A couple of weeks back the NZ Institute of Economic Research released a paper which looks into the traditional cost-benefit analysis used for appraising transport projects and asks the question of whether the current process fully recognises all the costs and benefits of those projects.
Existing transport cost-benefit analysis misses critical impacts “Standard cost-benefit techniques significantly under-estimate the costs and benefits from transformational infrastructure projects like motorways.” said NZIER.
“Transformational projects change economic activity, regional population, and land use – changes missed by standard cost-benefit techniques.” “For instance, a standard cost-benefit appraisal of Transmission Gully ignores whether Transmission Gully increases the number of people living along the Kapiti Coast and the costs and benefits associated with this.”
Understanding how major transport strategies affect the way we live and work is crucial for allocating limited public funding. Getting it wrong wastes money and can harm the long-term prospects of cities. The problem of accounting for changes in land use occurs worldwide with transport appraisal. It happens because people generally don’t know how to value these sorts of impacts.
In short, existing appraisals don’t assess the main long-run impacts of major projects. NZIER has researched ways to broaden the scope of appraisals.
It’s important to note that the paper highlights the breadth of both costs and benefits is likely to have been under-estimated previously. In other words, doing appraisals in a more robust manner isn’t necessarily going to boost the argument for all transport projects, but instead likely shift some projects upwards and some downwards on a priority list.
The relationship between travel time savings and land-use impacts has been discussed previously on this blog, particularly in relation to the work done by David Metz a UK transport expert. The NZIER study once again highlights this really critical point:In many respects this is just highlighting the Marchetti Constant – that people will on average spend a certain amount of their day travelling and the faster you make it to travel from point A to point B, the longer distance people will travel (rather than them spending less time travelling).
The paper itself is full of lots of complex equations which probably only really make sense to economists, but it comes to a particularly interesting conclusion:My translation of this is along the lines that projects which induce a land-use change which spreads development across a wider area and encourages longer trips may well create problems which undermine the benefits supposedly generated by the project. Basically that if a motorway encourages people to travel longer distances than they did before the motorway existed, then in the longer run (something current appraisal methods ignore) there may be little justification for said motorway project. This is particularly true if (as is the case) roads are not priced according to their use.
NZTA are currently reviewing the Economic Evaluation Manual – the guide for assessing transport projects. Let’s hope that some of the thinking in this paper gets incorporated into that review.
Groups like Auckland2040 bemoaned three storey terraced houses as potential “highrise” slums that will end the world – if they are allowed near rich beach side suburbs of the North Shore or high amenity areas of the isthmus – have become a common theme since the consultation on the Unitary Plan began a few months ago. As the consultation period drew to a close they also adopted another tactic, questioning the population projections that the council is using. They question whether we will have 1 million people in the region in 30 years’ time and even went so far as to suggest their followers make the following statement in their submissions.
Re-evaluate the projected population growth used as a basis for the plan based upon census information and consider other ways of reducing population growth in Auckland rather than just accepting that the projected growth is an inevitable fact.
Now the council hasn’t just plucked a number randomly out of the air, they are using projections from Statistics NZ to guide the planning process. People familiar with the numbers – or who read some of the numerous posts we have done on the issue – will know that there are actually three sets of population projections for Auckland, a high growth scenario, a medium growth scenario and a low growth scenario. The council has also frequently pointed out that historically Auckland has tended to grow faster than predictions. Here are the current population projections for the region.
Now I’m not sure if this was pre planned or if it was a response to people questioning the projections but last week the council held one of their Auckland Conversations events to talk about the issue. The speakers were Len Brown, Chief Planning Officer Roger Blakeley and special guest Len Cook who was formerly the countries chief statistician and who has also performed a similar role in the UK. You can watch the full discussion from all three speakers here (you have to sign up to watch but it is free)
You can also follow the presentations separately if you want:
What I took from watching this is that the council is on the right track. They are planning for the highest projected population growth just in case it happens instead of planning for less and crossing their fingers and hoping the growth doesn’t occur. But even with this approach is still being questioned with the likes of Auckland2040 – who were at the event – seemingly thinking we should take the crossing our fingers approach. Yet Bernard Orsman from the NZ Herald who was also at the event seemed to present the information as if the mayor was desperately holding on to using the figure for some sort of political reason.
Auckland Mayor Len Brown is sticking with a projected population growth figure of one million more Aucklanders to justify controversial plans for apartments in the suburbs and urban sprawl in the countryside.
Last night, Mr Brown said Auckland’s history of exceeding high-growth projections made it prudent to provide for the high-growth scenario of a million more residents by 2041.
The figure of an extra one million people has been the basis for the council’s asking Aucklanders to adapt to a new way of life in the draft Unitary Plan that includes high-rise and small-size apartments in the suburbs and 160,000 homes outside the existing urban boundaries.
The council’s use of the high-growth projection has provoked debate about the figure and whether something should be done to slow the city’s population growth.
Mt Eden resident Alan Kemp is typical of many, having called the Unitary Plan a “rotten plan” based on bad numbers that allowed multi-storey buildings at odds with their surroundings.
This is how Radio NZ saw the talk which seemed much more balanced.
Or listen here.
The issue has come up again in the Herald this morning with another piece by Orsman regarding the use of high projections used for planning in the Auckland and Unitary plans vs the medium projections used in the planning of infrastructure.
The Auckland Council is talking up another one million residents in the city by 2041, but it is taking a prudent line when it comes to providing transport, water and other services.
The council has adopted a Statistics New Zealand’s high-growth scenario of a million more residents by 2041, but its water body is using a medium-growth scenario of 700,000 more residents.
The mismatch has raised questions, but council chief planning officer Dr Roger Blakeley says it is prudent to provide for the highest likely population growth and to be cautious to avoid over-investment.
He said the council required council bodies to be cautious about capital spending ahead of time to avoid high borrowing, interest and depreciation costs.
Underspending on infrastructure, he said, could be addressed through regular budget reviews and incremental increases to facilities, such as wastewater treatment plants.
During feedback on the draft Unitary Plan, concerns about a lack of infrastructure planning have been a hot topic at public meetings.
Councillor Cameron Brewer has called for an independent review of the most likely population growth, saying the council’s projections are out of kilter with the Government’s national infrastructure unit’s mid-range projections
I think that the point Blakeley makes is perhaps the most important in this entire debate, effectively we should be planning for the worst but investing for what is most likely. If the worst does happen then we can adjust our investment levels accordingly but if growth falls short then so will the amount of intensification. With Auckland’s having a history of under planning for growth, I’m actually surprised that we still have people – especially politicians – suggesting that we carry on that tradition. I guess it is because the politicians who have to deal with the mess under planning causes will almost certainly be different to those currently in office.
Lastly perhaps my favourite graph from the presentations is this one from Roger Blakeley’s presentation which shows the population changes between 1961 and 2011 by migration and natural increase. What is clear is that population increase from natural means is consistently increasing and now with the exception of a couple of years makes up the vast majority of the population increase.
Edit: and with almost perfect timing, the council has just put up this post on the issue which answers the question of:
Q1. What population growth projection do we use for the Unitary Plan, and why?
Q2. What population projection do we use for infrastructure planning, and why?
Q3. How do we monitor for changes in future population projections?
You would expect a mega corporation with the name of Citi to be interested in how cities function – and it appears they are. The banking giant has an initiative called Citi for Cities which while obviously channel for their business, also provides some interesting information on cities. They describe it as.
Cities generate prosperity and advance society. They are where citizens strive, where businesses drive growth, and where governments create the conditions for success. As over 100 million people move to urban areas each year, our cities are in the midst of an unprecedented transformation. Citi for Cities applies the full capabilities and global expertise of Citi to meet urban challenges in more than 1,000 cities across the globe, every day.
One thing they have done as part of this initiative is to commission The Economist’s Intelligence Unit (EIU) to produce a benchmarking study looking at the future competitiveness of cities. They have then compared the results for 2025 to see how they are expected to change from 2012. All up they compared 120 different cities across the world. Here is the list of cities they assessed
Competitiveness is obviously quite a complex measure so this is the methodology they used.
Competitiveness is a holistic concept. While economic size and growth matter, several other factors determine a city’s competitiveness, including its business and regulatory environment, its institutions, the quality of human capital, cultural aspects and the quality of environmental governance. These factors not only help a city to sustain high economic growth, but also secure its future competitiveness.
Against this backdrop, the Economist Intelligence Unit deﬁnes a city’s competitiveness as its ability to attract capital, businesses, talent and visitors. The 2025 City Competitiveness Index benchmarks the competitiveness of 120 cities across the world at two distinct points in time: today and in 2025. We do so by examining 32 indicators for each city. Indicators are grouped into eight distinct, thematic categories and assigned weights: economic strength 30%, physical capital and ﬁnancial maturity 10% each, institutional character and human capital 15% each, global appeal 10%, social and cultural character 5%, and environment and natural hazards 5%.
The Index includes a total of 27 qualitative and ﬁve quantitative indicators.
A city’s overall ranking in the benchmark Index is a weighted score of the individual categories. For a full breakdown of the categories, individual indicators and sub-indicators, weightings and data sources, see the Appendix.
While the report doesn’t give detailed breakdowns of how cities perform in each of the categories, it does say that Auckland is in the top 20 for Institutional Character which looks at Electoral process and pluralism, Local government ﬁscal autonomy, Taxation, Rule of law and Government effectiveness.
The report also noted that there was no major correlation between the size or density of a city to its competitiveness rating however they did find a strong correlation to the quality of the cities physical capital.
The quality of a city’s physical capital is highly correlated with its overall competitiveness. Statistically, the correlation between a city’s competitiveness and the quality of its physical capital—deﬁned in the Index as the quality of physical infrastructure, public transport and telecommunications infrastructure—is the strongest among the eight sub-categories that make up the Index. Two Chinese cities, Shanghai and Beijing, ascend to the top 20 in terms of their physical capital in 2025 and are among a group that is otherwise dominated by a mix of rich, well established global cities. Eleven of them are also among the 20 most competitive overall.
What’s interesting is how strong the mention of public transport is, the quality of the road network is one of the sub categories within the physical infrastructure group. The rankings come from the EIUs Global Liveability Index and we know from that the one thing that really lets us down is our PT infrastructure. Anyway enough about the methodology, on to the rankings – here are the top 10
While Auckland is a bit further down the list ranking 42nd overall. While our score does improve slightly, it isn’t enough and sees us slip 11 places from 2012.
As mentioned earlier, there is a strong correlation between the quality of physical infrastructure and competitiveness. We also know that one of the biggest areas that lets us down is the quality of our PT yet despite that, current plans still see 60-70% of all new funding going towards more roads. Perhaps it’s time to flip that funding around and focus on fixing one of the key areas that is letting us down.
While also looking around the Citi for Cities website, I came across this section which looked at different parts of the urban ecosystem and naturally I went to look at the transport section which contains:
To be prosperous, sustainable, and globally competitive, cities must increase their transport capacity, upgrade their transport technology, and make critical infrastructure investments.
The reason I found this interesting is that the focus is not on improving the speed of a single occupant vehicle but on improving transport capacity. I suspect that if we were to assess the various proposed transport project based on how much capacity they add to the overall transport system we might get some very different results in terms of project priorities.
Lastly a little something on one of the costs of parking that doesn’t often get thought about.
Unfortunately there is a tendency in discussions on housing affordability to remain quite siloed. The government seems to be only concerned with land supply as the key to addressing affordability, financial commentators privilege access to loans and other financial instruments, and developers stress construction overheads and compliance costs. Other observers, like this blog, are keen to point out city regulations that inhibit compact and attached building typologies as barriers to better dwelling affordability. It is clear that all of these are important contributors to the problem and it is not my intention here to dismiss any of the above, but rather I want to add another that I think gets even less attention but that is just as important. Location specific overheads.
People aren’t stupid. When looking for somewhere to live they automatically calculate all the costs and benefits of any possible dwelling and the biggest single cost after the direct property costs [mortgage, rates, rents] is transportation. In fact consideration of transport costs is really indivisible from direct dwelling costs in calculation of affordability. Any analysis that fails to understand locational costs in addition to land, construction, and financing costs is likely to remain deeply flawed.
The Victoria Transport Policy Institute’s Todd Litman describes this as Affordable-Accessible Housing and discusses it throughly in this paper. What follows is a quick summary of this work.
These figures are from Canada but there isn’t too much reason to believe that the general thrust wouldn’t also hold for Auckland. Vancouver like Auckland is doing well so therefore has a growing population and pressure on its existing housing stock. Also while Vancouver’s Public Transit systems are much better than Auckland’s it remains true for Auckland that service is better the closer to the centre you get, and it is therefore more possible and cheaper to get around using Public Transit in the inner suburbs and city. This balance is clearly reflected in dwelling prices too. People are clearly willing to pay more to avoid life on the motorways.
You can see that the construction costs are basically constant for each type but that the land and the transportation costs vary depending on the location. Land is more expensive as the location becomes more desirable, but transportation costs increases as the location moves further out. But also note that the biggest cost determinant is building size and type. So even the most expensive 100m^2 apartment is cheaper than the cheapest townhouse or detached house. Size does matter, as does type.
It is also important to note that both housing and transport costs form a greater proportion of people’s expenditure the poorer they are:
Perhaps because the costs of car ownership are either minor or born by employers or absorbed as a business overhead by many players and commentators in the property field that the reality of these costs for those on lower incomes are too easily overlooked. When vehicle cost is either insignificant or not born directly then car ownership can is likely to be viewed as a source of pleasure and an opportunity for expression of status and individuality. This personal experience muddies the appreciation of the burdens of car ownership on many in an auto-dependant society. Car ownership and all its attendant costs are just assumed to be covered for ‘normal’ people. This is how locational overheads can be ignored.
This analysis is supported by the existence of available and keenly priced dwellings in fringe and distant locations. Why else do they remain undesirable? They are not in practice as affordable as they seem because their location is expensive to operate from. Isolation while sought after by those with the money and preference for lifestyle blocks is an expensive burden for those at the other end of the socio-economic scale.
Even if a dwelling is built cheaply on cheap land and comes with supported financing, it may still fail to be affordable in practice because of its separation from employment, education, medical, and other social amenity, particularly if it is underserved by Public Transport.
Experts recommend spending less than 32% of total household budget on housing (rents or mortgages, basic utilities and maintenance) and less than 18% on transportation, or 45% on housing and transport combined. Many lower- and middle-income households exceed these levels (Figure ES-1).
The most expensive form of transport for poorer households are private vehicles. If a dwelling is poorly connected to public services and employment then in order for adults to get to work, as well as for the elderly, children, and infirm in those households to function will be dependant on buying, maintaining, and running multiple vehicles. This section of society often gets into debt with private lenders over vehicles and over-extension on these loans can often be the source of default and failure to meet other commitments. High transport cost due to the dispersed nature of habitation, employment, and services is a very real contributor the problem of people remaining trapped in negative income.
Careful consideration of the location of affordable housing as well the continued improvement in Public Transport services and attention to barriers to its use [cost, frequency and suitability of services] are two vital tools in improving the lives of all Aucklanders and the economic performance of the whole city. Transport poverty is a drain on productivity.
People who live or work in more accessible, multi-modal areas have better access to goods, services and activities, tend to own fewer vehicles, drive less, and rely more on alternative modes than in more automobile- oriented, sprawled communities.
Housing with more affordable locational attributes enable people to turn up to work more regularly, are more able to meet their housing payments, and are more likely to get family members to medical services earlier and whose children are more likely to arrive at school having had breakfast or at all.
Communities must respond to changing demands and conditions. Current demographic and economic trends are increasing demand for affordable-accessible housing, and increasing the benefits to society of accommodating this increased demand.
So in summary: To truly address the problem of housing affordability we need to address all of the following:
Construction and Compliance cost
The types of dwellings that are best suited to meeting all of these criteria are more likely to be smaller, attached dwellings on brownfields sites well served by public transport and local community services and facilitated by a fast tracked consenting and funding programme.
We talk quite a bit on this blog about the importance and value of agglomeration, which is the additional level of productivity which comes from locating activities close to each other. Agglomeration is why Auckland growing will be good for all New Zealanders, and at a smaller scale why central parts of Auckland growing will be good for all of Auckland. While agglomeration economies are well studied in terms of observing that they most definitely do actually exist, it has been a little less certain exactly why they exist.
A recent article in The Atlantic Cities reports on research done by MIT (Boston version, not Manukau version) on this question – with some perhaps unsurprising but at the same time interesting results:
There have been plenty of theories. Adam Smith famously figured that people become more productive when we’re able to specialize, each of us honing a separate area of expertise. And when lots of us elbow into cities, we’re able to specialize in ways that we can’t when a rural farmer must also double as his own butcher, accountant and milkmaid. Other economists have suggested that cities become great agglomerators of industry when factories cluster together around economies of scale and communal access to transportation.
“We think there’s an underlying completely different way of thinking here, which is very different from the economist’s way of thinking,” says Pan, a doctoral candidate in computational social science in the MIT Media Laboratory’s Human Dynamics Lab. Previous work by researchers at the Santa Fe Institute has proven the math behind the power of cities: As they grow in population, all kinds of positive outcomes like patents and GDP and innovation (and negative ones like STDs and crime) grow at an exponential factor of 1.1 to 1.3.
This means that all the benefits (and downsides) that come from cities don’t just grow linearly; they grow super-linearly, and at roughly the exact same scale, with a growth rate that looks on a graph something like this blue line (a linear relationship is shown in red):
As for why this happens, though, Pan pushes aside theories about the location of manufacturing or the specialty of trade. “It’s more fundamental than that,” he says. “Cities are about people. It’s just that simple.”
We have discussed the work of the Santa Fe Institute in before in this post with a video presentation by theoretical physicist Dr Geoffrey West.
The full paper in which the study is published highlights that fundamentally it’s the density that we’re able to form social ties which generates the super-linear increase in outcomes. As noted, “the larger your city, in other words, the more people (using this same super-linear scale) you’re likely to come into contact with.”
However, unlocking the potential of cities is dependent upon ensuring that sufficient transport infrastructure is available for the city to effectively function as a large connected entity, rather than just a series of smaller disconnected placed which just happen to be next to each other. This is detailed further below:
“What really happens when you move to a big city is you get to know a lot of different people, although they are not necessarily your ‘friends,’” Pan says. “These are the people who bring different ideas, bring different opportunities, and meetings with other great people that may help you.”
Maybe this doesn’t sound like a novel discovery – that the inherent power of cities lies in our individual connections to each other. Other researchers have nipped at a similar idea, calculating, for example, the “social interaction potential” of place. But until recently, most economic thinking sidestepped the sheer value of human interaction in favor of explanations about the proximity of manufacturing, or the processes of production.
This explanation for the power of cities also raises some curious questions about those places that remain an exception to the model. In some African cities and Eastern mega-cities, innovation and productivity don’t grow super-linearly. Populations grow, but the benefits don’t accrue with them as we would expect. This is likely because transportation infrastructure in those places is so poor that people aren’t able to connect across town to each other. “To live on the west side of Beijing,” Pan says, you never go to the east side.”
What I find fascinating is to analyse whether the internet has the ability to change this fundamental relationship – because it’s now so easy to be in instant contact with a huge number of people no matter where you are. Yet none of the recent research seems to suggest that technological advances make agglomeration less important – in fact it seems like as employment specialises more and more, agglomeration actually becomes more critical than ever.
The intensity of the Unitary Plan ended up distracting us a bit from the discussion around alternative transport funding, although perhaps that was intended. Submissions on the funding options close today so this is a quick recap and explanation of my submission. Submitting is very easy, just go to the Keep Auckland Moving site and scroll to the bottom of the page. If you want you can just change the appropriate check boxes, fill in your details and submit.
First a quick recap. When the government merged the various councils to create the now Auckland Council, they required that a 30 year spatial plan be developed that would guide the city. Effectively it is the vision for the city and it became known as The Auckland Plan - this was then used to guide detailed rule book that is the Unitary Plan. However transport seems to be one area that politicians can’t help but get distracted by and the Auckland Plan deviated away from just providing the high level strategy, goals and objectives to listing specific projects. Seemingly too scared to anger anyone, it seemed like every single project ever thought of was added in to one massive wish list with just some horse trading to decide which projects should have the highest priority.
The problem though is that this wish list wasn’t cheap and estimates suggest that after taking into the expected funding available from existing options, there would be a $10-15 billion shortfall that would somehow need to be addressed. Raising that kind of money isn’t going to be easy so Mayor Len Brown set up a consensus building group (CBG). The CBG was made up of members from a wide variety of organisations including Cam from the CBT and the intention was for them to come to an agreement as to how we could raise the revenue needed. Despite the rhetoric from certain politicians, this wish list wasn’t a massive spend up on rail or PT but around 60-70% of the funding was actually going to roading projects.
At the same time, and in conjunction with the work going on with the CBG, Auckland Transport created the first iteration of the Integrated Transport Programme (ITP). One of the key things the ITP did was to effectively take the massive transport wish list from the Auckland plan and put it through some modelling analysis to see the impact the projects would have. Unsurprisingly the results weren’t pretty and the results showed that even if we spent the extra $10-15 billion above what we already were planning congestion would continue to get worse.
Unfortunately the CBG, they weren’t allowed to re-litigate what projects were on the list and so had to look at funding sources in isolation to seeing whether projects on the list would actually make things better or worse. Had that been able to occur, it is likely that many of the projects on the wish lists would have dropped off or been put off significantly. The CBG started the process with a list of potential options which were:
- general rates
- targeted rates
- development contributions
- tax increment financing
- regional fuel tax and road user charge/diesel levy
- tolling new roads
- road pricing on existing roads (i.e. some form of network charging or congestion charging)
- additional car parking charges
- visitor taxes
- airport departure tax
From there they whittled it down before announcing two options to meet the funding shortfall. It is also noted that the road pricing in option 2 is likely to have a much greater de-congestion benefits than option 1 as it would more effectively manage travel demand.
But, there is a lot more to this than just how we pay for these projects. As we have shown recently, there are some significant shifts occurring in our society at the moment. Per capita vehicle ownership, kilometres driven and even the number of people getting driver licences are all in decline. Further these trends are likely to only get stronger if we implement the measures above in a bid to raise money. The very process of raising enough money to cover the transport wish list, especially with the road pricing option, is likely to remove much of the demand and therefore the justification for many of the roading projects. This brings up the question of whether we should just go ahead and implement these measures anyway, even if just in a cost neutral way.
We have also seen recently that the way we measure congestion hasn’t been ideal. We have traditionally compared traffic speeds on a road with what is possible in a free flow scenario however we should really be comparing traffic speeds with the speed at which a piece of road is at its most efficient and moving the most vehicles. This is a significant shift in thinking and has some potentially massive impacts as most projects are justified based on time savings. Projects like the CRL which add significant capacity perform much better that a project which shaves just a few seconds off a drivers time but that doesn’t actually make a road more efficient.
With this in mind, here is a summary of the feedback I am providing.
- Of the two options presented I support option 2.
- We should consider implementing road pricing in a cost neutral way in advance of the need for additional funding mechanisms so we can more accurately measure the impact it has on the transport network.
- Before any additional funding scheme is implemented, all projects need to to be put through a robust process to properly determine their economic impact along with the impact they will have on the entire transport network, not just on the specific area they are located in. The projects then need to prioritised according to which ones have the most positive impact.
- Additional funding should only be obtained for projects that will make a positive impact to the transport system and the exact impacts need to be made clear to the general public.
- Assessing projects based on the how fast they can move a single occupant vehicle is not a good measure of success, we should instead be taking into consideration projects that add the most capacity to the network.
As mentioned earlier, the consultation period closes today so if you are interested in how we fund our future transport needs then please make sure you make your voice heard.
Last night the Land Transport Management Amendment Bill passed on it’s third reading, which means that it is set to become law soon.
The Land Transport Management Act dates from 2003 and it set up the New Zealand Transport Agency and established the rules under which it operates in order to achieve “an affordable, integrated, safe, responsive, and sustainable land transport system”.
The LTM Amendment Bill changes a number of aspects of the Act. For starters the purpose of the Act is now to “contribute to an effective, efficient, and safe land transport system in the public interest.” Gone are the sustainability, affordability and integration aims.
Back in October we covered this and other changes in this post. At the time it looked like the major concerns were the reduced influence of the Regional Land Transport Committees around the country, the repealing of the legislation that enabled a regional fuel tax and the provisions that enabled the NZTA to borrow hundreds of millions from the Crown for its roading projects. (There is one part of the Bill that is quite good – the introduction of PTOM to hopefully get better value from public transport operators.)
But the sting in the tail for Auckland now appears to be the repealing of a section of the Auckland Supercity legislation. Brian Rudman described the effect as this:
The new law strips Auckland councillors of their power to decide how the $459.5 million of ratepayers’ money – 33 per cent of total rates income – spent on transport each year is targeted. Instead, the final arbiter will be the unelected board of Auckland Transport, which will have to follow the Government policy statement (GPS) on land transport
The repealed clause of the Local Government (Auckland Council) Act 2009 is highlighted below.
The rationale for this change is covered on pages 158 – 160 of this report from the Ministry of Transport. Acknowledging Auckland Council’s concerns, the MOT had this to say:
Auckland Council considers that the proposed consequential amendment to the purpose of Auckland Transport, within section 39 of the Local Government (Auckland Council) Act 2009, would misalign the transport functions of Auckland Transport and the democratic accountability of Auckland Council and the overarching Auckland (Spatial) Plan.
Particular reference was made in the presentation to the committee to section 15(1)(ab) of the Local Government (Auckland Council) Act 2009 which gives the Auckland Council responsibility for setting the transport objectives for the region.
But the MOT dismiss this with:
This, however, leaves the question of Auckland Council’s role. That role is framed in the Local Government (Auckland Council) Act 2009 and does not need to be duplicated in the Act:
- under the spatial plan provisions set out in Section 79 of the Local Government (Auckland Council) Act 2009 Auckland Council is charged with setting “a strategic direction for Auckland and its communities that integrates social, economic, environmental, and cultural objectives”
- Auckland Council also controls the local transport funding needed to deliver the regional land transport network. Auckland Council’s Long Term Plan sets out Auckland Council’s policies and plans over at least a 10 year period
- under section 92 of the Local Government (Auckland Council) Act 2009 Auckland Transport must give effect to the Long Term Plan and act consistently with the relevant aspects of any other plan or strategy of the Council to the extent specified in writing by the governing body of the Council
- additionally, section 91 requires that Auckland Transport include in its statement of intent a narrative on how the organisation will contribute to the Council’s and, where appropriate, the Government’s objectives and priorities for Auckland.
There is, however, one duplicate reference to transport objectives. Section 15(1)(cb) of the Local Government (Auckland Council) Act 2009 refers to Auckland Council’s functions including setting the transport objectives for the region, while the Regional Land Transport Plan prepared by Auckland Council sets out the objectives, policies and measures for the region. Officials recommend that the Auckland Council’s provision be repealed.
It seems strange that on the one hand MOT say Auckland Council are tasked with writing the Regional Land Transport Plan, yet on the other hand Auckland Council has no decision making for transport objectives. But actually, having a closer look at the relevant section of the Act, it is Auckland Transport (who are governed by a Board), not Auckland Council (who are governed by a democratically elected Council) that is tasked with preparing the Regional Land Transport Plan (every six years now under the Bill). The MOT are clearly wrong in stating that it is the Auckland Council’s responsibility to prepare the Regional Land Transport Plan.
The effect of this remains to be seen. ”Governing Body” here refers to the elected members of the Auckland Council, including the Mayor. Does this now mean that Len Brown no longer has a say on what transport projects proceed and which ones do not? Has Len’s campaign for the CRL been neutered by this legislation? Do Councillors now effectively become lobbyists to Auckland Transport’s Board to get their own local transport issues into the plan? What becomes of Auckland Council’s Transport Committee? Does it now pack up its bags?
Perhaps this is central Government’s bid to stop the work of the Consensus Building Group (of which I am a member). The objective of the group is to look at alternative funding mechanisms for transport, so under this change it looks as if the work of the group now falls outside of Auckland Council’s responsibility.
But does this change amount to taxation without representation? Accountability for the expenditure of 33% of the rates budget now falls with Auckland Transport, governed by a Board and not Auckland Council. But presumably Auckland Council still has the power to withhold ratepayer funds when Auckland Transport comes cap in hand for more money, as it did for the Hop project? Does the passing of the Bill now mean that the Finance and Strategy Committee has no say in how transport funds are spent?
This is a confusing state of affairs. What are the MOT and the Government thinking? How will this work in the real world, away from the rarefied atmosphere of MOT headquarters? (For the record, National, ACT and United Future were the three parties that supported this bill, all others were opposed.)
Whether or not having a ‘limit’ around the edge of Auckland (call it a MUL or a RUB of whatever) drives up the cost of housing is a fairly long-running debate. The argument in favour of this assumption is encapsulated by an opinion piece in the NZ Herald a week or so back by Don Brash:
At the moment, less than 1 per cent of New Zealand’s area is urbanised. We are one of the least densely populated countries in the world. The council has quite deliberately chosen to make land expensive.
And the consequences of that decision are disastrous, socially and economically.
It’s disastrous socially because for most low and middle-income families, buying a house in Auckland is now not even remotely possible, and for those families who do make the attempt, it almost inevitably means both parents working outside the home. Most low and middle-income families can’t even make the attempt, and often live in over-crowded, poor quality rental accommodation.
At the moment, the median house price in Auckland is some seven times the median household income. It should be about three times, as it was 20 years ago and is now in many of the fast-growing cities in, for example, the United States.
Why is it possible to buy 500sq m sections on the outskirts of Houston for $40,000, whereas 400sq m sections on the outskirts of Auckland cost $400,000? The answer lies simply in the fact that in Houston there are relatively relaxed attitudes towards using land on the outskirts of the city, whereas in Auckland that has been prohibited.
We’ve recently discussed the question of whether or not sprawl is a good idea, and I think that’s largely a separate debate to this one. What’s particularly worth testing here is the question of whether opening up large amounts of greenfield land will improve housing affordability or not. The Auckland Housing Accord and its accompanying (although rather contradictory) legislation means that we may well be testing this question in the relatively near future – but recent evidence suggests that standalone housing built on the urban periphery is generally very expensive. Let’s take a look at what was noted in a Central Government report on housing and affordability recently:So standalone houses on the urban periphery generally aren’t that cheap to build, whereas most higher density housing types are comparatively affordable to construct on a per unit basis. And it seems that the availability of affordable housing units is very much linked to the number of higher density units being built:Now one of the reasons why recent standalone houses might be so expensive is because there’s (apparently) not a lot of greenfield land going around – which means that it’s fairly scarce and therefore high value. Expensive land means that a developer needs to put a big house on the site (or two or three smaller ones, which is generally banned through planning rules) in order to make a profit. So maybe opening up more greenfield land could lower the price of that land (more supply leading to lower prices at a set level of demand) and therefore result in it being “economically sensible” to build cheaper standalone dwellings on that greenfield land.
An interesting question then, however, is “how much extra greenfield land would be needed to make a difference?” Plus, perhaps, also a question around whether there really is a shortage of greenfield land being supplied. Let’s refer once again to the Central Government report, this time in relation to land supply:
The key ‘takeaway’ point from the above slide is that only a small proportion of land which is zoned for development and served with infrastructure has actually taken the next step to being developed. As “boosting housing supply” requires a lot of extra houses to actually end up being built, we find ourselves with two further questions:
- If we want to go from around 2,000 sections being “ready to go” (i.e. subdivided) up to around say 10,000 – does that mean we need five times as much land zoned and serviced as we have now? In other words, is the market always going to drip-feed the subdividing of zoned and serviced land into sections, no matters how much land is available?
- Do we instead need to focus on what’s holding up the 15,000 sections worth of land that is zoned and serviced from actually being split up into subdivided sections and eliminate those barriers?
Option 1 may well lead to achieving the desired amount of increasing housing supply, but at a truly staggering cost to ratepayers and taxpayers in the form of new roads, new schools, new water pipes, new wastewater pipes and so on. Furthermore, if it’s only around 13% of zoned and serviced land which is actually going to be split up for development to occur on it, then we’re going to be building an absolutely vast amount of roads, pipes, schools and all the rest which are totally surplus to requirements – at least in the short term.
Undoubtedly this post raises far more questions than it has answers, which is unsurprising. There just doesn’t appear to be much evidence that the best way to improve housing affordability is by building more houses on the edge of the city. Or that it’s a lack of zoned and serviced land which is holding up the release of new greenfield sections onto the market. Or that increasing the supply of land zoned for greenfield development will actually do anything – especially not in the short or medium term, to improve housing affordability.
It’s all a bunch of questions, a bunch of very expensive questions if the Auckland Housing Accord does decide to open up greenfield land in the vague hope of improving housing affordability.
Ok so while the Unitary Plan submission period is over and I intended on not writing about it for a while, I really couldn’t go past a piece in the Herald today from Fran O’Sullivan. She seems to have picked up many of the points that we, and others have made.
The so-called debate on Auckland’s draft Unitary Plan has become disconnected from the big-picture narrative that it serves: that contained in the overarching Auckland Plan, which aims to transform Auckland into the “world’s most liveable city”.
Deputy Mayor Penny Hulse admitted as much when I challenged her about this at a lunchtime discussion on the plan this week. Hulse was adamant the council would respond to the formal consultation when the plan is notified around September-October.
“It’s simply the first draft, or a draft draft plan,” are the words Hulse and Mayor Len Brown are using as they explain there is a great deal more formal feedback to come this year before the Unitary Plan is finally bolted down. And even then there will be an evergreen aspect to it, as the plan must be responsive to changing conditions in years to come.
But Hulse is also pledging to be “robust”. I read this as shorthand for not allowing the council to be bullied by the ill-informed and those spreading misinformation into backing down on plans for Auckland to be a compact city and caving in to the lobby that advocates for increasing urban sprawl by pushing the city’s limits to gobble up more prime farmland.
Good stuff. After weeks of listening to and reading self-interested Nimbyism masquerading as objective concern, it was a relief to hear some common sense from Hulse.
This is Auckland’s chance to get it right.
Yes, the council will give way a bit on the margins to accommodate more housing. But there is an additional infrastructure cost to this which proponents overlook: more roads, more rail links, more sewerage, water, electricity and phone lines and more schools. It’s not simply a matter of plopping down new cookie-cutter houses on vacant farmland.
She even notes an important point missed but many of those who complain as well as making a surprising and almost out of context comment on supporting the CRL although I’m not to sure about the comment on paying for it by selling assets.
The great irony is that much of what the Nimbyists complain about can already take place under Auckland’s existing planning rules.
As a CBD dweller, I welcome the added vibrancy Auckland will enjoy as more people make the city their home in coming years. The CBD and inner suburbs in particular could do with a massive injection of people. Auckland needs a beating heart. It would be terrific if there were more inner-city dwellers – young and old.
There are three issues that concern me: first, the insane way that central Government continues to throw roadblocks in the path of Brown’s CBD rail loop plan. Brown could settle it once and for all by flicking council shares in other assets and reinvesting the equity in the new rail kit and borrowing the difference.
And finally she even gives a nod to our friends at Generation Zero including:
Their argument for intelligent density and against sprawl is compelling. Couple that with their insistence on giving the urban design rules statutory weight and Auckland would be on to a winner.
A nice refreshing piece from the Herald. Only shame we didn’t see it earlier to help inform the debate.
While on a similar topic, another article in the herald caught my attention. This one was on land prices, specifically how some people/companies are land banking huge chunks of land within the existing urban boundaries to get massive profits.
A land banking business with a big piece of residentially zoned real estate on Auckland’s outskirts has made more than $6 million a year for almost two decades – doing nothing.
QV records shows Yi Huang Trading Company owns 39 Flat Bush School Rd, which it bought in 1995 for $890,000.
Now, this 29ha block is listed on the market for $112.6 million, promoted as “the land of opportunity, vacant but close to Barry Curtis Park”.
Now we obviously can’t force anyone to develop land if they don’t want to but before we go opening up the cities urban boundaries it would probably be a good idea to start being smarter with what land we already have. We know that there are potentially 15,000 sections that could be developed within the existing urban limits and without addressing the issue of land banking, we are likely to see similar behaviour happen with the opened land as owners drip feed sections to the market to maximise the return they are able to get.
Out of interest, the section mentioned above is listed in the unitary plan as a mixed housing zone allowing sections down to 300m². Assuming around 25% of the land would be used for the likes of roads and parks that leaves enough potential space for over 700 dwellings.
At a national level we charging ahead with a few hand picked mega roading projects that will tie up our transport spending for the next decade or so. Unfortunately it doesn’t get much better locally with billions upon billions of dollars of ratepayer and taxpayer money proposed to go into transport projects over the coming decades, pretty much all of them relying upon significant traffic growth to be justified.
We’ve discussed changing travel trends on this blog for quite some time now, in particular the plateauing of traffic growth for an extended period of time since roughly the middle of last decade. Here’s a nice graph that Stu put together looking at vehicle kilometres travelled and car ownership rates over the past decade:
Similar trends are starting to show through in a whole variety of countries around the world. With billions of dollars being poured into roads in the coming year the real questions relating to this trend is understanding why it’s happening and then figuring out whether it’s a short term anomaly or the start of a much longer pattern of stagnant or falling traffic.
While New Zealand specific research into understanding the causes of these trends is strangely absent (Stu’s superb analysis aside), an increasing amount of analysis is being undertaken in the USA to ‘get to grips’ with what’s going on. And while shorter term issues – like the economic situation of the past few years – seem to undoubtedly have had some impact on the trends, it seems that there are some more major underlying cultural shifts which are perhaps making the biggest contribution. The New York Times picked up on this recently:
For six decades, Americans have tended to drive more every year. But in the middle of the last decade, the number of miles driven — both over all and per capita — began to drop, notes a report to be published on Tuesday by U.S. Pirg, a nonprofit advocacy organization.
People tend to drive less during recessions, since fewer people are working (and commuting), and most are looking for ways to save money. But Phineas Baxandall, an author of the report and senior analyst for U.S. Pirg, said the changes preceded the recent recession and appeared to be part of a structural shift that is largely rooted in changing demographics, especially the rise of so-called millennials — today’s teenagers and twentysomethings. “Millennials aren’t driving cars,” he said.
In fact, younger people are less likely to drive — or even to have driver’s licenses — than past generations for whom driving was a birthright and the open road a symbol of freedom. Research by Michael Sivak of the Transportation Research Institute at the University of Michigan found that young people are getting driver’s licenses in smaller numbers than previous generations.
Online life might have something to do with the change, he suggested. “A higher proportion of Internet users was associated with a lower licensure rate,” he wrote in a recent study. “This finding is consistent with the hypothesis that access to virtual contact reduces the need for actual contact among young people.”
Of course this isn’t a particularly ground-breaking observation – various studies and articles have been talking about younger generations not being as keen on driving as previous generations were at the same age. What’s particularly interesting is that this report has taken the recent trends and then applied them to forward travel projections under a number of “what if” scenarios to get an idea about what might happen in the future:
Young people aged 16 to 34 drove 23 percent fewer miles on average in 2009 than they did in 2001—a greater decline in driving than any other age group. The severe economic recession was likely responsible for some of the decline, but not all.
Millennials are more likely to want to live in urban and walkable neighborhoods and are more open to non-driving forms of transportation than older Americans. They are also the first generation to fully embrace mobile Internet-connected technologies, which are rapidly spawning new transportation options and shifting the way young Americans relate to one another, creating new avenues for living connected, vibrant lives that are less reliant on driving.
If the Millennial-led decline in per-capita driving continues for another dozen years, even at half the annual rate of the 2001-2009 period total vehicle travel in the United States could remain well below its 2007 peak through at least 2040—despite a 21 percent increase in population. If Millennials retain their current propensity to drive less as they age and future generations follow (Enduring Shift), driving could increase by only 7 percent by 2040. If, unexpectedly, Millennials were to revert to the driving patterns of previous generations (Back to the Future), total driving could grow by as much as 24 percent by 2040.
All three of these scenarios yield far less driving than if the Driving Boom had continued past 2004. Driving declines more dramatic than any of these scenarios would result if future per-capita driving were to fall at a rate near that of recent years or if annual per-capita reductions continue through 2040.
The different scenarios are then graphed:The real kicker point is when you start comparing these scenarios with past traffic volume forecasts – as shown below: From what we’ve seen previously, it appears that pretty much all future transport modelling in Auckland is calibrated to a 2006 base year – pretty much exactly when we started to see transport trends change dramatically. Presumably that will be updated when results from this year’s census come through, but if projections do end up being updated to reflect not only changing travel trends going forward but also the fact that what’s happened in the past seven years is rather different to what was likely to have been expected back in 2006, we could be in for some huge shocks.
In short, it wouldn’t be surprising for the justification for new roads becoming significantly more difficult. Which makes a lot of sense if the demand for them isn’t going up anymore. This issue was also raised by Green transport spokesperson Julie Anne Genter yesterday on Radio NZ.
Or listen here
Interestingly the NZTA responded to this.
Or listen here
Ernst’s claim that every road works for public transport and for active modes is almost comical. Just looking at Auckland, how many buses are using the Victoria Park tunnel, how many will use Waterview and why is there no cycleway planned for Puhoi to Wellsford and where is the promised walkway under the Newmarket Viaduct?