most valuable retail and commercial precinct. A pattern that would be recognisable to city inhabitants throughout all ages and nations, and is only worth emphasising here because everybody adult today has grown up under the opposite, and anomalous, pattern. So what is in fact abnormal and inverted in the long history of urban settlement is strangely conventional and may even seem natural.
This explains the confused incomprehension of people like Herald writer John Roughan, a deeply committed 20th Century dweller who just can’t get to grips with this return to the natural urban order of things this century in Auckland, with the city reshaping itself again on urban terms, building proper city kit like underground rail and the volume of pedestrians pushing out the car from city streets. As opposed to the suburban auto-privileging order he is comfortable with. This is the pattern of the mid-late 20th century in Auckland; the good old days of auto-dominated yet unpeopled city streets, a commuter city completely unlived in, and dead at nights and on weekends; everyone having fled to the haven of the suburbs. So he confuses the vibrancy of crowded city pavements and new construction with some sort of disorder:
Meanwhile, the heart of Auckland looks like a body in the first phase of drastic surgery. It lies stunned, wan, with opened wounds and heavy bandaging.
Whereas to city lovers the scale and ubiquity of construction currently underway in the city is exhilarating and full of promise*. Auckland now has something of the energy of early 20th century North American cities; alive with commerce, construction, and crowds. Rather than the plodding predictability of the old provincial town that Roughan seems to be yearning for.
This kind of confusion and conflict is to be expected in times of significant change that it is clear that Auckland and many other cities are experiencing now. The bewilderment and anger of some older people at the [largely misunderstood] Unitary Plan is another sign of this: people tend to react fearfully when much of what they always assumed would be permanent and unchallenged starts to melt away. Views formed decades ago can calcify and to see their concrete expression demolished can provoke emotional reaction.
So we can expect more lashing out and confused editorials by those unable or unwilling to move with the times, because I am pretty certain this is a powerful and irresistible trend, as shown by the scale of work, over $10 billion of new construction underway or about to be in Auckland City along the CRL route. As powerful in fact as the last time our city conformed to international trends and profoundly altered its form and movement systems: yup that’s right, when we went all in for motorways, suburban living, and dispersed shopping malls.
Auckland Star April 1973
We are just changing horses again, and this time back to a normal urban pattern based on a hierarchy of concentration, but as with all evolutions or even revolutions, they still take place in the context of what went before. So Roughan’s sacred suburbia, with its rituals of weekend car washing, lawn mowing, and BBQs, will still exist, and in fact can still be the enveloping context for many people’s entire Auckland experience if they so desire. The wheel turns, but also rolls forward, building on the old, as well as replacing it. Just as buildings of earlier phases of Auckland’s history, particularly from its most urban period in the first half of the 20th Century, can (thankfully) still be seen in these photographs, so will the monuments of the second half of last century persist, the motorways, the malls, the parking buildings, the stubby towers, but the new emphasis is increasingly now elsewhere.
Only I would contend that this time we are being much less destructive than before; we are not dismantling the motorway system, or even running it down, although we will stop adding to it; importantly this is unlike what happened to the tram network and passenger rail during the motorway/sprawl era.
This change may be a shock to people like Roughan, but it really is more evolutionary than revolutionary, additional not substitutive.
All palaces are temporary.
*= which isn’t to say that every change is ideal, see here for a critique of the public space issues at Commercial Bay: Are we getting the Public Space…
Auckland Transport’s HOP card generally works pretty well for most people and is a vast improvement from what we had before with different ticketing systems for each mode/company. But almost 5 years on, it still has some amazingly annoying and very customer unfriendly bugs/features that they’ve never fixed. One of the chief among these what happens when an auto top-up fails due to a credit card expiring. The issue goes like this:
- Person sets up for their HOP card to be automatically topped up by a chosen amount from their credit card every time the HOP card drops below a pre-set balance. A great feature when it works.
- When the credit card expires – unlike most companies which a) stop attempting additional payments and b) contact the customer to get them to update the credit card details – AT keep on trying to charge the existing card. After failing a three times, AT then block the HOP card. The customer is blissfully unaware the payment has failed as the system will have already put money on the HOP card, until it is blocked.
- The customer then has to shell out $10 for a new card and in many cases loses whatever credit was left on their HOP card.
To make matters even worse, it appears that the original card and ‘stolen’ balance still show up when people log on.
Thanks to an OIA from one person affected, the herald have now revealed just how much this has happened.
More than 12,000 people have had their AT Hop cards blacklisted because their automatic top-ups failed.
And Auckland Transport is now reviewing its processes around how it notifies customers that their card is about to be blocked.
Yve Bourke was left stranded in July when her card was blacklisted and depended on the kindness of a stranger to pay her bus fare because Auckland Transport hadn’t told her that her card had been blocked.
“I went to get on the bus one morning and it declined and I thought, ‘That can’t be right’ so I tried a few more times and the bus driver told me I had to get off the bus.
“Luckily some lovely man paid for me who said to me, ‘You should check your credit card if you’ve got an auto top-up because mine expired mine last month and I got blacklisted.”
That turned out to be almost exactly what happened Bourke.
While I haven’t had it happen to me, I know it is incredibly annoying and embarrassing to find your card not working. I had it recently when an online top-up was delayed despite being before AT’s 10pm cutoff. This particular customer seems quite lucky that AT both transferred her balance and refunded her the cost of a new card. Most others I’ve heard this happened to aren’t so lucky.
So infuriated with the process, Bourke fired off an Official Information Act request to find out how many others had gone through the same ordeal.
Since their roll-out in June 2013, 12,124 people have had their cards blocked because of top-up failures totalling more than $330,000 in remaining value – however this figure includes the amount of the automatic top-ups even if the payment didn’t go through or whether the customer transferred the value to another Hop card.
Auckland Transport was not able to provide the actual amount of customers’ prepaid credit which it’s seized.
HOP actually first rolled out to trains at the end of 2012 but I’m guessing June 2013 is the date that AT pulled the data from. Based on that, it works out at AT blacklist an average of almost 11 cards every single day, that is huge. If it caused say 5% of those people to stop using public transport, that could equate to 300,000 trips a year.
Given the numbers this has happened to and the comments here and on social media we’ve regularly seen over the years, AT’s explanation that it they notify customers appears to be complete BS.
Spokesman Mark Hannan said three attempts were made to complete Bourke’s automatic top-up and admitted a trigger email wasn’t sent because there were two email addresses attached to her account and there “was some confusion”.
Usually, a customer would be notified of the problem twice before the card is blocked.
The agency is working on an AT Hop website improvement project which includes reviewing the notification process to “improve both the content of the email notification, and the subject, to make it clearer for customers”.
As mentioned this is only one of the many annoying quirks of HOP that exist and which have never been fixed. Some others include, but not limited to:
- If you top up online but don’t tag on within 60 days the money disappears into a void.
- Tagging on, then topping up as your balance is low, then tagging off can charge a penalty fare.
- They still advise it can take up to 3 days for an online top up to occur – even only updating daily was archaic four years ago.
I was aware the upgrade to Simplified Fares (this Sunday) involves some significant software upgrades to the HOP system. As such and not long before the fares were announced I asked Auckland Transport if the upgrade would also address some of these frustrations. The only answer I got was that they wouldn’t comment on it.
If improvements aren’t coming as part of the changes this weekend, then AT need to get on with it and with some urgency.
Who benefits from enabling housing development? And who bears the costs of restricting it?
One common refrain is that reducing regulations to enable housing will deliver higher profits to developers, while disadvantaging existing homeowners, who must contend with more people living in the neighbourhood. Another view is that restricting housing supply primarily benefits existing homeowners, who earn (untaxed) capital gains, while disadvantaging people who don’t own homes.
Along with Fran O’Sullivan, Arthur Grimes, Bernard Hickey, and many other commentators, I tend to agree with the second viewpoint: The primary distributional impact of restrictions on housing supply is to benefit existing homeowners at the expense of future homeowners. In this post I will argue that 1) we face a choice between existing and future home owners and 2) profits from development pale in comparison to untaxed capital gains on property.
So if you’re concerned about rampant profiteering, then you should be in favour of enabling more housing development.
Profit, homeowners, and false dichotomies
Developers undoubtedly set out to make a profit. They are after all putting their own time and money into building something, which in the process exposes them to risks. In this context it seems reasonable that they get something in return, otherwise, why would they develop housing at all? Whether developers earn a reasonable profit then effectively comes down to competition, and the best way to encourage competition is to enable lots of people to be developers.
In general, the more we restrict and regulate the supply of housing, then we will get less supply and less competition.
Those who rally against developers making profits seem to ignore that most of Auckland’s existing housing stock resulted from profit-seeking developers. This includes many houses that are now protected for heritage reasons. So it’s not clear to me that simply because developers are look to make a profit today, that the resulting developments will not be valued.
It is certainly fair to say that developers will only able to make a profit from development if they build something that people are prepared to pay for today. This is another way of saying that developers must consider their customers , i.e. people who want somewhere to live. So it strikes me as a false dichotomy for people to argue that developers “put profit before people”: If developers didn’t meet the needs of at least ***some*** people, then they wouldn’t make a profit.
Instead, the main trade-off seems to be between existing and future homeowners. I think Arthur Grimes described the trade-off best when he said (source):
My call for policies to drive a house price collapse is driven by my personal value judgement that it’s great for young families and families on lower incomes, to be able to afford to buy a house if they wish to do so. My concern is not for older, richer families, couples or individuals who already own their own (highly appreciated) house.
In this quote Arthur observes that we primarily have a choice between existing homeowners and future homeowners. He doesn’t mention developers at all. So when councillors vote for regulations that restrict housing supply, they are effectively voting in favour of existing homeowners. This is fine, provided they are comfortable with adopting what I consider to be a typically conservative position. These councillors are, in effect, behaving like Tories; they are protecting those who already have wealth.
The effects of restricting supply: Dislocation and rampant profits
However, building new homes isn’t the only – or even the main – way to make a profit in Auckland’s current housing market. Due to restricted housing supply, we aren’t building enough homes to meet demand. As a result, prices have risen.
Rising prices has two primary effects. First, it squeezes low-income people out of the market. This is a well-documented phenomenon. As the California Legislative Analyst’s Office found in an analysis of the San Francisco Bay Area, suburbs that developed less housing experienced more displacement. Without new housing development, every new resident must displace an existing resident – a vicious dynamic that hits low-income households hardest:
A lack of housing supply is compounded by distortionary tax policies – principally our unwillingness to tax unearned capital gains on housing – with the result that house prices are going up at a fast clip. This provides an unearned, untaxed capital gains windfall for people who are lucky enough to own property.
Unearned capital gains, unlike developer profits, are a win-lose scenario. People who own houses win, as the value of their assets rise. But people who are renting or trying to buy a home lose to an equal extent, as they face higher and higher prices.
So how large are capital gains compared to developer profits, anyway?
In recent years, untaxed capital gains on residential property have been very large relative to developer profits. According to data from the Reserve Bank, untaxed capital gains on residential property exceeded $100 billion last year:
- In the first quarter of 2016, the total value of residential property in New Zealand was $905 billion
- One year earlier, the value of residential property was only $791 billion.
By comparison, according to Statistics NZ’s most recent (2014) Annual Enterprise Survey, which tracks industry performance, residential housing construction firms (ANZSIC E301) made gross, before-tax profits of a mere $570 million. Even if we add in “other construction services” (ANZSIC E321, E322, E323, E324, and E329), which includes land development firms as well as a whole bunch of other stuff, total residential development profits add up to no more than $2 billion a year, before tax. And developers pay taxes on those profits! For the visual learners out there, here’s the data in a chart:
In other words, the profits that developers earn are relatively insignificant compared to the unearned, untaxed capital gains that have accrued to property owners. I would argue that the latter are largely the result of regulations that restrict housing supply, and hence represent a transfer from future homeowners, and to a lesser degree developers, to existing homeowners.
So what’s the takeaway message from all this? Well, if Councillors like Mike Lee and Cathy Casey are concerned about profiteering in New Zealand society (and they say they are), then they should start pushing to enable more housing development in Auckland. Yes, developers may make slightly more money in the process, but this increase pales in comparison to the reduction in untaxed capital gains that would accrue to existing home-owners. If you’re concerned about people making unearned profits, then regulations that restrict housing supply and which drive up the prices of existing dwellings should be your primary target.
Yesterday the council released the recommendations from the Independent Hearing Panel (IHP) for the Proposed Auckland Unitary Plan (PAUP) and as expected when there are over 1000 pages of recommendations there’s a lot to talk about, way too much for one post. As we also expected there is a mix of outcomes, some are good and others not so good. An overview of the changes is provided in this 123 page report which is what I’ll mainly focus on for this post.
First up the council had a couple of big wins with the IHP agreeing with many of their high level objectives for managing growth, such as:
- Affirming the Auckland Plan’s development strategy of a quality compact urban form focussed on a hierarchy of business centres plus main transport nodes and corridors.
- Concentrating residential intensification and employment opportunities in and around existing centres, transport nodes and corridors so as to encourage consolidation of them while:
- a. allowing for some future growth outside existing centres along transport corridors where demand is not well served by existing centres; and
- b. enabling the establishment of new centres in greenfield areas after structure planning.
- Retaining the Rural Urban Boundary (together with a substantial area of land zoned Future Urban Zone inside it) as a means of managing large-scale growth and infrastructure planning (this last point has a bit of a catch though which I’ll cover off later.)
That means the IHP didn’t just throw everything out and start from scratch but have made changes that address many of the shortcomings from the notified plan and the biggest of these is that the notified plan simply didn’t allow for enough growth. In this regard the IHPs recommendations are said to lie somewhere between what the council originally notified and what submitters like Housing NZ were after which was much more widespread upzoning across the region.
One of the areas they haven’t changed are the residential zones themselves. There are still the main urban zones of Single House (SH), Mixed Housing Suburban (MHS), Mixed Housing Urban (MHU) and Terraced Housing and Apartment Building (THAB) and many of the rules for the zones, such as height limits, remain the same. One big change is the removal of density provisions on the MHS so it matches the MHU and THAB zones – although there are various development standards and levels at which resource consents apply. Importantly where each zone is applied has also changed, one example being that the council walkable catchments for higher density zones of 200-400m while the IHP have recommended it be doubled to 400-800m. It is those and other amendments which are behind the changes in development capacity.
The level of development capacity has been a crucial issue for the IHP. They have agreed with the high side predictions of need to provide around 400,000 dwellings over the next 30 years and that for planning purposes it’s better to err on that high side. In short better to allow too many dwellings to be built than not enough. To this end they also say:
It became apparent early in the hearings that in the development of the proposed Unitary Plan the Council had relied on the theoretical capacity enabled by the Unitary Plan, rather than on a measure of capacity that takes into account physical and commercial feasibility, which the Panel refers to as ‘feasible enabled capacity. Feasible enabled residential capacity means the total quantum of development that appears commercially feasible to supply, given the opportunities enabled by the recommended Unitary Plan, current costs to undertake development, and current prices for dwellings. The modelling of this capacity at this stage is not capable of identifying the likely timing of supply.
When you look at the PAUP in this regard there becomes a huge issue with it estimated to only be able to provide 213k dwellings, well short of the 400k needed. Through the changes they’ve made they estimate that the feasible enabled residential capacity has almost doubled, going from 213k to 422k. As you can also see, the biggest two changes have come from within existing residential areas and within centres and mixed use areas.
The impact of the changes can be seen on the two maps below showing what was feasible under the PAUP on the left and what is feasible under these recommendations. As you can clearly see there is a lot more development that has been enabled – although it seems more still could have been done on the isthmus.
You may recall the Auckland Plan development strategy had a 70:40 split, up to 60-70% of development occurring within the existing urban area and 30-40% occurring on greenfield land. Yet thanks to council getting scared of the noisy groups opposing housing, the PAUP as effectively flipped those numbers around. While the IHP have recommended that spatial distribution be deleted, the changes above have helped to return the Unitary Plan to that level. This is shown below.
The table below is based on some early analysis by council on the recommendations showing how much land was included in PAUP vs what is in the recommendation. As you can see there are some quite significant differences.
As mentioned earlier, the Rural Urban Boundary (RUB) stays but it has been changed significantly, both in scale and how it will work in future. One key change is the IHP say the exact location of it should be decided at the district plan level. That means it could be changed in the future through private plan changes. That makes it a soft boundary and as I mentioned yesterday, could make it more difficult to plan big infrastructure projects.
Lastly just to quickly touch on one of the points I raised yesterday that I haven’t already covered, parking rules. The IHP have retained parking maximums in the City Centre Zone while the other Centre zones, the Business, Mixed Use and THAB zones and the Centre Fringe Office Control area have neither minimums or maximums with the main exception being for retail and commercial services activities where a minimum of 1 space per 30m² has been recommended. This is a big win for the major retailers who wanted minimums for anti-competitive reasons, making it harder for small businesses particularly in town centres to afford to compete. Outside of the zones mentioned previously, all other areas will have minimums applied.
In another post I’ll look at comparing the maps of the proposed plan and what has now been recommended.
The council are due to start formally debating the plan on August 10 and have that wrapped up on August 18 so the plan can be formalised. If they don’t agree with an IHP recommendation they can’t just reject it and instead have to provide an alternative solution and produce a cost benefit ratio for it. Overall the recommendations represent a vast improvement to the Unitary Plan and while not everything is what we hoped for, there was always going to need to be some compromises. After dragging on for about four years now, the finish line is in sight and it seems to me that councillors should just be encouraged to pass the plan as it is.
In May the government announced a package to try and increase the number of electric vehicles in New Zealand as a way of reducing emissions – a laudable goal but some of the government’s proposed some measures missed the mark. At or at least near the top of the list was the idea to allow for electric cars to use bus lanes and the Northern Busway.
Enabling electric vehicles to access bus and high occupancy vehicle lanes
Access by electric vehicles to bus and high occupancy vehicle lanes (lanes where a vehicle must have more than a certain number of occupants) will be of value to households and businesses. Access to such lanes will mean electric vehicles will be able to travel more quickly than vehicles otherwise held up in traffic.
At the same time, the changes will also empower road controlling authorities to allow electric vehicles into special vehicle lanes (such as bus lanes) on their local roading networks.
The Government will make changes to the Land Transport Act and Rules to allow electric vehicles to drive in bus and high occupancy vehicle lanes on the State Highway network, which it controls. One example is the Northern Busway in Auckland.
As I said at the time, the idea is madness and defeats the whole purpose of having bus lanes which is to make buses:
- faster, making them more attractive to use and can also make them time competitive with driving.
- more efficient, because buses are faster they can run more services can be run for the same cost or alternatively fewer vehicles and drivers may be needed
- more convenient as if they allow more services to be run it means higher frequencies so less time waiting at bus stops.
- more reliable as they’re more likely to arrive at stops and the final destination on time.
It’s now been revealed by the Herald that the government ignored advice to at least consult with councils first before announcing the idea and highlighting that at least one council is ruling it out.
Andy Foster of the Wellington City Council said his city had the country’s highest rate of public transport use “by far” and did not foresee it opting for the change.
“Traffic getting in the buses’ way is not conducive to maintaining reliable timetables.”
Foster, who chairs the council’s transport and urban development committee, said he saw “no chance” that electric vehicles would be allowed to use the city’s bus-only lanes.
“Bus lanes are generally very well respected by motorists. If some vehicles start using bus lanes because they are [electric] there is a greater risk that others which are not [electric] will do so too.”
They also say Auckland Transport and the Christchurch City Council seem cool on the idea although the NZTA say they have begun initial discussions with Auckland Transport to investigate the potential of permitting electric vehicles on the Northern Busway
Back when this policy was announced I sent an Official Information Act request to the Ministry asking for details relating to the idea. I received back some excepts from a report looking at options for promoting EVs but it had been sitting in my inbox for a while. It includes the suggestion that the Minister consult councils on the idea first as well as a few other interesting comments. For example, not only did they recommend talking to road controlling authorities (RCAs) first, they say the NZTA expects none of the major RCAs would implement it.
I find the point that the NZTA highlighted that such and idea was unlikely to work as the RCAs wouldn’t want to implement it as much more damning than the fact he didn’t consult with them
They expand a bit on the efficiency impact portion below highlighting that it will likely impact PT and general traffic congestion. Even more so bottom paragraph below confirms the bus lanes will be full soon but that people will still want to drive in them.
As a way of implementing the idea, it was suggested to either use legislation to declare EVs as allowed in all bus or transit lanes or give RCA’s the power to decide on what lanes to allow EVs to use. Thankfully the Minister at least chose the second option but given the responses above, it seems unlikely to they’ll approve having EVs in bus lanes. That raises the prospect despite the government suggesting it, it won’t actually be possible anywhere. That in turns means the whole point of the policy would be a flop and will have wasted precious resource from the ministry. I wonder if the government will quietly drop it.
Of course if they really want to get more use out of bus lanes one idea would be to provide more funding to put more buses on which would have the added benefit of making PT much more useful.
Arthur Grimes, the former chair of the Reserve Bank board, caused a stir with his proposal to crash Auckland house prices by 40% by building lots more housing:
My call for policies to drive a house price collapse is driven by my personal value judgement that it’s great for young families and families on lower incomes, to be able to afford to buy a house if they wish to do so. My concern is not for older, richer families, couples or individuals who already own their own (highly appreciated) house…
Research at Motu (accessible from www.motu.org.nz, and published in international scholarly journals) shows that (given current interest rates and incomes) a 1% increase in the number of dwellings relative to the population leads to a reduction in house prices of around 2.2%. Thus a 40% fall in house prices means that the number of dwellings in Auckland would have to expand by around 18% relative to the current dwelling stock. On top of that, the stock has to increase to reflect population growth. So with, 2% population growth per annum, the stock of dwellings in Auckland would have to increase by roughly 30% if prices were to fall by 40% over the next 6 years.
There are currently around 500,000 dwellings in Auckland. A 30% increase in dwelling numbers over 6 years translates into an extra 150,000 houses over that time – i.e. 25,000 extra houses per year for each of the next 6 years. This estimate contrasts with much smaller (and nonsensical) estimates of housing shortages that are often quoted. The reason is that those smaller estimates (e.g. 10,000 extra houses) would just leave prices where they are!
Now, I’m not quite as confident that the spillovers from a large drop in housing prices could be contained without significant effects on financial stability or the real economy. And there are definitely many challenges to technical feasibility, including zoning, infrastructure capacity, and availability of builders. But I fully agree with Arthur’s framework for thinking through supply and price dynamics.
It’s a welcome break from much of the usual commentary about the supply and demand balance in Auckland’s housing market. For example, it’s common to hear statements like, “Auckland’s population grew 22% between the 2001 and 2013 Censuses, while the number of dwellings in the city increased by 19%. Therefore we’re only 3% short.”
I’d describe this as the “quantity surveying” approach to market analysis – i.e. count up the number of people, count up the number of homes, and compare the difference. It’s not good economics, as it completely fails to consider:
- Desired outcomes from the housing market: As Arthur observes, an appropriate goal is for young people and low-income families to be able to access the housing market. We’re trying to achieve lower prices, not a certain ratio of dwellings to people.
- Underlying relationships between supply, demand, and prices: As Arthur points out, in order for prices to fall, the housing stock must be rising faster than population. Exactly how much faster depends upon the degree to which there is pent-up demand for housing that hasn’t been met in the past.
With that in mind, let’s take a closer look at Arthur’s figures. He argues that:
the stock of dwellings in Auckland would have to increase by roughly 30% if prices were to fall by 40% over the next 6 years… [which] translates into an extra 150,000 houses over that time – i.e. 25,000 extra houses per year for each of the next 6 years.
Why is an additional 30% increase in dwellings needed when Auckland’s population has only grown by around 30% over the last 15 years? Doesn’t that seem a bit too large?
From a quantity surveying perspective it does, but from an economic perspective, it’s totally sensible. To see why, we need to think about what rising housing prices mean. If the supply of a good – housing in this case – is constrained, prices must rise until some potential buyers give up and go elsewhere. In the Auckland housing market, that could mean:
- Moving elsewhere in New Zealand – surely a factor behind recent price rises in Hamilton, Tauranga, and beyond
- Moving overseas – a total loss of that person’s capabilities to the NZ economy
- Staying in Auckland and living in overcrowded or unsafe housing – which disadvantages them and costs the public health system and social agencies
- Living in a car or on the streets – it’s frankly appalling that I even have to mention this.
The fact that Auckland’s prices have been rising more rapidly than prices in the rest of the country (which are affected by the same bank lending conditions and macroeconomic trends as Auckland) is an indication that price-driven rationing is probably occurring. There is likely to be a significant amount of pent-up demand for Auckland housing – and if we figured out how to meet it, the city would get bigger. (Leading to, among other things, increased agglomeration economies.)
Finally, it’s worth discussing Arthur’s thoughts about where new housing should be constructed. He takes the SFBARF view: build absolutely everything everywhere:
So how can we get these extra houses and where can they go? Some people favour intensification and some favour expansion of the city’s footprint. The size of the task means that both are required.
Auckland is lucky that it has plenty of farmland around it and – contrary to popular myth – farmland is almost worthless in farming uses compared with residential use. Expansion is therefore required, but with a proviso. A change in the zoning of rural land to residential gives the existing landowner a massive uplift in value – i.e. a multi-million dollar gift from the community. To my mind, this value should accrue to the community that grants the zoning change. The Public Works Act could conceivably be used (or changed) to enable Council to buy rural land at a premium (say 50%) above the rural land value and then all extra value uplift would accrue to the Council to be used for infrastructure and services for the enlarged community.
Auckland also has plenty of opportunities for intensification in areas where developers would wish to intensify and where people wish to live. For instance, Tamaki Drive is ready made for high-rise apartments where tens of thousands of people would no doubt wish to purchase apartments. Of course climate change may make development on Tamaki Drive a risk, but a few blocks back from the sea – on the ridges overlooking the harbour – would work just as well. Lift the restrictions on the heights of new developments, and I expect that we would see an utter transformation in the intensity of housing from Orakei through to Glendowie.
Why can’t we do it with sprawl alone? There are two answers. The technical answer, which we’ve extensively covered on the blog in the past, is that new infrastructure to greenfield areas is expensive and time-consuming to develop. The time lag to intensify sites that are already served with infrastructure can be smaller, provided that consenting is straightforward.
However, the economic answer is, to my mind, even more important. Research into the determinants of property prices in Auckland consistently finds that proximity to the coast and proximity to the centre are two of the most important attributes for buyers. People value the amenities that come with coastal living – that’s a significant part of the attraction of being in Auckland – and they value the consumer amenities and employment accessibility that are concentrated in the centre.
A sprawl-only plan may work from a quantity surveying perspective – it would raise the ratio of dwellings to people – but it would mean growing away from the coast and away from the centre. The next swathes of farmland to be developed – east of Flat Bush, west of Orewa, and north of Kumeu – are all a long way inland.
This will work for some people, but for many it will miss the point of living in Auckland. If we are to meet growing demand, we will also have to think hard about how new residents will access to the city’s man-made and natural amenities.
The inclusion of congestion pricing in the recent Auckland Transport Alignment Project interim report has (helpfully) reignited the public debate on the topic. Transportblog’s authors have been pretty enthusiastic about the idea – see e.g. Stu Donovan’s posts on the topic.
But the announcement also raises some questions. For example, congestion pricing is certainly a good idea in principle, but could we put it into practice in Auckland without unintended consequences? And would people in Auckland get on board with it?
So I thought I’d open this up to readers: What do you think the preconditions are for congestion pricing in Auckland? In other words, what would we have to do in order to make the scheme work?
I have my own thoughts on the matter, but rather than putting them forward I thought I’d summarise some of the main things that come up in discussions. I’ve left aside the exact design and technical feasibility of congestion pricing – for now, let’s just assume that it’s going to be possible to implement a GPS-based pricing system that allows for variable tolls between different roads and time periods.
1. We don’t need to do anything else.
Some people argue that congestion pricing will work without any further changes to transport infrastructure or services. Stu, for example, put forward this case the other week.
The argument in favour of this view is that congestion is typically very concentrated in peak periods due to bottleneck delay, and that encouraging people to take some trips a bit earlier or a bit later will benefit the overall transport network without imposing large costs on people who re-time journeys to avoid tolls.
2. We need to provide more public transport infrastructure and/or walking and cycling options before implementing congestion pricing.
A second common view is that we need alternative, non-driving transport options in place prior to congestion pricing. Reasonable people could disagree on what would represent enough alternatives, but I’d suggest that a reasonable aspiration would be:
- Bus routes that cover most of the city, with reasonable frequency
- Spare rapid transit capacity through key pinch points such as the Auckland Harbour Bridge and Panmure Bridge
- Cycle lanes running on or parallel to many urban arterials.
The argument in favour of this view is that it is unfair to ask people to pay a toll without giving them options for avoiding it. In that respect, it conflicts a bit with the first view, which holds that people will have the option of re-timing trips to avoid tolls.
3. We need to use the revenue from congestion pricing to improve transport infrastructure and services on busy corridors.
A third view is that we should spend any additional revenues from congestion pricing to build additional transport infrastructure. Some people argue that this should be more roads, while others argue for public transport.
It seems a bit perverse to implement a demand management measure (congestion pricing) and then turn around and spend more building infrastructure. However, the argument in favour of this view is that congestion pricing will give us a better indication of which corridors have high economic value – as evidenced by higher tolls – and hence that investment is needed to allow more people to use them.
4. We should “recycle” additional revenue from congestion pricing into lower taxes or rates.
Another view on what to do with the revenue from congestion pricing is that it should be returned to households. In other words, the scheme should be “revenue neutral” on the whole.
There are two main ways to do this:
- Lowering income taxes, which will (all else equal) enhance incentives to work while discouraging car commuting at peak times
- Distributing money equally to households, through lower uniform charges in the rates bill or AECT-style dividends.
The argument in favour of the first approach is that it will tax “bads” (i.e. excess congestion) while rewarding the “goods” (i.e. working). The second approach doesn’t improve incentives to work – people would get the money regardless of whether they are working or not – but it would ensure that every household had an additional chunk of money that they could choose to save, spend, or use to offset the cost of tolls.
5. We should liberalise residential and business zoning rules alongside implementing congestion pricing.
Separate from what to do with the revenues, another view is that it would be necessary to change our approach to land use planning in order to get the best result from congestion pricing.
The argument in favour of this view is that congestion pricing would influence people’s decisions about where to live and work. In other words, some people may choose to move closer to work to avoid paying tolls, while others would prefer to move further out of town to take advantage of faster drive times. However, zoning rules that, for example, held up intensification around employment centres may prevent this from happening.
6. We don’t need congestion pricing in the first place.
Finally, some people argue that congestion pricing is unnecessary. There seem to be two main reasons why someone may hold this view:
- Contrary to popular perceptions, Auckland’s not really congested enough to need congestion pricing
- If we just got on and built a lot of roads, like, immediately, traffic would flow smoothly and there would never be any congestion ever again.
The first reason seems to have at least some evidence supporting it, but the second evinces an insane disregard for basic economics (induced demand), financial realities, and the laws of geometry.
Leave your views in the comments, or answer the following poll:
Congestion pricing has once again hit the political radar, with the news that the Auckland Transport Alignment Project has recommended it as an option to more efficiently manage the transport network. They find that variable road tolls – highest during peak periods on busy roads and low (or even zero) at off-peak times – are the single most effective intervention to improve traffic flow.
On the whole, it looks like support for the idea is on the rise, which is positive. That suggests that the work that Auckland Council’s consensus building group did a few years back has contributed towards a better public conversation on the issue. That’s good, as it’s a challenging idea to sell to people.
The NZ Herald’s editorial on the topic was tentatively supportive and showed a reasonable understanding of the core principles of congestion pricing:
Transport Minister Simon Bridges conceded this week, “we can’t keep building new lanes on highways. We will need a combination of demand-side interventions if we are going to deal with congestion over the next couple of decades”. He prefers the term “demand-side interventions” to taxes, tolls or charges but those are what it means.
Unlike the council, the Government does not advance these for revenue raising but for reducing traffic on the roads. It clearly thinks road rationing is more politically acceptable than revenue raising and the AA agrees. Feedback from members, it says, showed support for tolls as long as people could be convinced it was for congestion benefits, not simply revenue.
However, the Herald’s editorial also exhibits a common misunderstanding about congestion pricing, arguing that free routes must be available as an alternative to tolled routes:
The joint report for the council and the Government this week did not suggest how road travel might be charged. Mr Bridges said one option was to track all traffic with GPS technology which is being trialled in Singapore and Japan. But that implies no roads would be free at times the charge applied. Travel is a basic freedom. We could welcome the chance to pay to use a fast lane when we need one, so long as free lanes remain.
The Herald’s position is basically in line with NZTA’s existing tolling policy, which states that:
…a road tolling scheme may be established to provide funds for the purposes of one of more of the following activities, namely, the planning, design, supervision, construction, maintenance, or operation of a new road, if the Minister of Transport is satisfied that:
- the relevant public road controlling authorities (including the Transport Agency) have carried out adequate consultation on the proposed tolling scheme;
- the level of community support for the proposed tolling scheme is sufficient;
- if an existing road is included in the scope of the tolling scheme, it is physically and operationally integral to the new road in respect of which the tolling scheme will be applied;
- a feasible, untolled, alternative route, is available; and
- the proposed tolling scheme is efficient and effective.
However, I think that both NZTA and the Herald are being too hasty in assuming that the untolled alternative route has to run parallel to existing roads. Alternatives can exist in time as well as in space.
Stu Donovan described the maths behind this last week. Transportblog reader Bryce Pearce also dug up a good practical example: apparently Singapore’s road pricing scheme allows people to travel for free most of the day. For example, if you are trying to drive on Lorong 6 Toa Payoh at 8:30am, you’ll have to pay $1. But if you leave an hour earlier or an hour later, you won’t pay anything:
ATAP took a similar approach when choosing how to model congestion charges. As the following diagram shows, the ATAP scheme would increase peak and inter-peak pricing, relative to current fuel taxes, but decrease charges in evening periods. Consequently, people would have options to save money for certain types of trips, for example, by shifting supermarket trips from the afternoon to the evening:
Arguably, being able to travel for free on the same road, at a slightly different time, is even better than being able to travel for free on a different, more circuitous road at the same time.
There are obvious user benefits to the approach of varying tolls by time of day. It allows people to make better choices that respect their individual preferences for time, timeliness, and money.
But there are also important system-wide benefits from variable tolls between different time periods. Because congestion can be quite sensitive to changes in the number of cars on the road at a given time, encouraging even a relatively small number of people to shift the time at which they travel can lead to large benefits.
That’s nicely illustrated in the following graph of Auckland Harbour Bridge traffic volumes. The AHB is essentially free-flowing during the middle of the day, when there are around 1300 vehicles per lane per hour. But it is considerably slower during the evening and morning peaks, when the bridge carries more like 1500-1700 vehicles per lane per hour.
Because the peakiest bits of the peak are relatively short – perhaps 2.5 hours in total across an average weekday – you could improve the performance of the bridge by charging tolls during a few short windows. People could still travel for free (or at any rate a lower price) during the remaining 21.5 hours of the day.
From my perspective, that’s a pretty good alternative for drivers! But what do you think about the issue?
Yesterday the Government announced its latest policy on addressing the housing crisis in Auckland and increasingly in other centres, a $1 billion infrastructure fund to pay for the bulk infrastructure needed to support *some* of the new houses needed in greenfield areas.
The Prime Minister today announced a new $1 billion Housing Infrastructure Fund to accelerate the supply of new housing where it’s needed most, Finance Minister Bill English and Building and Housing Minister Dr Nick Smith say.
The contestable fund will be open to applications from councils in the highest growth areas – currently Christchurch, Queenstown, Tauranga, Hamilton and Auckland.
Mr English says the Housing Infrastructure Fund will help bring forward the new roads and water infrastructure needed for new housing where financing is a constraint.
“The Government will invest up front to ensure the infrastructure is in place. But councils will have to repay the investment or buy back the assets once houses have been built and development contributions paid.”
As we know Auckland is growing at rate faster than any other region in the country – there are a few districts growing faster, such as Selwyn following the Earthquakes but they are also off a much lower base. The Q&A suggests that the high growth areas are defined as the areas expected to see a 10% growth in the 10 years to 2023. In that time frame, Stats NZ predictions suggest that Auckland will see 58% of the country’s population growth. That figure is even higher if just comparing the five areas listed with Auckland taking around 70% of that growth. As such we can expect the lion’s share of that $1 billion to be used in Auckland. Auckland’s growth over the following years doesn’t slow down either and in the 30 years to 2043 over 60% of all growth in NZ is expected in Auckland.
One big issue right from the start is that for those other cities, a share of $1 billion would go a long way. But in Auckland with its infrastructure needs on another scale, it would be gulped down so fast it would barely touch the sides. The recent work that AT and the NZTA have been doing on Transport for Future Urban Growth suggests that over 30 years around $10 billion is needed in the greenfield just for transport infrastructure. On top of more funding is needed for other physical and social infrastructure that will be required to ensure these new developments have the level of amenity that will be expected/required such as parks, community facilities and much more.
There is of course a lot more infrastructure that’s needed in Auckland but seems that only the greenfield stuff counts for this funding.
Dr Smith says the fund will be available only for substantial new infrastructure investments that support more new housing, not to replace existing infrastructure.
“To access the fund, local councils must outline how many new houses will be built, where they will be built and when they will be available. Ideally, they will have agreements with developers on these issues.
“Funding may also have other conditions attached, such as faster processing of resource consents. All of this will require close collaboration between central and local government.”
Mr English says infrastructure, and its financing in particular, is one of the three key constraints to building more houses – alongside land supply and consenting requirements.
“Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure sooner by aligning the cost to councils with the timing of revenue from development contributions.”
Depending on the number and timing of applications, it will require the Government to temporarily borrow up to $1 billion, which will increase net debt until it is repaid.
Only funding new infrastructure is kind of understandable but it does raise some questions, such as just what constitutes new infrastructure. In many cases building new roads or pipes also requires upgrading existing infrastructure to cope with the demands of new areas. We know we can’t just build tens of thousands of dwellings on the edge of town and expect the motorways to work. We also know that there are plenty of areas within the existing urban area for which replacing existing infrastructure is likely to be needed to enable new development. One such example would be the NW Busway which enables growth in existing urban areas such as Te Atatu but also will be critical in enabling growth in the entire North West.
I guess that if councils can assume this fund will pay for some of the greenfield growth they would have otherwise needed to build, it enables them to re-prioritise budgets to focus their normal funding on improving existing infrastructure.
One aspect I do like is the idea of linking funding to developments, the last thing we want is the council or government spending precious funds building infrastructure to an area only for a developer not to build anything and then profit off the increased land value. That of course also raises the question of why the government doesn’t just build a heap of homes themselves.
Perhaps the biggest issue with this announcement is that it’s not going to have any real short term impact. Even if the funding tap was turned on tomorrow – and it seems the details are yet to be worked out – the types of infrastructure projects that this fund will help deliver are not quick things to enable. They normally take years of planning, consenting and construction before any house can be built and so it will be many years before any housing this fund enables will have any impact on our current crisis.
Overall the fund seems useful but not quite as useful as the government’s headline suggest. A lot of it is going to end up coming down to the details and rules put in place and those have yet to be worked out. Ultimately the whole thing just seems like a way of loaning money to councils in a way that sits on their books differently. It will also be critical to see just what projects get built with this funding. If it just results in trying to quickly build a pile of auto-dependant sprawl that would be a terrible outcome but if it also is focuses on good quality outcomes such as decent walking, cycling and PT facilities it could be quite useful.
In addition to the infrastructure fund, the government have also said they’re looking at setting up urban development authorities.
Dr Smith says the Government is also considering establishing Urban Development Authorities (UDAs) to help further speed up the supply of new housing.
UDAs have streamlined powers to override barriers to large-scale development, including potentially taking responsibility for planning and consenting and other powers.
In some form or another we already have a few of these with the likes of Panuku Development Auckland, the Tamaki Redevelopment Company and the Hobsonville Land Company. How will a government UDA be different from these, with the possible exception of having the power to compulsory acquire land. If they did allow for compulsory acquisition it would be interesting to see if they also extended that to at least Panuku.