Growth: what is it good for?
Accommodating a growing population can certainly be challenging. It means having to find more money to invest in transport and water infrastructure to enable new residents to live and travel in the city. As Auckland Council’s recent consultation on the Long Term Plan shows, asking people to pay more is never a very popular proposition – even if they like how the money’s being spent.
And, as Stu pointed out in his post on Auckland house prices this Monday, population growth can also put pressure on housing markets. Multiple research papers from the Reserve Bank have shown that increases in net migration tend to be followed by increases in house prices – shown in this chart. Obviously, homeowners do quite well out of this, but others face added costs:
In short, it’s not surprising that some people feel trepidatious about population growth and migration. And it’s not surprising that those anxieties are especially present in Auckland, which is projected to continue growing rapidly over the next three decades.
While unease about population growth is understandable, I’d argue that it’s misplaced. In my view, the benefits of urban population growth in New Zealand far outweigh the costs. While large urban areas can become dysfunctional – think of Beijing’s astonishing smog problems or the high cost of infrastructure in sprawling American cities – New Zealand’s cities are nowhere near large enough for the diseconomies of scale to triumph over the economies of scale.
This is easy to see if we look at the periods when Auckland hasn’t been attracting migrants. Here’s a chart from a presentation on Auckland’s demographics by Auckland Council social researcher Alison Reid. It displays the composition of Auckland’s population growth since 1922. In recent decades, natural population increase – i.e. people having babies – has been the biggest source of growth. Net migration is important, but it can be quite volatile – surging up and then crashing back.
What stood out to me from this chart was that the years with little or no net migration to Auckland have not been good times for the city. Net migration slowed to a trickle during the Great Depression, and turned negative during the constrained years during and after World War Two. More recently, quite a few people fled Auckland during the economically calamitous Muldoon years. Net migration remained low during the painful adjustments imposed by the following two governments.
I wasn’t living in Auckland during the 1990s – my parents had joined the queues leaving via Auckland airport – but friends who were say that the city was turning into a ghost-town. History shows that shutting off the migration tap has never led to a better, more vibrant city or more opportunity for residents. It’s simply been a sign of failure.
My hypothesis is that New Zealand has a strong feedback loop between net migration and economic growth. When growth prospects get worse – as they did in the 1970 and 1980s – it dissuades people from coming here and encourages Kiwis to leave for greener pastures. This in turn worsens growth prospects by sucking consumer demand out of the economy and reducing perceived household wealth (i.e. lowering house prices).
By contrast, good growth prospects tend to attract migrants to New Zealand’s cities and encourage potential emigrants to stay. This in turn leads to a virtuous cycle between higher growth and increased migration.
We can’t fully control this process, as it depends in part on what’s happening in Australia and the rest of the world (not to mention macroeconomic variables that we don’t fully understand). But we can make sure that our cities are in a good position to take advantage of population growth.
The first, and most important thing we can do is to build better cities that are able to attract and efficiently accommodate more people. In Auckland, for example, we’ve got some challenges, including transport investment that’s been heavily skewed towards cars (and only cars) and rising house prices. But the flip-side of those is that we’ve got great opportunities to:
- Improve transport choice by investing in Auckland’s “missing modes” – a frequent bus network throughout the city, rapid transit infrastructure, and safe walking and cycling infrastructure
- Improve housing choice by providing opportunities for people to develop higher-density residential typologies in market-attractive areas
- Invest in great public spaces, such as Auckland’s waterfront and increasing numbers of shared spaces.
Second, as we attract more people to our cities, we need to accommodate them in an efficient and environmentally responsible way. This means enabling people to live in areas that are accessible to jobs, shops, and other amenities. As I found when I looked at carbon emissions from commutes in New Zealand cities, people in inner-city areas are considerably more environmentally friendly than their co-workers from the urban fringe.
Moreover, the data shows that increasing density can be a positive-sum game for existing communities as well as for the environment. At the city level, we can’t observe any relationship between rising population densities and congestion – fears of traffic-choked streets just don’t seem to have materialised in practice. (So much for diseconomies of scale!)
On the other side of the ledger, suburbs with higher population densities have better consumption choices. Many of the services that people rely upon – from vege shops to Japanese restaurants to public transport to roads – exhibit strong economies of scale, which means that they get better when there are more people around.
Which suggests that there is also a third important thing that we need to do, which is to tell good stories about the opportunities that urban growth will offer us. New Zealand’s used to thinking of itself as a rural economy with some cities sprinkled around as afterthoughts. That’s a dated and inaccurate self-image when over half the economy is located in our three largest cities.
So, what’s your perspective on urban growth?
One of the many reasons that people choose to live in cities is that cities offer variety. As Stu Donovan has argued before, being around more people sometimes seems inconvenient, but it also exposes you to new ideas, new people, and new consumption choices.
I’ve previously written about the value that people place on choices in housing and transport markets, and how having more choices is particularly valuable for people on low incomes. This week, I want to look at how cities provide us with choice in the retail and restaurant markets.
My hypothesis is that there are economies of scale in the provision of both public and private goods. In more straightforward terms, that means that if you live closer to more people, you can have more public transport, more parks, more good restaurants, more shops, and so on and so forth. If this intuition is true, the best way to obtain variety at an affordable price is to live in a dense area of the city.
In order to test this hypothesis, I took a look at Statistics New Zealand’s Business Demography statistics, which provide information on the number of businesses (“geographic units”) and employment within particular industries. Very helpfully, Stats NZ publishes this data at a suburb level (“area units”, in Stats-speak).
I’ve focused on two particular types of businesses that serve households’ daily needs:
- ANZSIC industry H45, which includes restaurants, bars, and clubs
- ANZSIC industry G41, food retail, which includes supermarkets and other small-scale food retailers.
I mapped the density of these businesses throughout different Auckland suburbs. Blue colours show higher densities of restaurants/bars or food retailers; yellow colours show lower densities. A few clear patterns emerge. First, densities tend to be highest in inner city suburbs, and even more so in the city centre. Second, there are also pockets of higher density around satellite centres like Takapuna and New Lynn. Third, the density of retail and restaurants tends to be much lower on the fringe of the city.
How can we explain these patterns? Why are some areas so much better supplied with retail and dining options than others?
We can get some insights by looking at the built form retail and restaurants areas in different areas of the city.
Here’s what a retail street looks like in the city centre, where high residential and employment density sustain a lot of activity both day and night. This is O’Connell St before and after its shared space transformation. Notice how people are just walking up:
Here’s what retail looks like in an inner-city shopping and dining district, Ponsonby Road, which is surrounded by old suburbs of medium population density. It has lots of shops right on the street, plus a bit of parking tucked around the back:
And here’s what retail looks like in a newer suburb at the edge of town – Albany centre. It’s physically separated from nearby residential areas, highly car-dependent, and as a result, it requires large swathes of parking to support each shop or restaurant:
Albany Mall – Aucklands most modern Metropolitan Centre…
In other words, less parking is required to get shoppers to the door in densely populated areas – which should make it easier to sustain more shopping and dining options per square kilometre.
A simple econometric analysis seems to support this view. I attempted to explain the density of restaurants and food retailers in suburbs in terms of the population density and employment density of those areas. (Using Census and Business Demography data from Stats NZ.) As I hypothesised, there is a statistically significant, positive relationship between higher population and employment densities and the density of restaurants and food retailers. These two factors predict roughly 85% of the variation in restaurant and retail density in Auckland suburbs.
Regression results are reported in the table below, for anyone who’s interested. These aren’t perfect models – I suspect that it would be worth testing some spatial regression models, as retailers often attract customers from a wider catchment than a single suburb. Furthermore, we’d have to analyse changes over time in order to establish that increasing population density in an area will in turn increase retail diversity. But these results do provide a reasonable indication of the underlying relationships.
OLS regression models for restaurant and retail density
|Residual Std. Error (df = 339)
|F Statistic (df = 2; 339)
||*p<0.1; **p<0.05; ***p<0.01
What do these figures mean? The coefficients from the model – highlighted in bold – display the relationship (or “elasticity”) between population or employment density and density of restaurants or food retailers. They show that:
- Areas with 10% higher population density have, on average, 4.6% more restaurants/bars and 6.0% more food retailers (including supermarkets)
- Areas with 10% higher employment density have, on average, 6.2% more restaurants/bars and 4.9% more food retailers.
In short: Higher density can benefit people by giving them more choice in restaurant and retail markets. Having a mix of residential and commercial uses around is even better, as it can sustain activity throughout the entire day rather than just in the evenings or at lunchtime.
Stats NZ’s data isn’t granular enough to say, but I suspect that denser areas also have a greater diversity of dining and retail options. (This is intuitively obvious – if there are already two fish-and-chip shops in the neighbourhood, why would anyone choose to open up a third?)
What do you make of this data on density and retail choices?
Earlier this week, I took a look at the relationship between congestion and density. I was investigating geographer Phil McDermott’s claim, based on some dodgy data comparing between cities, that increasing density would increase congestion.
Economists know that it is difficult to make inferences about causality using cross-sectional analysis. Simply looking at variations between different cities doesn’t allow you to form robust conclusions about how those cities got to where they are.
One of the ways in which economists seek to strengthen their understanding of causality is to look at changes over time. For example, if you observe that increases in density tend to be followed by increases in congestion, then that is stronger (although not necessarily conclusive) evidence that there is a causal relationship.
With that in mind, it is worth asking: How have congestion and density changed in New Zealand cities over time? Unfortunately, we don’t have enough data points to conduct a robust econometric analysis, but we do have enough to start painting a picture of recent changes. We can draw upon two relevant sources:
I’m going to focus on NZ’s three largest cities – Auckland, Wellington, and Christchurch – as two of the three experienced big increases in density between 2001 and 2013. (MoT hasn’t collected data on Hamilton and Tauranga for as many years.) If these increases in density coincided with rising congestion, it may be an indication that intensification can lead to increased congestion.
Here’s the data. It shows that density has risen 33% in Auckland between the 2001 and 2013 Censuses, 17% in Wellington, and a mere 3% in Christchurch:
And here’s the Ministry of Transport’s Congestion Index, which measures the average minutes of delay per vehicle-kilometre, relative to totally free-flowing conditions. This is a bit of an unrealistic comparison, as a 2013 NZTA research report by Wallis and Lupton shows. The only way that you can totally avoid all queuing or stopping at traffic lights is if there are no other cars on the road. So it wouldn’t be realistic to say that we could speed up the average Auckland trip by half a minute per kilometre. However, this is still a useful indicator for changes from year to year.
While the Index bounces around a bit from year to year, the overall trends are clear. Levels of congestion are flat or falling in Auckland and Wellington, which experienced big increases in density over the last decade, and rising in Christchurch, which hasn’t gotten denser. In particular:
- Average delay for Auckland drivers was 25% lower in 2013 than it was in 2003
- Average delay for Wellington motorists fell 5% from 2004 to 2013
- Average delay for Christchurch drivers rose a staggering 31% between 2004 and 2010. Unfortunately, MoT’s monitoring seems to have been disrupted by the earthquake, but anecdotal evidence suggests that congestion has worsened since then.
In short, data on changes in density and congestion in New Zealand cities contradicts the notion that intensification will necessarily cause worse traffic congestion. If anything, it suggests that rising density may do the opposite, by making it more feasible for people to walk, cycle, or take public transport.
Do we need to treat this data with caution? Most certainly. As I noted earlier in the week, there are a number of omitted variables that influence congestion, such as such as changing consumer preferences, macroeconomic changes, and significant investments in both roads and public transport over the last decade. But it does suggest that wild claims about the negative traffic impacts of new apartment buildings should be taken with a significant grain of salt.
What do you make of this data?
A number of recent posts have taken a look at some of the “strategic misrepresentations” that people have used to argue for a sprawled-out, roads-focused Auckland. We’ve taken aim at some of the common fallacies, including:
A while back someone sent me an article by geographer Phil McDermott that really hits the trifecta of fallacies. He argues that building apartment buildings on arterial roads – precisely where they will have the best access to frequent public transport services on Auckland’s New Network – is a bad idea because it will lead to increased congestion on the roads.
McDermott’s argument is long on subjective judgments (young people may want apartments but old people downsizing from big suburban homes never will!) and short on quantitative analysis. Here’s his key piece of evidence that constructing apartments on arterial roads will inevitably lead to more congestion:
Congestion – the elephant in the apartment
That might be just as well because mindlessly boosting residential development on arterial roads promises simply to compound Auckland’s congestion problems.
We know higher densities are associated with higher congestion. Auckland’s geography means it already performs poorly on this count. The Tom Tom Congestion Index confirms this.
When the 2013 congestion index for 65 American and Australasian cities is plotted against population density (sourced from the Demographia website) Auckland sits among the worst performers – Vancouver, Sydney, Los Angeles, and San Francisco (Figure 2).
Figure 2: Population Density and Congestion
This is not a serious piece of analysis – it is an insult to econometricians. McDermott makes three elementary errors in this short excerpt alone.
First, he uses bad data that misrepresents levels of density and congestion in these cities. Matt has previously taken a look into the guts of the TomTom Traffic Index and found that it is not a useful measure:
It measures the difference in speed between free flow and congested periods. That means cities with lots of all day congestion there isn’t as much of a difference between peak and off peak times and therefore they get recorded as having less congestion.
Likewise, I’ve done some empirical work on population densities in New Zealand and Australian cities that has showed that Demographia’s statistics are similarly meaningless. Demographia measures the density of the average hectare of land in the city, rather than the density of the neighbourhood in which the average person lives. Nick has shown how badly these figures misrepresent the actual density of New Zealand cities:
Second, McDermott omits important variables and makes inappropriate inferences about causality. While he observes a correlation between two variables, that’s hardly sufficient to prove that building apartments will increase congestion. The causality could very easily run the other way. For example, it could be the case that the presence of congestion creates an incentive for people to live closer to employment and amenity. If that’s the case, then McDermott’s preferred policy of banning apartment developments would make Aucklanders much worse off by preventing them from minimising their travel costs.
Another possibility is that the relationship between density and congestion is mediated through other factors. Both may be caused by a third variable that McDermott has omitted, or there may be an intermediate step between density and congestion. (Or, as noted above, the measures themselves might be rubbish.)
A while back, CityLab’s Eric Dumbaugh provided an excellent illustration of the complex nature of congestion. He looks at data on US cities and finds that higher congestion is associated with higher, rather than lower, levels of productivity:
As per capita delay went up, so did GDP per capita. Every 10 percent increase in traffic delay per person was associated with a 3.4 percent increase in per capita GDP. For those interested in statistics, the relationship was significant at the 0.000 level, and the model had an R2 of 0.375. In layman’s terms, this was statistically-meaningful relationship.
Such a finding seems counterintuitive on its surface. How could being stuck in traffic lead people to be more productive? The relationship is almost certainly not causal. Instead, regional GDP and traffic congestion are tied to a common moderating variable – the presence of a vibrant, economically-productive city. And as city economies grow, so too does the demand for travel. People travel for work and meetings, for shopping and recreation. They produce and demand goods and services, which further increases travel demand. And when the streets become congested and driving inconvenient, people move to more accessible areas, rebuild at higher densities, travel shorter distances, and shift travel modes.
In light of these counterintuitive relationships, the simple two-variable OLS regression that McDermott is relying upon is almost certainly misleading.
Third, McDermott fails to recognise that people are less exposed to congestion in denser, mixed-use cities. It’s simple: when people have better transport choices – i.e. access to frequent bus services and rapid transit, and safe walking and cycling networks – it doesn’t matter as much that the roads are congested. Increasing Auckland’s density by constructing apartment blocks and terraced housing on arterial roads will make it easier for people to have those choices, because the arterial roads are where the frequent bus services under the New Network will go:
Frequency is freedom
Furthermore, density allows people to be closer to where they want to go. I find it odd that McDermott (and others) underestimate the importance of physical proximity in cities, even as people are paying high prices for the privilege. Building more homes in the areas that are accessible to jobs and amenities will allow more people to choose proximity over long commutes. (Without preventing others from making a different choice.)
A question for the readers: Would you rather have a 40 kilometre commute travelling at 80 km/hr, or a 5 kilometre commute moving at 30 km/hr? Show your work…
I thought a commenter on a recent post about a new apartment development on Great North Road had a really great point about the state of the debate:
…the fact is the intensifiers are not winning the argument, as was noted by someone else above. I wish they were but with the tin-ear people have here for this sort of argument, it doesn’t surprise me that it is being lost. Compare the nuanced arguments made here about transport (expansive, studied proposals like the CFN) to the “developers and freemarkets will sort it out” type arguments around intensification and you’ll see what I mean.
This rings true to me. Although I would argue that a lot of thought has gone into Transportblog’s analysis of policies like the Unitary Plan or the effects of limits on density, it’s often difficult to tell the good news stories about market-led intensification.
This is challenging in part because there appear to be trade-offs. Building an apartment building in Ponsonby is obviously a good thing for new residents, as they get to live in a nice area that they might not otherwise be able to afford. But it also has some disadvantages for existing residents, who may feel like they have to put up with more traffic, less sunlight on their porches, and so on and so forth.
In short, it’s easy to fall into an “us versus them” narrative – which is what I was arguing against in the earlier post. I don’t think this is necessary. There are many positive stories about rising residential densities and a lot of benefits for existing residents. We should start telling these stories.
Basically, it boils down to this:
If more people live in a neighbourhood, more services will be available locally for all residents.
Higher population densities make it more efficient for transport agencies to run high-frequency bus routes. They make it easier for supermarkets to open up in closer proximity, competing down prices for groceries. They make it easier for councils to justify improving local parks, improving streetlighting, and upgrading streets. Density allows there to be a cafe or two on every block, so residents can easily step out for a hot drink in the morning. This is all good stuff!
Essentially, having more people around you means that there’s a bigger local market for all sorts of useful things. As densities increase, neighbourhoods will become more convenient for the people who live in them. But if they don’t, there’s never going to be a reason to run a bus every ten minutes. There’s never going to be an incentive for Countdown to open a shop one kilometre down the road from New World. The cafes and drycleaners and florists will never set up across the street.
Here are a few examples of the kinds of environments that could be enabled by intensification. Importantly, these aren’t high-density neighbourhoods – they tend to be composed of terraced houses, row houses, and 4-6 storey apartment buildings rather than massive high-rise towers.
Here’s Greenwich Village, Jane Jacob’s old hood and one of Manhattan’s medium-density neighbourhoods. Look at how many retail and dining choices the residents have:
Here’s a typical cafe in Paris, another city that’s great due to its density and mix of uses. The city’s awash in local cafe and restaurant options because it is dense enough to support lots of them.
Here’s an example from San Francisco – the Castro district, which is one of the spiritual homes of gay and lesbian culture in North America. Medium densities in the area support fantastic (if a bit off-the-wall) nightlife.
And finally, one from Auckland: this is the Elliot Street shared space, which never would have happened without the apartment boom in the city centre. I bet a lot of people around Auckland are looking at how great this is and asking, “when will my neighbourhood get something like this?” The answer is: When your neighbourhood has enough people to support it!
So, what would you like to see happening in your area? Do you think that having a few more people around would help it happen?
Demographia is a pro-sprawl think tank in the USA that publishes density and house price data for cities across the world. They’re often seen using their statistics to argue that the only way to deliver affordable housing is with suburban fringe expansion into greenfields land.
Demographia’s data on housing affordability has come under fire in the past for slipperiness with definitions and misleading choice of measures. But their analysis of population density has gotten less attention – although it’s even more riddled with errors.
Demographia’s approach to calculating density is simple but misleading. They have simply calculated the total number of people in each city and divided it by the total land area covered by that city – including unpopulated areas like parks and reserves. This measure of average density is actually quite irrelevant. For example, Demographia uses it to claim that Los Angeles is more dense than New York.
As Peter outlined in this recent post, what is much more relevant is the density of the neighbourhood that the average person lives in, rather than the density of the average acre of land in the city.
For argument’s sake, consider a village of one hundred acres with one hundred residents. By the measure of area weighted density the density is simple, one person per acre. Does this represent the reality of how people live? Well it could, if everyone lived alone in a separate house on an acre of land. But what if they didn’t? What if everyone lived in a single apartment block in the middle of town that sat on one acre of land? Well then the density the people actually live at would be 100 people per acre. That’s a hundred times more dense… but the same density by Demographia’s measure!
And what if it were something more complex? What if a quarter of the town lived in the one apartment building, half lived in eighth-acre sections around it, and the remaining quarter were spread out over the rest of the land? Doesn’t that sound a bit closer to the reality of most cities? One person per acre means nothing for this theoretical town, half the people live at eight times that density and a quarter at fifty times the density.
Just in case you’re still unsure, in the image below the dots represent dwellings and each box has the same number of dots in it. Overall they have the same average density however in reality they would feel like two very different places.
In short population-weighted density is a much better indicator of the density of the neighbourhoods people chose to live in, and a much better way to describe cities and housing.
With that in mind, it was a simple task to take Peter’s data and throw it on a chart. In simple terms these show how many people live in neighbourhoods (Census meshblocks to be precise) grouped by density in Auckland, Wellington and Christchurch. I’ve also picked out the density level that Demographia says each city is.
It’s easy to see a few things here. First of all we can see that neighbourhood density can vary quite a lot within cities. One number just can’t describe how people live. Second, we can see there is something of a bell curve. Most people live within the middle range of densities, those living very low or very high are small in number, but that middle is actually quite broad. Third, we can see how far off Demographia is. Their supposed summary statistic isn’t anywhere near the middle of the curve, it’s actually near the bottom in each case.
For example it seems the Demographia figure describes the density at which roughly five percent of Aucklanders live. Nine percent live at lower densities, and 86% live at higher densities. Many people live in neighbourhoods that are two or three times more dense than Demographia’s misleading average. In short, Demographia’s figures are irrelevant for the vast majority of Aucklanders (and Wellingtonians, and Christchurchers). They don’t reflect how the majority of people choose to live.
Sorry Demographia, your data is plain useless.
One of the last vacant lots in Mount Eden is currently under development. It’s a big section on the corner of Mount Eden Rd and Kelly St – formerly occupied by what seemed to be a slightly feral orchard. It’s large enough to fit three or four old-style Mount Eden villas with generous backyards, or several blocks of walk-up apartments with space for shared vegetable gardens (and possibly even garages)
While I liked having the empty lot and the trees in the neighbourhood, I thought that development could have been a great opportunity to contribute to Kelly St’s unique character. Here’s a picture of what’s across the road: an elegant art deco building on the corner, built out to the site boundaries and joined up to a row of cool brick buildings hosting various businesses.
But the developers didn’t (or couldn’t) build something in a similar style. Here’s what’s going up across the street. It’s completely uninspiring, completely out of step with the rest of the neighbourhood, and completely within the rules.
What the Kelly St site is getting is a dull cul-de-sac with eight or ten two storey boxes. They have the superficial aspects of a traditional Kiwi home – the pitched roof, the setbacks from the edge of the site, and, of course, the two-car garage out the front – but they’re packed in densely with no yards to speak of. As I’ve written before, this should not be surprising, as when land is expensive people try to use it efficiently. But it is a bit disappointing.
Aesthetic judgments are slippery and subjective, but I think most people would prefer more buildings like the ones in the first picture, and fewer buildings like the ones in the second picture. My question is: What can we do to get good buildings to happen more often?
In the National Review, a conservative American magazine, Reihan Salam takes a look at the confused state of the American debate over intensification. His article, entitled “The Great Suburbia Debate” criticises the position taken by Joel Kotkin, a long-time campaigner for low-density suburban development. He writes:
Though I’m an admirer of Kotkin, and though I can’t speak for every conservative who has made the case for denser development, he gets a number of important things wrong…
For example, Kotkin claims that “some conservatives” (again, no names) have been “lured by their own class prejudice” into turning against market forces. “In reality,” Kotkin writes, “imposing Draconian planning is not even necessary for the growth of density.” Of course, this is exactly the argument that Edward Glaeser makes in The Triumph of the City, a manifesto for the pro-market, pro-density right. “In places that have both liberal planning regimes and economic growth, such as Houston and Dallas,” he observes, “there has been a more rapid increase in multifamily housing than in cities such as Boston, Los Angeles, San Francisco or New York.” Indeed, this is why many conservatives, myself included, have explicitly argued that cities like New York, San Francisco, and Los Angeles should look to the liberal planning regimes of Houston and Dallas as a model. (To be clear, by “liberal” planning regimes, Kotkin means less-restrictive, more market-oriented planning regimes, and so do I.)
The global cities that manage to be both highly productive and affordable, like Tokyo and Toronto, tend to have liberal planning regimes, which allow for rapid growth of housing stock, and in particular of the multifamily housing stock. These regions are characterized by rapid housing development in the suburbs and in the urban core, and their “suburbs” tend to be more urban than low-density suburbs in the U.S. governed by stringent planning regimes that tightly restrict multifamily development. When Glaeser makes the case for density, he does so not by calling for “imposing draconian planning” on cities and towns. Rather, he explicitly calls for the relaxation of land-use regulation.
Kotkin relies heavily on the work of Wendell Cox, a transportation consultant who seems to believe that denser development is necessarily a product of central planning. In desirable regions, however, less restrictive planning regimes will naturally lead to higher densities, as property owners will naturally seek to maximize the value of their investments. Restrictive land-use regulations tend to limit density, not impose it on unwilling landowners.
Salam’s article is excellent and I recommend reading it in full. I pulled out these excerpts as they highlight a few essential facts that often go missing from the debate over urban policy:
- Denser development cannot be imposed by fiat – it will happen if and only if there is market demand for it (as there often is in places that are accessible to jobs and amenities). If nobody wants to buy apartments, then no apartments will get built!
- Urban planners can’t simply require people to build at higher densities – but they can limit density to below what the market wants.
- The rising demand for higher density development isn’t a market distortion, but evidence that the market is working.
In short, we must interpret rising population densities as the result of many individual decisions rather than the whim of an urban planner. My research shows that population densities are rising rapidly in Auckland and several other large NZ cities, which suggests that we’re voting heavily for density with our feet and our wallets. This is, as Salam suggests, a natural outcome of market forces and should be accepted with equanimity. We should recognise this demand where it exists and make complementary public investments in walking and cycling facilities and public transport.
Lastly, I’d note that people from all across the political spectrum should be able to appreciate cities. As Jane Jacobs observed in The Death and Life of Great American Cities, a good urban neighbourhood demonstrates many of the virtues that conservatives celebrate, such as small business ownership, a close-knit community that watches out for itself, and independent-minded civil society (often battling against big government bureaucracy in the form of overreaching traffic engineers).
Jane Jacobs campaigned against this Pharaonic act of bureaucratic hubris (Source)
As a result, we often see centre-right mayors implementing good urban policies. Big-city mayors such as New York’s Michael Bloomberg, London’s Boris Johnson, and Buenos Aires’ Mauricio Macri have been right at the forefront of the movement for better cities. They’ve realised that better cities are more prosperous, and that it’s possible to improve a city by improving the choices available to people.
Good cities should provide choices to their inhabitants. Any big (or small!) city is composed of a variety of people with various preferences, needs, and budgets. Look around you: Aucklanders are a bloody diverse bunch, and we’re getting more so as I type these words.
The Aucklanders of the future will want to get around in different ways, live in different places, and entertain themselves in different ways. In fact, this is already happening. It’s the reason for the success of the innovative mixed-use developments on the waterfront, the runaway success of Britomart and other rail upgrades, and, on the flip side, declines in vehicle kilometres travelled per capita.
At Transportblog, we recognise the importance of choice in cities, which is why we’re so enthusiastic about opportunities to invest in a better public transport network and better walking and cycling options. We believe that offering Aucklanders more travel choices at an affordable price will improve our living standards. Full stop.
What’s true in the transport market is also true in the housing market. Offering a greater range of housing choices will raise the living standards of Aucklanders, because we want to live in different types of homes. Enabling higher-density development in more areas will make some people much better off, because they want to live in dense environments, without making anyone else worse off.
Critics of intensification often fail to understand this argument. They say: “Oh, you just want to make everyone live in a tiny shoebox apartment!” In fact, the exact opposite is true. Enabling some people to choose to live in apartments or terraced houses will ensure that there is more land available for others who would prefer a lifestyle block in Dairy Flat or a quarter acre in Flat Bush.
Essentially, urban planning that enables housing choice allows for both high-density and medium-density living options and more low-density suburban living. This isn’t idle conjecture – it’s a well-established finding in urban economic theory and the empirical literature.
A few years ago a team of economists from the Reserve Bank of Australia put this idea to the test using economic modelling techniques. Their paper, entitled “Urban Structure and Housing Prices: Some Evidence from Australian Cities” (pdf), tested the impact of different urban policies. (NZIER economist Kirdan Lees has also done some similar work for New Zealand, but his initial paper (pdf) did not look at building height limits. In any case, the results are similar.)
The RBA economists model a relatively simple, monocentric city with employment and amenities concentrated in the centre and the residential population radiating out in a circle – the basic workhorse model in urban economics. While this is a simplification, it can easily be generalised to a polycentric city – just imagine multiple centres rather than a single centre. Their “unconstrained equilibrium” looks like this:
In short, densities – and building heights – are highest in the areas that are most accessible to employment and amenities. Land prices are also highest in these areas. This doesn’t occur as a result of a planner’s fiat – it happens because lots of people want to live close to the action. Others, of course, would prefer to be a bit further away with more space – and that is what they get in the unconstrained urban equilibrium.
Next, the RBA economists simulated the effects of imposing a building height limit. In effect, limiting building heights would prevent people from choosing to live at high densities near employment and amenities. Here are the results – the magenta lines show the effects of the constraint:
Pay close attention to the middle two panels. They show that a building height limit does not just restrict high-density development in the centre – it also raises densities in the outskirts of the city. In short, a city that constrains medium to high density development doesn’t just fail to provide options for people who want to live in apartments. It also fails to provide options for people who want quarter acre sections or lifestyle blocks.
Has this happened in Auckland? It’s difficult to say for certain, but my research on population densities in NZ and Australian cities found that Auckland was missing out on both medium-density suburbs and low-density exurbs.
Finally, as the first panel shows, these restrictions are expected to raise the cost of housing for everybody, regardless of location or housing preference. As I said at the start, good cities provide choices for their inhabitants. Failing to provide for choice in the housing market just means that we all pay too much for homes that don’t suit our preferences.
So, what’s your dream Auckland home? Subject to budget constraints, of course…
Back in July former World Bank urban planner Alain Bertaud and his wife Marie-Agnes, a fellow professional in the field, came down to New Zealand at the invitation of the NZ Initiative and the Minister of Finance’s office to deliver a series of talks on urban economics. He had a number of thought-provoking things to say to urbanists of all stripes – a message that was very much in line with Transportblog’s core principles and big ideas.
He looks much happier in person
While Bertaud is sometimes cited as a proponent of low-density urban sprawl and motorway development, his arguments about urban development were nuanced and thoughtful. The Bertauds are, after all, urbanists themselves. They have chosen to live in vibrant, dense, and diverse cities – Paris, Washington, D.C., and lately New York. (That’s a revealed preference if I’ve ever seen one – they certainly don’t live in Houston!)
In addition to seeing Bertaud’s talk , which is available online here (pdf), I was lucky enough to sit in on a smaller discussion section with other professionals in the field. I took three key messages away from the talk and the conversation.
First, cities are labour markets. We often forget this fact, even though it’s the reason we have cities at all. Cities are the physical expression of agglomeration economies, or the productivity advantages of locating near other people and businesses. In Bertaud’s view, ensuring the efficiency of urban labour markets means ensuring that people can access a large number of jobs from their homes.
As a result, he argued that urban and transport planning should aim to keep down commute times. He recommended looking at two key measures – first, the number of jobs available within a 30 minute drive, and second, the number of jobs available within a 45 to 60 minute public transport journey. Here, for example, is his analysis of commute times in Singapore and the US.
Bertaud didn’t recommend any specific policies to reduce travel times, although he spoke positively about Singapore’s use of demand-responsive road pricing and development of an expansive metro network to reduce average travel times. As a transport economist there are a couple of key observations I’d make on the topic:
- Building more roads is not a good way to reduce travel times. Induced demand – people driving more or moving further out of town in response to new road capacity – usually eats up the forecast travel time savings. In short, people travel more but they don’t travel any faster. If you want to actually reduce driving times, the only way to do it is to introduce road pricing.
- Cities with reasonable densities and an underdeveloped public transport network – like Auckland! – are in a good position to improve employment accessibility through investments in rapid transit networks and better bus networks. Fortunately, Auckland’s pursuing this approach.
- In light of induced demand, the best way to improve the accessibility of jobs may be to simply make things closer together. The efficiency of dense urban environments is often underrated. For example, although the roads in downtown Manhattan are far more congested than Houston’s, Manhattan’s effective labour market is much bigger simply because everything is so close.
Second, we must plan for the cities that actually exist, not the cities that we wish could exist. Bertaud presented an excellent graphic to illustrate this point. It showed four kinds of cities – three that exist and one that does not (and can not):
Most cities that exist today are what Bertaud calls “composite cities”, meaning that a significant share of jobs are located in the CBD or in major centres, while other jobs are scattered around in industrial parks, neighbourhood shops, etc. In this city, people have a range of different travel needs. Many people need to get to large-scale, high-density employment hubs, which are efficiently served by rail lines and busways, while others are better off driving to more dispersed employment locations.
In short, real-world cities require a range of transport solutions, and they will not function well if one mode is unreasonably neglected. We don’t have to go far for an example of the perils of mode bias: the remarkable renaissance of the Auckland city centre, and its increasing contribution to New Zealand’s economy, would not have been possible without reinvestment in the rail system and the development of Britomart.
City centre screenline survey results show public transport accounts for all growth in inbound trips over the last two decades
However, Bertaud criticised what he described as the “urban village” model, which hypothesises that if employment is dispersed evenly throughout neighbourhood centres then people will travel only to the nearest centre. This is a seductive idea – it promises to reduce travel distances by distributing employment. Unfortunately, it doesn’t exist in the real world because people have complex travel needs. Even if one member of a family chooses to live near where they work, their partner will often have to commute to a job further away.
We see this flawed idea pop up from time to time in New Zealand from advocates for suburbanisation. For example, people sometimes argue that we could reduce congestion by stopping growth in the city centre and relocating it to Manukau central instead. Aside from the fact that we tried this before and it failed, decentralising employment would only increase congestion from all the cross-town trips and reduce the efficiency of Auckland’s labour market.
We don’t have to go far for an example of the failures of the urban village model. Christchurch lost its city centre in the 2011 Canterbury Earthquake, and employment dispersed throughout the city. Although the jobs have decentralised, the city now suffers from higher congestion as it can’t run efficient bus services or provide enough road capacity.
Third, it’s important to ask whether planning regulations are restricting development in areas that are accessible to employment and amenities. Economists in New Zealand have spent a lot of time talking about Auckland’s metropolitan urban limits while paying little attention to regulations in the rest of the city. Bertaud argues that limits on density, such as building height limits or minimum lot sizes, can price out the poor from accessible areas. Incidentally, this may be happening in Auckland – my research found that poorer people tend to live further from employment hubs and commute longer distances as a result.
Bertaud said that when he was advising developing-world cities on planning policies, he’d often start by creating a map of the minimum lot size required by existing rules and estimating what share of the city’s population could afford that amount of land. Here, for example, is his map of floor-to-area ratios in Mumbai, India, which shows that in most parts of the city people are required to buy 1 square metre of land for every 1 square metre of dwelling they want to build. As land is quite expensive in Mumbai, this is basically a policy that requires the poor to get out or build illegally:
It would be fascinating to see a similar map for Auckland if anyone wants to have a go…
If you went to Bertaud’s talk, what did you think of his ideas?