Cortright makes a convincing argument that the exploding demand for urban living is not being met by supply. How does a city grow urban land? Stuart (above) provides a good start of places in Auckland that are sitters for urban intensification. Here is Cortright:
But in economic terms, high and rising prices are sending a clear market message: cities are valuable. More people want to access the advantages that cities provide, and in the face of growing demand we have a shortage of great urban spaces. The market is signaling that we need to build more and better city neighborhoods. Instead of discouraging developers from creating new housing, the most effective solution to this problem is to increase the supply of new urban neighborhoods.
..In many cities, zoning restrictions, discretionary approval processes and excessive parking requirements—and now, potentially, new taxes on developer–makes new development difficult and expensive.
A welcome latecomer to the discussion on urban economics and the constraints on growth due to land use regulation, the Economist has recently published a series of excellent articles. This one considers the growth implication of land use regulations and presents some possible solutions including a land tax.
Concern over land has come roaring back. The issue is not overall scarcity, but scarcity in specific places—the cities responsible for a disproportionate amount of the world’s output. The high price of land in these places is in part an unavoidable concomitant of success. But it is also the product of distortions that cost the world dear. One estimate suggests that since the 1960s such distortions have reduced America’s GDP by more than 13%.
The good news is that the world’s urban-land scarcity is largely an artificial problem. The bad news is that that does not make it a soluble one. Redressing strict land regulation is among the most politically fraught of policy issues.
Large companies are moving back into the city in an attempt to attract and retain workers—particularly younger workers who are postponing homeownership and favor renting in walkable neighborhoods with easy access to restaurants, shopping and cultural opportunities.
Companies are relocating to not only be closer to skilled workers but also to keep those workers happy. “They need to be where the brain trust wants to be,” said Rick Lechtman,eastern U.S. director of the National Office and Industrial Properties Group at Marcus & Millichap in New York. “Employees work 10- or 12-hour days at their desk and don’t want to be in the middle of nowhere.”
Matt Wade. “How treating pedestrians better will boost the economy“, The Age. In this fascinating piece researchers explore the agglomeration benefits of walking improvements. We will surely revisit this work in more detail, as it is consistent with much of the Blog’s articles and initiatives. Having a robust evidence base for something that is so plainly obvious is an indication of how far we are along the path to returning to the tradition of urban living.
Economic change, especially the growing importance of knowledge-based firms, has made the walkability of business centres all the more important. The exchange of ideas and information is crucial for the productivity of knowledge industries. That’s one reason why knowledge-intensive businesses – like finance, insurance, IT and professional services – tend to cluster together in CBDs. Much of the sharing of ideas and knowledge takes place face-to-face. And those face-to-face encounters are very often the result of a walking trip. It might sound old school but walking is vital to our premier business hubs.
The study identified big variations in the routes available to CBD walkers. Some walkways allowed pedestrians to travel at a maximum average speed of 4 kilometres an hour. But others allowed speeds of just 1 kilometre an hour because of obstacles like unfavourable traffic light phasing. Those slow pedestrian routes have a significant impact on productivity. SGS Economics and Planning concluded Melbourne’s economy could be boosted by $1.3 billion a year if the flow of pedestrians around the CBD was optimised. Terry Rawnsley, an economist at SGS Economics and Planning, said a similar improvement in Sydney’s CBD could yield a $2 billion lift to the city’s economy.
The law, passed in 1947, requires homes to be “free of damp”, but it has been largely forgotten. Tenancy tribunals have often sided with landlords, even when dampness was causing serious health problems to tenants.
Now, in a study published in New Zealand Universities Law Review, academics from Victoria and Otago university argue that it is time to resurrect the “free of damp” law to help families who are failing to win redress from tribunals.
Take a look at these powerful images from the blog Alternative Department of Transport, created by transposing typical Dutch cyclists into a British street environment… which could just as easily be a New Zealand street environment.
Straight away it becomes blindingly obvious why women, children and the elderly are so underrepresented among regular cyclists in NZ. It also demonstrates why most people put themselves in a majority group who would love to cycle more but don’t feel safe doing so.
Business owners have a bad record of guessing how their customers visit them. Here are a few links of studies that show the gap between the estimated and actual travel mode to commercial streets. #Protip: if business owners stand in the way of sensible transport infrastructure, it’s time to call in the surveyors.
Within hours of my last post on the housing “bubble” going live, news broke of a radio advertisement airing in Singapore, Malaysia, and Queensland which described Auckland as “an investor’s dream”. The radio advertisement went on to state:
“Now many people invest in Auckland because of the high demand for rents. There’s no stamp duty, no land tax, and within New Zealand, generally no capital gains tax either.”
Now radio advertising on a Singaporean Classic Gold station is a truly time-honoured way of reaching informed property investors. Prurient? Yes. Problematic? Indeed. For those who missed it, the premises and conclusion underpinning my last post can be summarised as:
Premise 1: Property taxes in New Zealand are relatively low compared to elsewhere in the OECD. According to Grimes (2003), 5.3% of New Zealand’s total tax revenues are raised from taxes on property, compared to an average of 8.3% across the OECD.
Premise 2: New Zealand is a relatively open economy with few restrictions on foreign investment. We have, or are in the process of negotiating, preferential trade agreements with a large number of countries, such as Australia, Singapore, and Malaysia.
Premise 3: Most countries overseas are currently running relatively expansionary fiscal settings, e.g. low interest rates. Some have even undertaken quantitative easing. There is an abundance of cheap capital is sloshing around like the world right now looking for a “home”.
Conclusion: New Zealand is likely to experience excessive demand for investment property.
Hitherto John Key has been pushing the line that supply is the main issue, largely due to pesky local government regulations. We can’t do much about demand, John says. This, my adoring readers, is partly true and partly false. The billboard below highlights the international dimension to the demand for property in Auckland. The international dimension matters, even if I’m not keen on singling out this dimension on its own.
As mentioned in my earlier posts, I do agree there is a need to improve the responsiveness of the supply-side, and that Auckwood can do better on that front, e.g. allowing residential intensification. But there’s also no doubt that such changes will take several years to implement and take effect.
It’s also true that the New Zealand economy is doing relatively well and that, as a result, our population is growing strongly.
I tend to agree with Peter that a larger population will benefit New Zealand, especially in the long run. This is largely due to agglomeration benefits – both domestically (e.g. in Auckland) and nationally (from having a larger local market). Hence I don’t really agree with those people who argue for 1) caps on migration and/or 2) incentives for migrants to settle outside of Auckland.
Indeed people continue to choose to live in Auckland despite the disincentive provided by high house prices. That suggests many people quite like living in Auckland, and that they would be adversely affected from having to live elsewhere. I think we should be careful to respect those preferences. I also think it’s presumptuous of people to assume that migrants destined for Auckland could be almost as happy in Invercargill. I don’t think so; they seem more likely to head to Sydney, Melbourne, Brisbane, Perth, or Vancouver, i.e. be lost to us altogether.
On the other hand, it’s not correct to imply we can’t do anything about demand, especially from investors (NB: Source).
Simply running away from the problem, as the Government seems to be doing, is not a good strategy. The reality is that the demand for property we’re experiencing is partly the result of tax settings over which the Government has control. More specifically, the Government could choose to reduce the demand for New Zealand property by increasing taxes on property, if they so desired. As the frequently excellent Brian Fallow notes in today’s Herald:
The case for taxing the income of residential property investors is compelling. And their income is not just rental income, net of all the costs they can deduct. It includes capital income too. Alarmed by runaway house price inflation in Auckland, the Reserve Bank has called for a fresh look at the tax-preferred status of investor-owned housing. Investors, as deputy governor Grant Spencer pointed out last week, are the marginal buyers who set the price in large tracts of the housing market. They are often the people would-be owner-occupiers have to outbid to buy a home, and the prices it is rational for them to pay are inflated by distortions in the taxation system, including the “expectation of high rates of return based on untaxed capital gains”, in Spencer’s words.
In my last post we also discussed several ways we could increase the total tax burden on property in New Zealand, namely (NB: Thanks to those who commented with useful suggestions):
Stamp duty – This is a one-off tax levied on property transactions. This can either be charged to the seller or the buyer. Australia and Singapore both have stamp duties.
Capital gains tax (CGT) – This is a one-off tax levied on the capital gain calculated at time of transaction. The tax is paid by the seller. Australia has capital gains taxes.
Land tax – This is a periodic tax (most commonly annual, but it could be charged quarterly) levied on the value of land. The tax is paid by the owner. New Zealand used to have a land tax, which was abandoned in 1992.
Risk free rate of return (RFRR) – from what I can understand this basically looks at the equity someone has in a property and calculates a risk free rate of return that one should expect from that quity, which is then taxed.
Imputed rents – from what I can tell this estimates the rental value home-owners derive from living in their own home and treats this as taxable income.
I think we can scrub CGT off the list, mainly for political reasons, i.e. National have poured disdain on the measure, and Labor have walked away from the highly loop-holey and problematic policy they took to the last election. Stamp duties appear to be poorly targeted and likely to reduce liquidity in the property market, which in turn might reduce labour mobility. So I don’t think stamp duties are a good way to go.
This leaves us with land taxes, RFRR, and imputed rents.
At this point it’s worth noting the “Tax Working Group” (TWG) recommended a combination of a land tax set at 0.5% and a RFRR on rental properties (NB: For those who are interested Interest.co.nz has an interesting summary and analysis of TWG findings). The land tax would apply on land worth more than NZ$50,000 and would include the ability to defer payment until the property is sold. This is a useful way to ameliorate effects on asset rich, low income households. Other ways including using the revenue from these taxes to reduce taxes elsewhere.
So “my” preferred approach is to simply adapt and/or adopt the generally sensible findings of the TWG. Thanks to their hard work a few years back we seem to have a good handle on what we need to do to quench some of the demand for property in New Zealand. In my next post I’ll explore their findings in more detail, but for now I’m interested in what others have to say. How say you?
…the Government and the Auckland Council have to consider more aggressive measures on both sides of the ledger, including supply and demand. Prime Minister John Key has always left open the option of tweaking migration settings if the pressure on infrastructure and the economy generally becomes too much. Auckland’s housing pressure cooker is getting closer to that point.
The Reserve Bank is likely to force banks to progressively hold more capital to back rental property mortgages within a few months, which could push up interest rates for landlords. It is also expected to keep agitating quietly behind the scenes for more Government action to reduce the tax advantages for rental property investors. A brave Reserve Bank would be much louder.
Ultimately though, the bigger fixes on the supply side will take much longer. They could include introducing new types of leasehold agreements and long-term tenancies that make long term rentals more attractive for tenants and institutional investors alike. They could include removing many of the restrictions around building heights, parking and view shafts that reduce the density of housing in the ‘leafy’ suburbs around the centre of Auckland such as Grey Lynn, Ponsonby, Mt Eden, Remuera and Parnell.
Since the Department of Lands and Buildings erected 5,610 “refugee cottages” in camps all around the city after the 1906 earthquake, San Francisco has often relied on flexible housing types to meet the needs of residents, families and workers. Accessory dwelling units (or ADUs; also known as secondary units, in-laws or granny flats) offer a way to increase density while respecting neighborhood character.  Given the Bay Area’s housing crisis, in-law units are an important strategy for helping increase the supply of “naturally affordable” housing…
You don’t have to go fast on an e-bike, of course. You can just use the motor for that little bit extra when going uphill. But this was a revelation: at certain times of day, an e-bike can get you there in half the time.
Not just half the time of a regular bike – half the time OF A CAR. Or even a bus. Not to brag or anything, but: the other day I had a meeting in Ponsonby. I was running late, and set off only five minutes before the meeting was due to start. I got door to door from the Pt Chev shops to Ponsonby (4km) in ten minutes.
When someone builds a new home, does it make the city stronger and more fiscally sound? Or does it drain public resources? The answer depends a lot on where it’s sited and, more specifically, where it lies in relation to other homes and businesses.
Smart Growth America has developed a fiscal impact model that helps predict how developments will help or hurt the municipal bottom line. The tool they developed [PDF] takes into account how density affects the cost of delivering city services, from streets and sewers to fire protection, school busing, and garbage collection…
According to SGA’s model, the higher density development scenarios would have a far better effect on the city’s budget [PDF].
Neighbourhood greenways (aka “bicycle boulevards”) are a form of street treatment where simple measures such as lower speeds, traffic restraints, wayfinding and crossing treatments are used to create an environment that is friendly for walking and cycling.
They are particularly useful for connecting people to community facilities such as schools, parks, shops and other key destinations in a neighbourhood and beyond. Neighbourhood greenways (NGs) are a popular tool in North America (especially on the west coast) but have yet to catch on here in New Zealand, despite many similarities in street environment…
Walking, one of the most natural of human activities, has become shockingly rare in the lives of many Americans: Only two-thirds of adults report walking for more than 10 minutes at any time in the previous week...
Our choices about how to get around are largely shaped by our environment and our perception of what it will be like to get from one location to another on foot, in a car, on a bicycle, or via some other vehicle. The main geographic factors that influence people’s transportation decisions are proximity—how close the start and end points of their journey are—and connectivity—how fast and convenient it is to move from one to the other…
Proximity requires a compact mix of a variety of buildings types, so that the spaces for living, working, shopping, entertainment, and other activities are close together.
While proximity is about the location of places in relation to one another, connectivity is about the routes for traveling between those places.
Connectivity increases as there are more—and more efficient—transportation and route options for moving from one point to another. Grid street layouts (i.e. sets of parallel vertical and horizontal roads that intersect at right angles) are ideal for connectivity, since they offer numerous short segments, in the form of city blocks, and frequent intersections for moving from one segment to another. On the other hand, the “suburban spine” pattern common on the outskirts of many sprawling cities—with major roads connecting enclosed residential areas cut off by cul-de-sacs and dead ends—makes moving from place to place more complicated.
Never have I seen so many aggressive drivers as here in the city of sails. I agree more with the Danish consultant who called it a ‘City of Cars’. So much of the infrastructure is set up for cars, rather than pedestrians or cyclists, that drivers think that they own the road…
The stupidity of this situation is that (as I have said before) we suffer from road rage, from air pollution and our waterways receive heavy metal pollutants from car use, but if Auckland drivers weren’t so bad, cycling would be an excellent solution.
The size of the economy, the quality of the architecture, the activity on the sidewalks, the cleanliness of the streets: we can evaluate a city in any number of ways. But in my travels through North America, Europe and Asia, I’ve found no more telling indicator – and at times, no more important one – than the state of its subway station toilets, the true measure of urban civilisation.
Of course, to use this marker at all presumes a certain degree of development: not only must the city in question have a subway system, but that system must have toilets…
Solar power has won the global argument. Photovoltaic energy is already so cheap that it competes with oil, diesel and liquefied natural gas in much of Asia without subsidies.
Roughly 29pc of electricity capacity added in America last year came from solar, rising to 100pc even in Massachusetts and Vermont. “More solar has been installed in the US in the past 18 months than in 30 years,” says the US Solar Energy Industries Association (SEIA). California’s subsidy pot is drying up but new solar has hardly missed a beat…
For the world it portends a once-in-a-century upset of the geostrategic order. Sheikh Ahmed-Zaki Yamani, the veteran Saudi oil minister, saw the writing on the wall long ago. “Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil,” he told The Telegraph in 2000. Wise old owl.
[John, who suggested this article, also gives it credit for teaching him the word “ineluctable”. This means exactly the same thing as “inevitable”, but people will probably be impressed when you use it.]
Noah Smith, “Bigotry is expensive“, Bloomberg View. Not about transport or urbanism per se, but it makes some excellent points about how a society that offers people more equal opportunities can be a wealthier society as well as a fairer one:
So if a society bases its decisions of who gets which job on race and gender, it’s going to be sacrificing efficiency. If women aren’t allowed to be doctors, the talent pool for doctors will be diluted, and wages will be pushed up too high, choking off output…
Just how big of a difference does this make? A team of top economists has recently studied the question, and their results are pretty startling. In “The Allocation of Talent and Economic Growth,” economists Chang-Tai Hsieh and Erik Hurst of the University of Chicago Booth Business School and Charles Jones and Peter Klenow of Stanford estimate that one fifth of total growth in U.S. output per worker between 1960 and 2008 was due to a decline in discrimination. From their abstract:
In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage.
Yesterday I took the train out to Te Papapa to this ridiculous/amazing Japanese warehouse with hundreds of silk kimono for about $25 a pop, as well as amulets, antiques, etc. (This place, in case you wondered: https://www.facebook.com/asiagallerykimonomegastore)
It was insane, and made me wonder what other bits of Auckland beyond the city centre most people who don’t live in your area don’t know about.
Got any secrets to share about your neck of the woods?
Matt and I can second the recommendation for the Mahurangi Cement Works, a flooded quarry / popular swimming hole near Warkworth.
New projects are starting to pop up around Auckland, Christchurch and (to a lesser extent) the rest of the country at an amazing rate. There are plenty of new additions to the RCG Development Tracker this month – in residential alone, that includes Botanica Mt Eden, Anzac Lofts, Hemisphere Apartments, and Beach & Cavalli.
Apartments, and Albany
I’ve finally been able to shift Willis Bond’s apartment developments in Wynyard Quarter from “proposed” to “pre-sales” – they’ve now started selling units in two buildings, in an area that will eventually have 550-odd residences.
Construction has started at Albany’s Rose Garden Apartments, with a first stage of 200 apartments and eventually 800 or so. There are several other projects selling off the plans in the area, as well as cranes up and building underway on Library Lane, a short way from the Albany town centre.
It’s worth noting that there hasn’t been a single home completed in Albany’s town centre so far – there’s just a motel which was built around 15 years ago. Until now, Albany has been almost entirely retail focused, with more than 120,000 square metres of retail space. After our loss in the cricket, I’ll avoid any #mcgsobig comparisons and even the traditional rugby field comparison, but suffice to say that that’s a lot of shops. Albany is finally starting to get a residential element, and there could be several thousand people living there in a few years’ time.
I think us bloggers agree that Albany needs a rethink in terms of its pedestrian environment, especially now that it will have a sizeable residential population. We’ll write more about this soon.
As shown on the main Development Tracker page, there’s a lot of apartment construction underway. In Auckland, we’re giving building consents to around 2,000 new units a year, with many more being marketed and potentially kicking off during 2015.
I’ve also been making an effort to bring the Development Tracker up to date for the retirement village sector. This is still a work in progress, as there has been a lot happening. As Matt has written previously, these villages are often great examples of density done well. With an aging population, expect to see a lot more of them in the years to come.
Things are also heating up in the office market. At Wynyard Quarter, Fonterra’s new headquarters are well underway, as is the other VXV Three building, and a new building for Datacom has just been announced. Mansons are plugging away at 151 Victoria St West, and are moving NZME (who publish the Herald, among other things) in there, freeing up their current four-hectare site for future development. The 1980s-era BNZ building is likely to be refurbished this year too.
There are a few things I find interesting about the recent office trends. Firstly, the lion’s share of new office space in Auckland is going in the city centre. There is a smattering in the inner suburbs – Parnell, Ponsonby, Newmarket – and a little further out, but generally most of that new employment is going to be in the middle of the city.
Office projects across Auckland. We’re only showing developments of at least 5,000 sqm, so it’s not an entirely fair comparison, but there’s a definite city centre focus.
Secondly, the government’s employment-based target for the CRL looks as unrealistic as ever. It’s just not possible to create space for that many workers in a short time, given the long lead times in developing offices. At any rate, this target is a very poor way of measuring the need for the CRL, so good on the council for getting on with it in the face of intransigence from Wellington.
Bike commuting throughout the city is often like this: cobbled together out of a bit of bike lane here, an unprotected shoulder there, a scrap of sharrow and some silent pleas that cars won’t run you over. Bike lanes occasionally appear and vanish multiple times on the same street. Sometimes they last just a few hundred feet. It feels as if someone striped the city with dozens of quarter-mile commutes in mind.
Recently, Auckland found itself thrust into the global spotlight after being labelled as having some of the most expensive taxi fares in the world.
There are a number of reasons for these inflated prices, some of which fairly apparent, others slightly more abstract.
On the fairly apparent bench, we have issues such as Auckland’s sprawling nature and hilly geography.
A taxi that takes a patron from Britomart out to Te Atatu South has got a hefty return trip on their hands. Under ideal conditions, there would be a second patron waiting somewhere in Te Atatu, ready to take a trip back into Britomart, but this can’t be expected to happen all the time.
As a result, Auckland’s size and spread make for expensive taxi operation costs which are then are passed on to the customers. These kinds of issues can’t be avoided; population density and spread will always be factors in a city’s taxi fares.
There are other, slightly more subtle issues driving up taxi prices however.
Since deregulation in 1989, the New Zealand taxi industry has been operating in a supply and demand system. Under normal circumstances, such a system is self regulating, where the prices offered by the supply are controlled by the demand’s willingness to pay. Currently however, it would appear this system is not working as intended in New Zealand.
It should be dawning on us that at this moment of our maturation our great opportunity is not the resolution of national identity that has so burdened this last century of art. The idea of New Zealandness in art must die. We must be past this already. Fantails are birds and ferns are plants and rivers are water and farmers kill sheep so we can eat their bodies. It’s not that these things don’t matter. It’s just that there’s so much that matters more. What matters most now is only the work, in its own terms.
Abandon your metaphors. We need to understand that the work we make here must not just be good here. It must be good everywhere. Fuck it, it would already be good everywhere. Our opportunity now is to engineer a reflexive cultural imperialism: to use our little cities as the launchpads from which to reach into those global cities that have the hubris to think they are finished, and start leading them rather than just learning from them.
In place of that world’s history and bigness and wealth, we have now laid out before us such unprecedented creative freedom. It is our collective responsibility to continually and aggressively exploit that freedom, and lead the world into its own future. For the first time in my life, though, I do not know what that future ought to look like. This — this not knowing — this is all I might ever have hoped for. In the absence of knowledge, I have found hope.
Economists combine a lot of different things into “capital,” such as machines, buildings and land. Rognlie points out that almost all of the increase in the value of capital over Piketty’s timeline comes from land, instead of from other forms of capital. In other words, it’s landlords, not corporate overlords, who are sucking up the wealth in the economy. It’s a dramatic, startling insight that was somehow overlooked before Rognlie came along.
This is a very different story from the one we usually think of. Didn’t we relegate all-powerful landlords to the dustbin of history when we got rid of feudalism? Haven’t productive corporations replaced rent-collecting landlords as the wealthy class in advanced societies?
Maybe not. Urban economists believe that as density increases, productivity increases. This is what is known as an “agglomeration economy.” But as it becomes more valuable for people to work and live near each other, the value of central locations — of land — goes up. Landlords, who are producing no more than they used to, but who were sitting on advantageous locations, reap huge benefits.
Sprawl increases the distance between homes, businesses, services and jobs, which raises the cost of providing infrastructure and public services by at least 10% and up to 40%. The most sprawled American cities spend an average of $750 on infrastructure per person each year, while the least sprawled cities spend close to $500. In its Better Growth, Better Climate report, the New Climate Economy has found that acting to implement smarter urban growth policies on a global scale could reduce urban infrastructure capital requirements by more than US$3 trillion over the next 15 years. […]
Sprawl is bad for your health. Americans who live in sprawled neighbourhoods are between two and five times more likely to be killed in car accidents and twice as likely to be overweight as those in more walkable neighbourhoods.
Residents of compact, connected communities in the United States save more money and have greater economic opportunity than they would in more sprawled, automobile-dependent neighbourhoods. Households in accessible areas spend on average $5,000 less per year on transportation expenses, and real estate located in smart growth communities tends to retain its value better than in sprawled communities, due to greater accessibility to services.
Matthew Yglesias, “Neighbourhood walkability is good for the commercial real estate bottom line”, Vox:
Neighborhood walkability has been a huge asset for commercial landlords during the recovery from the 2008 recession. Moody’s and Real Capital Analytics have a cool dataset that lets you break down commercial real estate prices by WalkScore.
You can see that whether it’s in suburbs or in central business districts, prices have rebounded from the recession much more strongly in walkable areas than in car-dependent ones:
In the absence of mechanisms that force us to directly pay for the broader impacts of how we travel, we tend to underestimate the total cost to both ourselves and to society of different modes of transportation. This influences our daily decisions about how to commute − but also our views on whether or not to support proposed transportation investments on the referendum ballot.
For example, the price tag of replacing the Pattulo Bridge or building rapid transit in Surrey is frequently mentioned when discussing the referendum. But we don’t consider the added cost of waiting longer when busses are full. We don’t account for the increased life expectancy we gain from cycling, even though our decision to commute by bike means actual savings to the healthcare system. The Cost of Commute Calculator even assigns a value to the discomfort of riding a packed bus. After all, commuting on crowded public transit feels longer than the same time spent walking on a pleasant day.
The tendency to underestimate is most striking when calculating the cost of driving. The amount we pay through taxes for direct costs like road infrastructure and indirect costs like pollution, accidents and noise is significant.
A couple of thoughtful pieces from Bob Dey below. Firstly:
Council budget submissions a mockery of sensible planning
The best evidence that we live in a society of unbalanced thinkers is the graph showing the levels of submission for investing in Auckland. It’s a growing city, but there was a strong show of opposition to spending on transport. Every concrete jungle needs breathing spaces, children need parks to play on, yet opposition outweighed support for spending more on parks & community.
The strong show of opposition to spending on economic & cultural matters is an indication that plenty of Aucklanders don’t want a city that plans for economic growth instead of just letting it happen, and celebrating cultures is not something for the public purse.
But the huge opposition to spending more on governance & support shows how the council, in its first 4 years, has managed not to take everybody with it on a path forward. You can say there will always be malcontents, but this almost entirely negative vote stands out.
Bob also comments on some US articles about distant city fringe suburbs (or “exurbs”) vs inner cities, and the apparent resurgence of the fringe areas. He makes the point that these things are often seen as a dichotomy, which they’re not, and also that we need to think about the opportunities in between the inner city and the outer edge, and with a scale that falls in between urban sprawl and high-rise apartments.
What disturbs me most about these types of article, and also about much of the intensification v sprawl debate in Auckland, is the lack of thought given to suburban intensification – the how, not whether.
Apartments above or beside retail are starting to appear around some suburban centres [in Auckland]. These developments can be far better than the “all or nothing“ mindset because they provide for people to stay in their communities – perhaps single parents, the elderly, and also young singles, taking advantage of beaches, sports clubs, walking to shops and, importantly for urban activity, shorter commutes or easier access to public transport.
They can also, unfortunately, be stern reminders of our utilitarian, cost-dominated developer streak, as in boutique retail at ground, upstairs apartments, plenty of parking, concrete everywhere…. Soul, nowhere.
Both the exurb & intensification thinking here needs to be far more than simply plonking down a home. The equation has to include good access to jobs, shops, schools & amenities – integrated solutions.
Close to 82 percent of Germans who partook in the Federal Environment Agency’s biennial survey indicated they wanted town planners to focus less on private car transport and more on pedestrians, cyclists, car pooling and other means of public transportation.
Regarding the figures released on Monday, Germany’s Environment Minister Barbara Hendricks said, “We need a new concept of mobility in towns,” adding that reducing noise and fine-particle pollution should be a priority.
Germans don’t seem to be that different to Aucklanders, incidentally. As Matt wrote earlier in the week, consultation on Auckland Council’s Long-Term Plan found that people overwhelmingly wanted more spending on public transport and active modes.
Every week we read more than we can write about on the blog. To avoid letting good commentary and research fall by the wayside, we’re going to publish weekly excerpts from what we’ve been reading. This week is a bit more eclectic than usual…
RF: Why did you choose this approach to lobby for change rather than alternatives e.g. protests or advocacy?
TH: Our alternative plan for Pikku Huopalahti received positive feedback from local residents. We also noticed that we were able to challenge business-as-usual planning concepts. This was the case as the consulting offices that were officially invited to draft visions for the area were careful not to introduce ideas that would make their plans seem “unrealistic” in the eyes of the City Planning Department.
So essentially, we drew our conclusions that this kind of planning activism can really have an impact on the way we discuss cities and established planning concepts. In February 2014 we decided to scale up and draw an alternative general plan for the entire city of Helsinki as the City Planning Department was in the process of drafting an official plan. We were also inspired by an alternative general plan that like-minded planning activists had published in Stockholm in 2012 (Lindhagenplanen 2.0). They created an alternative plan using an urban plan from the 19th century as the visual and ideological example behind their new proposal. We did the same and named our alternative vision Pro Helsinki 2.0 after Eliel Saarinen’s grand vision Pro Helsingfors from 1918 to transform Helsinki into a world city.
RF: What were some of the reasons change was needed?
TH: We decided to lobby for change because we felt that the needs of those who favor urban lifestyles have been neglected for too long. For example housing prices in the inner city of Helsinki have skyrocketed due to a) continuously increasing demand, and b) because Helsinki hasn’t expanded the inner city for decades (but expanded the suburbs). So we want to give some concrete examples of how to develop the city in a manner that would speak to us urbanists.
First, here is a chart of the proportion of all rented dwellings where the landlord is in the “social” category that I defined above. There’s variation across regions, from under 10% in Tasman to around 25% in Gisborne, and all regions show a decline in this proportion from 2001 to 2013.
Google, Apple, Facebook, and other internet giants are growing fast, and they’re desperate to hire more engineers. The Bay Area should be comfortably topping the population-growth charts among large metropolitan areas. And the rising wealth of the region’s technology elite should be boosting demand for schoolteachers, doctors, chefs, barbers, landscapers, nannies, and others in service jobs. That, in turn, should trigger a massive building boom, creating jobs for construction workers. Hundreds of thousands — perhaps millions — of people outside of high-tech should be benefiting from the boom.
But that hasn’t really happened. Strict building regulations have made it impossible to significantly increase the Bay Area’s housing stock. So rising tech industry wealth is mostly translating into higher housing costs. Middle-class people outside the tech sector are finding it harder to pay the rent and impossible to buy a house.
The key to understanding the economy of New Zealand is that it’s an industry cluster, and the industry in question is agriculture. Or, and this might be a bit more controversial, the industry in question is agriculture marketing, the most perfect example of which being the way in which the Chinese gooseberry was renamed the “kiwifruit” and production ramped up exponentially to meet US and European demand. At some point, if they can transport them without bruising, I’d guess that they’ll have a go at doing the same thing with the Feijoa, a kind of South American guava that’s very popular domestically. Marketing isn’t looked down on as a frivolous activity for people not clever enough to do science in New Zealand, as far as I can see – farmers, if they want to enjoy middle-class incomes, have to be very aware about the difference between the stuff that comes out of the ground or off the animal, and the sort of thing that people want to see in their shops.
They are really very snappy about working out what the world wants and how to give it to them. Australian wine starts selling in the UK? Bang – New Zealand plants a load of vines. The Marlborough region develops a brand premium for Sauvignon? Bish bosh, ship truckloads of chardonnay grapes from Hawke’s Bay down to Marlborough and you can sell Marlborough Chardonnay too. Craft beer, did someone say? New Zealand agriculture is on the case, digging up the less successful vineyards and ramping up on a dozen new specialty varieties of hops. It is one of the few agricultural industries in the world which has basically no subsidies or tariff protections, and as a result they are just so much sharper and more responsive; it’s a perfect example for anyone wanting to talk about X-inefficiency in their economics class.
What’s interesting is that the general level of awareness of agricultural matters, and of the trends and fashions in global foodstuffs, is very widespread and very detailed. Over a barbecue, my brother-in-law asked me why I thought it might be that Europeans were prepared to pay such big money for manuka honey these days, and mentioned that a friend of a friend had been putting in more beehives. He had no real personal interest in apiary as far as I could see – he has a good job helping to keep the dairy giant Fonterra’s vast logistics chain of tanker trucks moving. It’s just the sort of thing that one makes conversation about in New Zealand, same as I might, six months earlier, have asked someone at a similar party what they thought about house prices. House prices are a common topic of conversation too, by the way, it’s not a totally alien culture.
The movement toward local control in planning made sense two generations ago, when higher powers were raining highways and urban renewal onto declining cities. But now that urban fortunes have turned so dramatically, the effect of local control has turned sinister.
It’s not obvious why – perhaps people are just better at telling others that they should be accepting new housing than they are at taking their own advice? – but higher level planning seems to yield more development, and community control tends towards much more conservative outcomes.
In New York and Chicago, you can see divergent attitudes towards development at different levels of government even within the current structure. The cities’ mayors – whether Bloomberg, de Blasio or the Daleys – are more pro-development than council members and community groups. The push to rezone for growth almost always comes from the mayor and his planning department, while local council members tend to want to scale back plans, or restrict development through downzonings.
Hundreds of new small dwellings are springing up across Auckland.
James Wilson, QV homevalue Auckland valuer, said that in the past 12 to 18 months, valuers had noticed a big jump in the number of smaller new places being built on sites which previously had only one house.
“The construction of minor household units is becoming increasingly popular as people look to capitalise on strong demand for rental properties,” he said.
Owners of properties in south and west Auckland showed the biggest appetite for the activity.
“It’s generally done to increase the return or help with mortgage repayments on an owner-occupied property. There is strong demand for home and income properties which provide multiple units of income, increasing returns for investors or aiding owner-occupiers with mortgage repayments,” he said.
The numbers confirm that Metro Vancouver is getting excellent value for its transit dollar. Todd Litman of Victoria Transport Policy Institute recently put these numbers together.
First, subsidy per passenger-kilometre (one passenger moving one km on transit). What do regional taxpayers pay to move the massive numbers of people they move every day? Less than 20 cents per passenger-km, which is right on the Canadian average and far better than what’s achieved in the US, Australia, or New Zealand.
And what do Metro Vancouver taxpayers get for these 20 cents per ride? Quite simply, a network that makes the regional economy possible, by allowing economic activity to grow despite the limits of the road network.
One measure of this is passenger-kilometers per capita. How much personal transit does Vancouver provide? How many people can travel, and how far, to access jobs and opportunities without contributing to traffic congestion?
Incidentally, those two charts show how Auckland’s gotten it wrong on public transport. We’re not spending very much per passenger-kilometre, when compared with the high cost, low ridership US cities, but we’re also far behind the Canadian cities on per-capita ridership. Remember, Auckland could have a transport system that performed like Vancouver if we chose to invest in it.
California has now suffered four straight years of brutal drought. Reservoirs have shriveled. Crops are wilting in the fields. Cattle herds are thinning out. Hydropower dams are generating less electricity.
And, rather than getting better, things actually seem to have taken a turn for the worse this winter. […]
As the low snowpack became clear, California started to take further action. On March 17, the state directed urban agencies to set new restrictions on how frequently residents could water their yards. On March 19, Jerry Brown announced $1 billion in new spending for short-term relief — including emergency drinking water — as well as accelerating some of those water-bond projects for recycling and desalination.
Now Brown is announcing the first-ever mandatory restrictions, mostly for urban water usage. […]
Of course, these rationing measures don’t apply to California agricultural users, who, again, uses about four times as much water as urban users. (That’s even though farming accounts for just 2.1 percent of the state’s GDP.)
Finally, anyone writing, reading, or commenting on blogs may enjoy watching this video. It certainly explains a lot…
As we have written before on Transportblog, we think that choice in housing and transport markets is really important. In particular, Aucklanders need to be able to choose not to live in apartments. Therefore we must act now to ban anyone from building any apartments.
They’ve already spread to New Lynn: could your town centre be next?
Thanks to the excellent investigative journalism practiced by the NZ Herald, we have become aware that apartments pose an existential threat to our way of life. Alleged political leader Len Brown has conspired with Auckland Council’s urban planners, many of whom started their careers developing five-year plans for collectivising agriculture under Joseph Stalin, to bulldoze Auckland and replace it with brutalist apartment towers. We must resist this at all costs.
These agents of darkness are also in league with a cabal of greedy developers, who will stop at nothing in their sick quest to make money by building homes for people. I’m horrified, simply horrified, that private businesses would seek to maximise their profits. That sort of antisocial behaviour shouldn’t be allowed.
Nobody wants to live in apartments, anyway, so there is no drawback to preventing them from being constructed. And anyone who does want to live in them is not a real New Zealander, and we wouldn’t want to have them around anyway. We have community standards to uphold. They probably don’t even own barbecues!
If we don’t ban the construction of new apartments, people will build them in such great numbers that they will drown out the sun from the gardens, porches, and barbecues of real New Zealanders. And because they will exclusively attract the “wrong type of people” (hint, hint), upstanding Epsomites will be overrun by an unprecedented wave of burglaries and violence. It’s only a matter of time until Auckland’s leafy suburbs resemble a war zone.
Some unscrupulous capitalist is currently marketing these Grey Lynn apartments to P dealers and biker gangs.
But that’s only the tip of this nightmarish iceberg. What’s worse is that building apartments on public transport routes will result in so much traffic congestion that it will prevent anyone from driving anywhere ever again. Auckland’s economy will collapse as self-employed tradesmen from Pakuranga will have to spend an extra five minutes driving to job sites.
In short, we have a stark choice: Ban apartments, or face utter catastrophe. Transportblog is standing up against the inhumanity of intensification. People need to be able to choose not to live in apartments, rather than being frog-marched into them at gunpoint as envisaged under the Unitary Plan.
Just like in Manhattan, where brutal totalitarian Michael Bloomberg has forced the world’s richest investment bankers into tiny shoeboxes.
Banning apartments is a great first step, but in the long term we have to prevent people coming to Auckland and trying to live in them. The only sane option available to us is a policy of eugenics and internal passports to prevent that from happening. It may seem draconian, but similar measures have succeeded wildly in countries as diverse as communist China, Soviet Russia, and apartheid South Africa.
Lastly, I recently realised that I do, in fact, live in an apartment in a leafy inner suburb. It is urgent that we prevent this sort of thing from spreading. As a prophylactic measure, I have driven my neighbours out of their homes, dynamited the buildings, and am awaiting a call back from a developer who’s interested in building an intimidatingly large McMansion on the site.
Here at TransportBlog, we often write about “missing modes“. Auckland is shamefully underprovided with alternatives to driving, and that’s the situation that led to us developing the Congestion Free Network. The CFN calls for investment in rail, bus and potentially light rail infrastructure, as well as more frequent ferry services. However, the CFN only shows part of the picture – it doesn’t show the other bus routes that will service the city at less regular frequencies (i.e. less frequent than a bus every 15 minutes), and it doesn’t show cycling routes either, although cycling is certainly another “missing mode” and one we spend a lot of time on.
Recently, however, I’ve been thinking that there’s yet another “missing mode” which isn’t really making it into the dialogue. The inspiration for this idea comes from an unlikely source – a band called Weezer. In addition to showing that people with glasses can still rock out, Rivers Cuomo is a talented and insightful vocalist. The following lyrics from “Surf Wax America”, track six on their classic Blue Album, made me start to wonder whether we need to broaden our focus:
The sea is foamin’ like a bottle of beer
The wave is comin’, but I ain’t got no fear
I’m waxin’ down so that I’ll go real fast
I’m waxin’ down because it’s really a blast
I’m goin’ surfin’ ’cause I don’t like your face
I’m bailin’ out, because I hate the race
Of rats that run, round and round in a maze
I’m goin’ surfin’, goin’ surfin’
You take your car to work
I’ll take my board
And when you’re out of fuel
I’m still afloat
As a typical trip demand profile, let’s say that you’re at Piha at point A and you need to get to point B.
You have several options. You could walk, but the depth of the water makes that difficult. You could try cycling, but the wet, salty conditions would be pretty harsh on the bike, not something you would want to do every day.* You could wait for a bus, but you might be waiting a long time, with Piha’s population much too small to support a regular bus service. Of course, Piha isn’t serviced by trains or ferries at all, so those options are out.
On the other hand, surfing is a great solution to this travel demand, as it could be for many other trips. These are some of the advantages that I can see:
Providing extra transport modes can change people’s transport habits, and help reduce private car ownership. That saves people money (surfboards are much cheaper than cars).
This is especially useful in places where the opportunity cost of owning a vehicle is high, such as dense city environments (e.g. the city centre, other metropolitan centres, or anywhere where we’re building up or digging down to create new carparks)
A great complement to public transport.
Given our long coastlines, surfing is very well suited to New Zealand (especially for Auckland, with its two harbours). This will assist the council’s aims to reduce Auckland’s emissions.
There are no “tailpipe” emissions from the surfboards themselves, as opposed to conventional cars which send out nitrogen oxides, particulate matter and so on. That’s a good thing for air quality in busy city locations.
As the images below demonstrate, surfing can be a very viable commuting option, although of course it can be used for all sorts of trips – to school, sport, the supermarket, the beach, and so on.
John Campbell is certainly an enthusiastic advocate for the proposal:
Later, we’ll need to invest in more infrastructure. You know the wave generator machine at Motat? I imagine one of those, but on a much larger scale – enabling people to cross the Waitemata with ease. As a “first cut”, we could look at setting up one of the generators at Northcote Point. Perhaps the rabid minority of residents there would find this a less intrusive alternative to Skypath? Based on some very preliminary calculations, it looks like the bits sticking out of the water shouldn’t be any larger than the 35-metre ventilation stacks needed for the Additional Harbour Crossing, so that should be acceptable visually.
At the city end, we could consider having another generator at the port. Ports of Auckland have been looking at putting more stuff in the harbour and it seems like everyone’s fine with that, so this could be a great addition – and provide an easy transport alternative for port workers.
* unless… the bike was made of wood?! Perhaps this is worth looking into.
As Figure 1 shows, it is the price of land that has ballooned relative to incomes, not rents, nor construction costs. Rents as a fraction of income has been largely unchanged, whereas the ratio of section prices to income has doubled since 1998.
As Figure 2 shows, the price of land is highest on the isthmus and south-eastern parts of the North Shore.
High prices are not evidence of the failure of markets or public policy
Very generally, even well-functioning competitive markets can experience extreme price spikes. It can be a market’s ‘call to arms’ for people to invest, innovate, and repurpose resources (in this case land) to meet unanticipated or emerging needs. The economic issue is whether or not there are barriers that prevent a market from making the adaptions that it needs to make to moderate prices.
From our vantage point in 2015, it seems like the dominance of cars was the natural, inevitable way transportation would evolve. But there are some good reasons to believe that may not be the case, Reid says.
One is that private, powered road vehicles came along and failed several times before they finally took off in the early 20th century. In the 1830s and 1860s, in particular, inventors in Britain, the US, and Canada came out with steam-powered carriages, based largely off the technology developed for railroads, as well as electric vehicles.
But these early cars failed for a few different reasons. There were few roads that were smooth or hard enough for them. But more important, Reid says, “There was no push for them. There was no group of people interested in popularizing them.”
Housing crises are cyclical yet there is very little planning, vision or innovation evident from leaders in this field. Successive governments and indeed many developers have responded only when we’re in a crisis, leading to higher costs, fire-fighting and inadequate planning. In short, we’re always playing catch-up.
We shouldn’t be building state houses or mixed private-public housing developments in the boom time. It is far too expensive for everyone involved. We should be building in the lulls, like in the seven-year lull we’ve just experienced. Planning smoothes out the bumps in the building industry’s cycles, doing away with housing crises and helping to make what we build a little more affordable.
The Australian Government is particularly good at this. In the quiet part of the building cycle they ramp up residential building subsidies to stimulate housing construction so not only are there houses being built, the prices are cheaper and the boom-bust impact is mitigated a little.
A more honest response would be the Government isn’t worried yet – it needs to find a convenient non-profit cover for the inevitable transfer of public housing stock to private concerns.
If that sounds harsh, consider how Bill English and John Key have described the performance of Housing New Zealand over successive years. As far back as 2013, Mr English was describing it as performing poorly, and saying the nationalised housing industry was a “disgrace”.
Shortly thereafter, Housing New Zealand beat six Australian social housing providers to scoop a major prize for “leading innovation”. No matter. What was said could not be unsaid, and changes were afoot.
@BicycleAdiago, “Not a parody but an actual @VicRoads advert for the introduction of Victoria’s helmet laws in 1990. HT @AusCycle”:
“Indeed, street trees so well establish natural and comfortable urban life it is unlikely we will ever see any advertisement for any marketed urban product, including cars, to be featured without street trees making the ultimate dominant, bold visual statement about place.”
What if our street trees WERE gone? What a better way to see the framing of public streets than to remove the very objects – trees – that enhance the space. So I put together a few GIFs that illustrate the before & after. Seeing them, I hope, will help you renew your appreciation for our arboreal friends.
Paul Krugman, “Charlatans, cranks and cooling“, New York Times: A nice discussion of how omitted variable bias can lead to failures in policy analysis:
The rise of the US sunbelt can be understood largely as a response to the emergence of widespread air conditioning, which made places that are warm in the winter attractive despite humid, muggy summers. […]
Now, these states have several things in common besides high temperatures. They’re all very conservative. And all of them that were states before the Civil War were slave states. These commonalities are, of course, all interrelated. Hot states had slaves because they were suitable for planation agriculture; and today’s red states are, pretty much, the slave states of 150 years ago.
Now, all of this raises some interesting problems for the assessment of economic policy. Because they’re politically conservative, hot states tend to have low minimum wages and low taxes on rich people. And someone who is careless, cynical, or both, could easily take the faster growth of these states as evidence that conservative economic policies work. That is, charlatans and cranks can, all too easily, end up claiming credit for economic and demographic trends that are actually the result of air conditioning.
Many New Zealand cities and towns are spartan, ugly and makeshift – designed with little regard to the natural world around them, urban designer Garth Falconer says. […]
Mr Falconer said Europeans came with ideas of how to design towns and cities based on what they already knew. This included the Protestant colonies of 16th century Northern Ireland and penal settlements of 18th century Australia.
But New Zealand’s terrain, ecology and climate conspired to frustrate the end results…
The truth is, the existing harbour bridge is not a bottleneck. Traffic generally flows over the bridge more smoothly than it does on the motorways north and south. The moveable barrier installed on the bridge some time ago has added a lane for commuter traffic at peak hours, the construction of the northern busway has removed some cars from the road, and the Victoria Park tunnel has doubled the capacity of the motorway at its previous worst choking point. All these developments have taken pressure off the bridge, as will the Waterview tunnel in a year or two.
Meanwhile, the Government remains unconvinced that a rail tunnel under the central city would be worth the cost when compared with the roading projects competing for the funds it is allocating for Auckland transport.
Every year since 2005, pro-sprawl think-tank Demographia has published a new edition of its “International Housing Affordability Survey“. They report a “median multiple” measure of housing affordability that compares median house prices to median household incomes within a number of cities, mostly in the English-speaking world.
Demographia’s aim, in publishing this data, is to argue that “if housing exceeds 3.0 times annual household incomes, that there is institutional failure at the local level. The political and regulatory impediments with respect to land supply and infrastructure provision must be dealt with.” By this, they mean building car-dependent suburbs on the urban fringe – and nothing else.
Another Demographia-approved urban paradise.
A number of people, including Todd Litman and Stu Donovan (on Transportblog), have taken aim at Demographia’s empirical analysis and choice of metrics. Unfortunately, Demographia is unwilling to open up its analysis and methodology for an independent peer reviewed, so it’s difficult to referee those claims.
Here, I want to take a look at the issue from a different perspective. Basically, the urban economics literature suggests that Demographia’s chosen measures do not mean what they think they mean. And they almost certainly do not prove the case they’re trying to make.Before I explain why, let’s start out with a quick look at the data. According to Demographia’s 2015 report:
The most “affordable” cities included the likes of Detroit (median multiple of 2.1), Cleveland (2.6), and Houston (3.5)
The “unaffordable” cities included most large Australian cities, including Sydney (9.8) and Melbourne (8.7), many “coastal” North American cities, such as Los Angeles (8.0), San Francisco (9.2), Vancouver (10.6), New York (6.1), and Boston (5.4)
All New Zealand cities were on the “unaffordable” end of the spectrum, ranging from Palmerston North (4.1) and Dunedin (4.6) to Christchurch (6.1), Tauranga (6.8) and Auckland (8.2).
In other words, there’s a quite large range of median multiples. This raises a quite obvious question: Why are people willing to pay so much more to live in some places? Why live in “unaffordable” San Francisco when “affordable” Houston is just down the road? Why live in Auckland when housing is relatively cheaper in Dunedin?
Why would anyone want to live in a large, multicultural city located between two beautiful harbours in a subtropical climate? Sheer madness.
Urban economists have studied this phenomenon in detail, and observed that there is an omitted variable in Demographia’s equation: the differing amenities offered by different cities. If a city offers good natural amenities or consumer amenities, people will be willing to pay more to live there. Conversely, if a place isn’t particularly nice, people won’t be willing to pay much for houses there. (Common sense, really.)
It is quite common in discussions of housing affordability to focus on the share of income being spent on housing, as if this is a natural measure of the degree to which housing affordability is a problem within an area. The spatial equilibrium assumption suggests that this measure is not particularly meaningful or helpful.
In short, urban economics suggests that we should interpret a high median multiple as an indication that a city offers great amenity for its residents, rather than an indication of bad policies. I tested this hypothesis by looking at the correlation between the (2012) Demographia median multiple figures and two international quality of living rankings. I found that there was a positive correlation between median multiples and livability.
Here’s the correlation between the median multiple (X axis) and Mercer’s 2012 Quality of Living Survey (Y axis; lower numbers indicate higher rankings). Once again, a positive correlation, with 31 data points:
In other words, high house prices relative to incomes are a good indicator that a city is a nice place to live. Rather than proving that Metropolitan Urban Limits inevitably push up house prices, Demographia’s median multiple seems to simply measure cities’ relative levels of amenity. When they argue that all cities should have a median multiple of under three, they are arguing for an absurdity: that all cities should offer the exact same level of amenity to their residents.
If we wanted to accomplish that, we’d have to destroy most of the things that make great cities great. This might make housing cheaper, but it wouldn’t make us any better off in a broader sense. That’s because it would require us to:
Bulldoze the Waitakere Ranges and use the spoil to fill in the Hauraki Gulf – to ensure that Auckland didn’t have any natural advantages over a flat, inland city like Hamilton
Dynamite the historic boulevards of Paris and replace them with American-style subdivisions and malls – to ensure that Paris didn’t offer anything that Houston doesn’t
Ban any venture capital or startup activity in San Francisco, to ensure that it doesn’t offer any agglomeration economies that don’t exist in Detroit
Build large screens over sunny cities like Tauranga and Brisbane – to ensure that they don’t have nicer weather than Moscow or Toronto.
But Demographia’s not aware of this. Their analysis is overly simplistic. The only thing it reveals is the authors’ grievous failure to understand the basics of urban economics. It’s no wonder that Demographia has never tried to have its studies peer reviewed or published in academic journals. Their claims aren’t supported by any valid conceptual model. But I guess that’s what happens when you get an urban planner and a former property developer to do an economist’s job…