Parking is massively oversupplied in US cities

When people discuss the costs of car-centric transport systems, they tend to tend to talk about congestion, fuel costs, crashes, or, if they’re environmentally-minded, carbon emissions.

However, one of the largest costs of auto-dependency is hidden in plain sight: the cost of providing parking spaces. The financial cost of providing parking spaces can be staggering. According to Todd Litman, “most communities have three to six parking spaces per vehicle (one a home, one at the worksite, plus spaces at various destinations such as stores, schools and parks)”. As car parks occupy around 30 m2 apiece, this means 90-180 m2 per car.

In Auckland, where suburban land prices range from around $250/m2 (west and south Auckland) to over $1000/m2 (inner isthmus, lower North Shore), surface parking would cost $22-90,000 per car. That’s more expensive than the cars that occupy those spaces!

mcc-coloured

Buildings are in red. Parks are in green. Everything else is roads and carparking.

Moreover,  land that is devoted solely to cars cannot be put to higher and better uses, such as dwellings, businesses, or public spaces. In a successful city, we would expect the value of those other uses to continue rising, meaning that the opportunity cost of car parking will also rise. Space is expensive in cities, and parking is an inherently inefficient use of land.

This spatial inefficiency is exacerbated by the fact that many cities have ended up with more car parking than is necessary. Eric Jaffe in Citylab reports on some important new research on parking oversupply in US cities:

Some new research reminds us just how oversupplied parking really tends to be in American metro areas: in a word, enormously. Rachel Weinberger and Joshua Karlin-Resnick of Nelson\Nygaard Consulting Associates analyzed parking studies of 27 mixed-use districts across the United States and found “parking was universally oversupplied, in many cases quite significantly.” On average across the cases, parking supply exceeded demand by 65 percent.

[…]

The researchers focused on districts with both residential and retail developments in a variety of settings—17 suburbs, 6 cities, and 4 towns—mostly in New England or California. (Interestingly, a third of the areas were documented as having the impression that local parking was scarce.) By looking at previous parking studies in these areas, as well as satellite imagery via Google Earth, they identified existing parking supplies and peak weekday and weekend demands.

Critically, the researchers also took into account the accepted practice of supplying 15 percent more spaces than necessary—a sort of buffer zone that reduces the congestion caused by drivers circling for spaces.

In all 27 districts, spanning places with 420 spaces to those with 6,600 spaces, Weinberger and Karlin-Resnick found an oversupply of parking over and above the buffer zone. The oversupply ranged from 6 percent up to 253 percent across the study areas (below, the highest over-suppliers). And in the nine areas that had believed parking to be scarce, the oversupply ranged from 6 percent to 82 percent.

us parking oversupply

These are pretty extraordinary findings. An average oversupply of 65% means that two out of every five parking spaces are, essentially, useless. We would never tolerate such waste in any other part of our economy – if, for example, two out of every five meatworks were sitting idle, we would start shutting down the unprofitable ones.

I highly recommend reading the rest of the article, as there are a number of other interesting findings in the research. One in particular stood out:

Interestingly, a third of the areas were documented as having the impression that local parking was scarce.

The researchers found that this was not correct – parking was in fact oversupplied in each one of these areas. Policymakers and businesses in these areas significantly overestimated the amount of parking that was truly required. It’s common to hear retailers complaining about the loss of on-street parking for cycle lanes and bus lanes, but the evidence suggests that we should treat their claims with caution.

The same thought occurred to me when reading the recent Motu paper on the cost of planning regulations. Based on a survey of 16 Auckland-based developers, the authors concluded that:

There were diverse views of the impact of car parking requirements on developments, reflecting differing development types. CBD apartment developers, particularly those developing at the affordable end of the market, prefer to include fewer car parks. They saw car parks as a cost to the development as the market value of a park was less than the cost of including them on the development. In contrast to CBD apartment developers’ views, suburban apartment developers tended to favour offering more car parks.

However, some of the comments from developers made me wonder whether they had also fallen into the trap of overestimating parking requirements:

“The optimal number of car parks in a suburban apartment development targeting the mid to upper end of the market is 2 to 3 per unit with additional common parking for guests”

Now, I haven’t been keeping a close eye on suburban apartment developments, but I’d be extremely surprised if developers were actually building three car parks per unit. If anything, the trend seems to be for fewer car parks. For example, the Merchant Quarter apartments in New Lynn have unbundled parking, while the apartments planned for Alexandra Park will have only one car park apiece.

Do you think Auckland has a parking oversupply? If so, what should we do about it?

We need more choice in transport markets

Via economist Donal Curtin, I ran across the draft report that the Australian Competition Policy Review issued last September. It’s a long and fairly technical document, but the introduction made some good points in accessible language:

Competition policy sits well with the values Australians express in their everyday interactions. We expect markets to be fair and we want prices to be as low as they can reasonably be. We also value choice and responsiveness in market transactions — we want markets to offer us variety and novel, innovative products as well as quality, service and reliability.

These are generally sound principles, and I think it’s worth considering how they might apply to transport policy. The first and most important observation is that New Zealand suffers from a serious dearth of choice in urban transport markets. Unlike most other developed countries, we have failed to invest in high-quality public transport, walking, and cycling alternatives.

This is what lack of choice looks like.

This is what lack of choice looks like in the US, another prominent exception.

In fact, it’s even worse than that: transport policy has actively sought to reduce or block choice and competition in urban transport markets. Late last year, I discussed how Auckland ended up with a motorway network rather than a regional rail network in the 1950s: politicians and planners misrepresented the costs and benefits of the scheme in order to scupper the alternatives. The same story has been repeated, with variations, over and over since then.

But surely more lanes will fix it?

Building more lanes will not give us more choice.

Things are changing – but too slowly. For example, changes to public transport policy and agency mindset are starting to deliver more useful bus networks. In Auckland, extensions of the rapid transit network – Britomart, the Onehunga Line, and the Northern Busway – have been highly successful. It is important to build on these successes, as they are integral to having real transport choices.

These people now have a choice.

These people now have a choice.

The Australian Competition Policy Review carries on:

Access and choice are particularly relevant to vulnerable Australians or those on low incomes, whose day-to-day existence can mean regular interactions with government. They too should enjoy the benefits of choice, where this can reasonably be exercised, and service providers that respond to their needs and preferences. These aspects of competition can be sought even in ‘markets’ where no private sector supplier is present.

This is especially true of transport. Low-income families have the most to gain from better transport choices, as they are in the worst position to afford the costs of owning and operating a car. As I found when looking at the costs of commuting by car and public transport, households could save thousands of dollars a year by cutting back on car ownership and riding the bus to work. (Findings reinforced by a recent study of commuter costs in Australian and NZ cities.)

Cycling is free! (Source)

Cycling is free! (Source)

At the moment, low-income households in Auckland and other large NZ cities disproportionately live in far-flung suburbs with limited transport choices (as I found when writing a research paper on housing and transport costs). Auckland’s New Network will improve service in many historically under-served areas of the city, but this is only a small step. As Luke showed when he looked at walking and cycling in Manukau, post-war suburbs are still pretty grim for everything but cars.

At this point, New Zealand’s transport policies should be oriented around giving people more and better transport choices. If we want transport to raise our quality of life, the best way to do it is to build our “missing modes”. More lanes on the same motorway will not cut it.

What choices would you like to make when travelling?

The pace of transport policy innovation

Economists who study firm performance or countries’ economic development know that the best way to get ahead is often to adapt or adopt proven ideas from elsewhere. Technology transfer has always been a crucial part of innovation.

What’s true for firms is also true for cities. Cities in New Zealand can and should benefit from adopting proven ideas from all around the world. There are a lot of things that we could easily do that would make us much happier and wealthier, including:

  • Investing in the City Rail Link to provide metro-style train frequencies throughout much of Auckland
  • Building more rapid transit to underserved areas such as northwest and southeast Auckland – busways are a proven and cost-effective solution for congestion-free mobility
  • Reclaiming some of our overbuilt road corridors for the movement and use of more people – which means painting more bus lanes, putting in protected cycle lanes everywhere, and fixing our many hazardous and unwalkable intersections.

Fortunately, the evidence shows that we can adopt good urban ideas when we put our minds to it. In a post last December, I reviewed some of the progress that we’ve recently made in public transport network design and delivery in NZ cities. I found, much to my surprise, that Auckland and other big cities are swiftly progressing towards international best practice.

Northern Busway efficiency

Time for an anecdote: I had a couple of American friends staying with me over the holidays. On their first day here, I got them a pair of HOP cards and explained how to get to the city centre and a couple of other destinations on the Mount Eden bus route and the Outer Link. With the aid of Google Maps, it was easy for them to travel to all sorts of places via PT – city centre, War Memorial Museum, Devonport, Balmoral for dumplings, even Takapuna for dinner one night. After a few days, they were praising the usefulness of Auckland’s PT system. That’s real progress.

So: Are there any other innovative policies that we should also be adopting?

A recent London School of Economics report entitled “Accessibility in Cities: Transport and Urban Form” (pdf) highlights the rapid growth of sustainable transport systems in recent decades. It finds that “several sustainable mobility concepts may be at a tipping point globally, as more and more cities are adopting these solutions to enhance their efficiency, competitiveness, social equity and quality of life.”

The following graph, from page 30 of the report, illustrates the rise of innovative new transport policies throughout the world:

LSE global adoption of sustainable transport

It displays several important trends that New Zealand cities need to partake in:

  • First, as I observed when looking at historical changes in Kiwis’ consumption of transport goods and services, vehicle technologies have not changed very much. We still get around on foot or on rubber or steel wheels, powered by fossil fuels, electricity, or the food we eat. We cannot expect that to change.
  • Second, urban passenger rail systems continue to be useful 150 years after they were introduced in London. Cities are still building metro systems for a good reason: they are the most space-efficient way to move lots of people. However, bus rapid transit (BRT), which was pioneered in Brazil in the 1970s, is now almost as popular, due to both its cost-effectiveness and the fact that it can “address the crucial challenge of lock-in presented by urban motorways by converting them to high capacity public transport corridors”.
  • Third, while vehicle technologies haven’t changed, the way we interact with them is changing. In particular, smart cards for paying PT fares and PT web apps are making integrated PT networks much more legible and usable – as my American friends found when visiting Auckland. These innovations will drive growth in PT use, as they open up PT networks for more users and for many more types of trips.
  • Fourth, innovations in street design recognise the need to put pedestrians, not cars, first. This is crucial for a number of reasons. By building roads that are inhospitable to walking or cycling, we have created an entirely preventable public health crisis – diabetes, heart disease, obesity, etc. By failing to recognise that people, not cars, buy things, work, and develop and exchange ideas, we have undermined our economic performance. That’s one of the reason that complete streets and car-free zones are two of the most popular policies on the list.

Lastly, the LSE report finds that policy changes, not new technologies, are key to developing efficient and productive urban transport systems. For one thing, the availability of new technology does not guarantee consumer uptake – as I found when looking at the slow rate at which people are buying hybrid and electric cars.

By contrast, local and central governments can achieve change much more rapidly by implementing policies or making investments that have been successful elsewhere. This can clearly be seen in the rapid pace at which cities have bought into many sustainable transport innovations. If our transport policies are going to meet our need for better, more prosperous cities, they must be outward-looking and forward-looking. We can’t just double down on 1950s-era ideas that have failed us time and time again.

Do you think that New Zealand can raise the pace at which it adopts good ideas?

Will people choose to buy new vehicle technologies?

Last year we started to take a look at an emerging technology that some claim will revolutionise urban transport – driverless cars. My view is that they aren’t all they’re cracked up to be – if we wanted to, we could easily get the purported benefits by investing in existing, proven technology:

While driverless cars (or hoverboards for that matter) sound exciting, we can’t afford to pin all of our hopes on them. The pragmatic, proven way forward for transport in a big city is the same as it’s always been: Give people good transport choices by investing in efficient rapid transit networks, frequent bus services, and safe walking and cycling options.

If we want a safer, more efficient, and more environmentally friendly transport system, we can achieve it now by making smart policy changes. We don’t have to wait.

But, for the sake of argument, let’s say that we did want to wait for driverless cars to solve our self-imposed problems. How long would it take, exactly?

The wait would be a function of three factors:

  • First, how long it takes until driverless cars are proven and widely available for purchase in New Zealand. Most people agree that the technology is improving and may be ready for wide deployment sometime in the next decade. (Obviously, regulatory barriers could slow uptake as well.)
  • Second, how long it will take the New Zealand vehicle fleet to turn over – i.e. how long until the cars that’s currently on the road is scrapped and replaced. At the moment, the average NZ vehicle is around 13 years old, meaning that we’d expect it to take at least 13 years for half of the fleet to be renewed. Full replacement of every car on the road could take 25-40 years – a quick glimpse at Trademe shows that people are still buying and selling cars built in the early 1980s.
  • Third, and possibly most importantly, how rapidly driverless cars gain market share. Even after the introduction of driverless cars, most people will continue buying self-drive cars, which will dramatically slow the transition to a driverless fleet.

People have spent a lot of time thinking about the first two points, but I haven’t seen any commentary on the third one. Fortunately, we can draw upon some real-world data to get a sense of how rapidly consumers take up new vehicle technologies. Over the last decade, hybrid and electric cars have become commonly available, with cumulative global sales figures in the millions. While they tend to be more expensive to purchase, they offer savings on fuel costs and improvements in environmental performance.

So: How have consumers responded to recent technological transformations?

In short, they have hardly noticed. People are not rushing to give up their petrol (and self-driving) vehicles, even though there are now viable alternatives. A recent study from the US has found that hybrid vehicles’ market share has stayed low, even though car-makers have introduced many more new models. Over a decade after the Toyota Prius first arrived on the market, hybrids account for only one in every thirty new car sales in the US:

hybrid-car-market-share

Source: IHS/Polk

Obviously, uptake of hybrid and electric vehicles has been faster in some places than others. However, a 2013 New York Times article on new vehicle technologies found that alternative vehicles have failed to capture a majority of the market even in the most favourable environments:

SANTA MONICA, Calif. — It would seem to be a good time to own an electric car in Santa Monica. From the charging stations dotted around town to the dedicated public parking spaces — all provided at no cost by the city — Santa Monica has rolled out the welcome mat for electric cars.

But even here, in this wealthy, environmentally conscious city of 90,000 west of Los Angeles, only a core group of owners has switched from traditional gasoline-powered cars.

Less than 4 percent of registered cars run only on battery power, according to an analysis by the industry researcher Edmunds.com of data from R.L. Polk, which records vehicle registrations nationwide. Hybrids, which run on some combination of gasoline and battery power, account for 15.5 percent, the data says, but many of those are traditional hybrids, which do not require a plug-in cord for recharging.

In other words, after a decade, over 80% of Santa Monica’s car fleet is still composed of conventional petrol cars. And that’s about as good as it gets anywhere in the US, which is on the leading edge of many new trends in vehicle technologies.

The picture isn’t much different outside of the US. Research on vehicle fleets in 19 countries shows that there are only two countries where hybrids and electric vehicles account for more than 1% of vehicle fleets. Norway (largely electric cars) and the Netherlands (mostly hybrids) were far and away the leaders in uptake, due to extraordinarily generous subsidies for buyers. Everywhere else lagged far behind:

In short, people don’t seem to be rushing out to buy new vehicle technologies. Although we all have the option to buy electric now, few people do in practice. It is very likely that driverless cars, when or if they become readily available, will follow a similar pattern. Initially, at least, they will be costlier and seem riskier than self-drive cars. Current rates of uptake for hybrid and electric cars suggest that it could take half a century or more for petrol cars to vanish from the road. Why should the transition to driverless cars be any faster?

All in all, recent market realities should encourage caution about driverless cars. Slow rates of uptake for new vehicle technologies mean that they aren’t going to solve our problems any time soon. A 2014 London School of Economics report on the state of urban mobility (pdf) described the dilemma of vehicle technology innovation well. They noted:

Regarding the development of new transport technologies, key actors (above all the automotive sector) have failed to convert technological progress into substantive improvements in energy efficiency and vehicle emissions or more broadly transform modes of accessibility in cities.

The clear implication is that if we want better transport outcomes, we must implement better transport policies. The data shows that waiting on new technologies is not a sensible option. If we want to lower the road toll, we must invest in safe roads, including protected cycle infrastructure. If we want a workable solution to congestion, we must build rapid transit infrastructure, bus lanes and walking and cycling improvements to give people the choice to avoid it.

There is no realistic alternative – so why don’t we get on with it?

The geometry of urban labour markets

Every half-decade, Census data gives us an interesting and detailed insight into how New Zealanders are travelling. Back in August, the Ministry of Transport published a comprehensive analysis of journey to work patterns in Auckland (ably summarised by Matt here).

Here’s one of the key maps from the report. It shows average distance travelled to work for all suburbs in Auckland. Blue means shorter trips, red means longer trips. As you can see, average commutes get a lot longer if you live further from the city centre:

Trip Length residential 2013(I’ve used the same data to take a look at issues like housing and transport costs and greenhouse gas emissions from commutes in NZ’s large cities. It’s definitely a rich source of insight into how we live.)

The Census journey to work data presents a conundrum. Auckland is not a monocentric city in which all employment is concentrated in the centre. It is in fact highly polycentric, with employment dispersed throughout a number of locations. The map below, which I put together quickly using Statistics NZ’s Business Demography employment data, shows this. There are certainly many jobs in the city centre – around 15% of the total – but employment is spread around the entire Auckland region.

Auckland_employment_by_AU_2014

Given this, why aren’t people in outlying areas simply commuting to the nearest jobs, and skipping the long average commutes across town? Why aren’t the residents of Browns Bay commuting to Albany, the residents of Glen Eden to Henderson, and Howickians to East Tamaki? Auckland’s employment has long since decentralised – so why haven’t our travel patterns decentralised as well?

To answer these questions, we must consider the dynamics of urban labour markets. Here’s an illuminating graphic from Alain Bertaud’s recent talk in Auckland, which I reviewed here. It shows four different models for urban labour market, ranging from a totally monocentric city (all jobs in the centre) to a totally dispersed city (all jobs randomly dispersed). Auckland is clearly what Bertaud calls a “composite” city. It has a strong and growing city centre, but also a lot of jobs spread around other metropolitan centres, industrial parks, local shops, etc.

In a composite city, people do not simply commute to the nearest offices – they will actually travel to jobs all throughout the city. The “urban village” idyll simply doesn’t happen in real life. There are three big reasons for this:

  • First and foremost, labour markets are dynamic. Even if people start out working near where they live, this happy state of affairs doesn’t necessarily continue. Companies go out of business, workers get offered better jobs elsewhere, and people change careers. This happened to me earlier this year – a job change saw me swap my short commute from Mount Eden to the city centre for a longer commute to Takapuna.
  • Second, most households include multiple workers, who may have jobs in very different places. If you’re a baggage handler at the airport married to an accountant who works in Newmarket, it’s not going to be possible to live anywhere that offers you both a five-minute commute.
  • Third, people don’t necessarily want to live right next to their jobs. While commute costs are an important determinant of household location choices, we also consider a range of other factors, such as proximity to beaches and parks, school zoning, the location of family and friends, and so on and so forth.

Bertaud urban structure graph

Because labour markets are dynamic and people’s location choices are influenced by a range of factors, average commute distances tend to follow the location of the average job in the city. In other words, if you live in a neighbourhood that is ten kilometres away from the average job, you’d expect your neighbours to commute ten kilometres, on average. Some of your neighbours will have shorter commutes to local jobs, while others will travel longer distances to jobs on the far side of the city.

With that in mind, I’ve calculated the weighted average location of jobs in the Auckland region using Statistics NZ’s Business Demography employment data for 19 high-level industries. (Without going into the details, you can think about the method as follows: Let’s say that one individual industry has 200 jobs in Albany and 100 jobs in Takapuna. Then the weighted average job would be located two-thirds of the way from Takapuna to Albany. That’s what I did, except I was working with data on over 400 Auckland suburbs.)

The following map plots a centre point for each of the 19 industries. It shows that the average job is located in the Auckland isthmus. The average job in “blue collar” industries like manufacturing and warehousing tend to be located much further south – a result of the concentration of those industries in places like Mount Wellington, East Tamaki, and near the Auckland Airport. “White collar” industries like finance and insurance and professional services, on the other hand, are much further north, as they tend to be more centralised in the city centre and, to a lesser extent, in metropolitan centres like Newmarket and Takapuna.

If we look back to the first map, from the Ministry of Transport’s analysis of Census journey to work data, we can see that the geographic centres of Auckland industries fit within the blue swathe of relatively low average commute distances down the middle of the isthmus.

Auckland_employment_centre_industry_2014

In other words, centrality still matters even in a decentralised city! In a dynamic labour market, it is beneficial to live near the average job because it will tend to minimise expected commute distances over time as you change between jobs. That’s one of the reasons why prices are so high in the most central areas of Auckland: people seem to be paying a premium to be closer to the average job.

Of course, the data in the last map also shows that workers with different skills may have different optimal locations. If you expect to work in a “blue collar” industry, living further south might be a better strategy for minimising your expected commute distances. On the other hand, living further north might be better if you’re expecting to work in office jobs. However, labour markets are dynamic in another way as well – people may retrain or change industries throughout the course of their lives, and children may aspire to different professions than their parents. If that’s the case, living closer to the centre still offers more flexibility.

Sunday reading 11 January 2015

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.

McKenzie Funk, “The Wreck of the Kulluk“, New York Times:

The Arctic was a long-term investment — Shell would not start production on such a big project in such a distant place until at least a decade after it found oil — but the future is always getting closer, and by 2010 the company was anxious. It took out ads in newspapers, hoping to pressure the Obama administration into opening the Arctic. One pictured a little girl reading in bed, a figurine of a polar bear next to the lamp on her nightstand. “What sort of world will this little girl grow up in?” it asked. If “we’re going to keep the lights on for her, we will need to look at every possible energy source. . . . Let’s go.”

Even with permission, getting to the oil would not be easy. The Alaskan Arctic has no deepwater port. The closest is in the Aleutian Islands at Dutch Harbor, a thousand miles to the south through the Bering Strait. In the Inupiat whaling villages dotting the Chukchi coast, only a handful of airstrips are long enough for anything other than a prop plane. There are few roads; human residents get around in summer by boat, foot or all-terrain vehicle. Shell was trying the logistical equivalent of a mission to the moon.

The Economist, “Nimble Opposition: A new study confirms suspicions about what drives planning decisions“:

Local opposition to new housing developments is common across Britain. It has long been argued that such opposition—NIMBYism to its critics—is linked to home ownership. Homeowners, unlike distant landlords, vote in local elections and receive planning consultations in their postboxes. They lose out from development in multiple ways. Loss of green space reduces their quality of life and increased supply of housing suppresses prices. Landlords managing diversified portfolios are less exposed to the value of one property. The idea that planning decisions are driven by the desire of homeowners to maximise house prices is known as the “home-voter hypothesis”.

On October 24th the Institute for Government, a think-tank, released a study supporting this theory with data. It looked at English local planning authorities (LAs) between 2001 and 2011 and found that for every additional ten percentage points in the proportion of homes that are owner-occupied, 1.2 percentage points were knocked off growth in the housing stock. Average growth was 8.8%, so the effect was marked. The authors are cautious about making a causal claim, but the correlation was observed after controlling for the number of planning applications and the amount of available land. A rough calculation suggests that, without the NIMBY effect, one million more homes would have been built during the period.

Brad Plumer, “Driving in the US has been declining for years. Will cheap gas change that?“, Vox:

The key concept here is price elasticity — how much the demand for gasoline changes in response to changes in price. The EIA estimates that, in the very short run, Americans’ demand for gasoline is fairly inelastic. The price of gas would have to fall 25 to 50 percent for US driving to rise by just 1 percent. (That is, the elasticity is -0.02 to -0.04.) …

Driving is on the downswing for a few reasons: 1) The US population is getting older, and retirees tend to drive less. 2) More and more young people are moving to cities, where there are better transit options. 3) It’s become much harder for teenagers to acquire drivers’ licenses. 4) Young people may be driving less for cultural reasons (possibly they prefer to hang out with their friends on Facebook than piling into a car and driving around aimlessly).

That may explain why American driving habits today seem to be less responsive to changes in gas prices than they were in the 1990s. Back then, the EIA estimates, it only took a 12 percent drop in gas prices to boost driving by 1 percent (elasticity was -0.08). Nowadays it takes a 25 to 50 percent drop.

Emily Badger, “Why no one likes indoor malls any more“, Wonkblog:

The mall that’s dying is, in fact, a specific kind of mall: It’s enclosed, with an anonymous, windowless exterior, wrapped in yards of parking, located off a highway interchange. It’s the kind of place where you easily lose track of time and all connection to the outside world, where you could once go to experience air conditioning if you didn’t have it at home…

The death of old-fashioned indoor malls is also the rebirth of shopping hubs that feel more like Main Street.

The importance of expensive apartments

Apartment development in Auckland often seems to be caught in a Catch-22. When we build cheap apartments, they’re criticised as a blight on the city – “shoeboxes” that nobody would ever want to live in. (Never mind that many people do live in them, and value the fact that they are an affordable way to live near jobs and universities in the city centre.) When we build high-quality but pricey apartments, some people claim that they prove that apartments aren’t a solution to Auckland’s high housing costs. (Never mind the fact that they allow more people to live in desirable areas.)

great north road apartment plan

Proposed apartments on Great North Rd – too flash to help affordability?

Over in the San Francisco Bay Area, they’re having a similar debate over how to plan for growth. The Bay Area has more severe affordability issues than we do, as the tech boom is placing pressure on both housing and office space. In San Francisco, new condos for wealthy geeks are frequently criticised as out-of-keeping with the city’s unruly liberal character.

Moreover, fragmented local government means that there is no coherence in regional planning – every city is effectively assuming that their neighbour will accommodate the growth that they won’t. This is the result:

Asking Prices Relative to Units Built

SPUR house prices vs new builds chart

Even though Manhattan and LA have more expensive neighborhoods, San Francisco is far and away the most expensive metro in the nation. This is due to the small number of units built each year relative to demand.

In Berkeley, a university town in the East Bay, residents just voted down a (binding) referendum that would have prohibited the construction of new dwellings in the downtown area. Local writer Zach Franklin reviews the state of the debate on the measure. His point about expensive apartments is particularly important:

Some “progressives” don’t believe in supply and demand. I’ve heard this at parties and online – people who say “the new condos are just for rich people”, or think that pro-development policies are a front for greedy real estate interests. Then there are the folks who have pet theories about how housing economics really work, which can feel eerily like talking with climate deniers. It’s actually pretty simple Econ 101 stuff – the rich folks will be at the front of the line no matter what, and if you don’t build the condos they’ll just take over middle-class housing. Build more housing and at least the line gets longer.

This is absolutely essential to understand. Economists have all sorts of arcane ways of describing this phenomenon, but the principle is simple: If you try to push down growth here, it will pop up there instead.

Preventing people from building new homes in a neighbourhood won’t simply make them go away – they will stick around and compete with each other to bid up the prices. (Some will lose out, of course – they’ll have to go to somewhere else that’s less convenient.) Here’s how this works in practice:

  • We regulate to make it difficult to build new homes in inner-city areas which offer the best access to labour markets
  • Upper-income people bid up prices for old villas and flats in Ponsonby, Mount Eden, and Newmarket
  • Middle-income and lower-income people can’t afford to pay these prices, so they move a bit further out, and bid up prices in Avondale, Three Kings, and Onehunga
  • The people who could formerly afford to live in those areas go even further west or south, driving up prices in Te Atatu and Otahuhu
  • The people at the bottom of the income ladder are thoroughly rogered – they’ve got a choice between paying heaps to live in overcrowded, unhealthy houses or moving so far out that they can’t access jobs or education.

The end outcome is residential segregation and unaffordable housing. A casual look at Census data on household incomes suggests that this might be happening in Auckland. The map below shows the share of households in individual Auckland suburbs that had low incomes in 2001 and 2013. (I used a higher threshold for “low income” in 2013 to account for the fact that average household incomes increased over this period. This is a pretty cursory analysis – I’d welcome ideas on better ways to present or analyse the data!) Areas coloured in darker blue had more low-income households, while areas coloured in yellow had relatively few.

As you can see, the Auckland isthmus and many coastal suburbs have become yellower over this time – which suggests that low-income families are being priced out of these areas. Many other areas – especially in west Auckland and Manukau – have gone from blue to green. Meanwhile, some pockets of blue in south Auckland have become darker, which suggests that low-income households may be crowding into those areas.

Notably, the city centre, where loads of apartments (both expensive and cheap) have been built, has a greater share of low-income households now than it did in 2001.

Auckland low income households 2001-2013

This is not a good outcome for Aucklanders, especially those on low incomes. By comparison, building lots of apartments, even expensive apartments, in desirable areas means that some of the well-heeled people who want to live in that area will not bid up prices on the run-down houses down the street as a second-best option. As a result, the affordable houses in the area can remain affordable.

Supply and demand – how does it work?

What will happen as we build our “missing modes”?

Last year I started to take a look at demand for new transport investments. I found that demand for toll roads has massively underperformed, showing that people are unwilling to pay for new roads. On the other hand, demand for new public transport facilities has taken off more rapidly than projected. All alternative modes are growing rapidly in Auckland, while driving has stayed flat for the past decade.

ResizedImage600304-FutureDemand-Diagram1

Why won’t it grow? We thought it would grow!

The conundrum is, basically: Why is this happening? I argued that declining willingness to pay for new roads is consistent with a saturated market – i.e. all the people who value driving are already on the road. But that doesn’t explain why demand for public transport, walking, and cycling has been so robust over the past decade.

Here, I want to investigate a potential reason for the boom in demand for Auckland’s “missing modes”: the “complete network” effect. I discussed this briefly in a post on the benefits of cycle investments:

Importantly, the researchers found that a larger, more ambitious programme of cycle upgrades will deliver a higher benefit-cost ratio than a smaller programme. This is what economists sometimes call the “complete network” effect – in effect, the more places you can get to easily and safely on a bicycle, the more likely you will be to cycle. (This is also why Facebook has so many users: You have to have an account because everybody else also has an account!)

Here, I want to take a deeper look at demand for relatively new, expanding networks. A 2008 working paper by Arthur Grimes (“The role of infrastructure in developing New Zealand’s economy”, pdf“) provided some historical data on how demand evolved for two important 19th-century infrastructure networks: telegraphs and railways. Grimes suggests that growth in demand on these networks followed an “S-shaped pattern” of rapid initial growth, a period of modest growth, and then a second period of rapid growth after the network reached a certain size:

A forecaster in 1866 would have had little ability to judge the extent of use of the new infrastructure over subsequent years given the lack of precedent for it. A forecaster in 1896, having seen 15 years of constant messages per person may confidently have forecast a stable outlook for that variable over the coming decade. He would have been mistaken almost by a factor of two within ten years.

Grimes’ data is summarised in the following graphs, with telegraphs on the left and railways on the right. The bottom two graphs show the “S-curve” in per-capita demand clearly:

Grimes (2008) infrastructure uptake curve

Source: Grimes (2008)

This nonlinear pattern in demand is likely to reflect two factors. First, growth in demand is fast at first because infrastructure builders start by constructing the best projects – i.e. the ones that will attract the most customers quickest. Once these projects are built, the next ones attract demand more slowly – roughly at the rate of population growth.

Second, the later upturn in the curve occurs after the network reaches a sufficient “critical mass” to become increasingly useful for more purposes. This is the complete network effect in action: filling in the missing links in a network can enable it to serve many more trips (or messages).

I would argue that demand for Auckland’s “missing modes” is following a similar trend. So: Where are we on the “S-curve”?

First, we cannot expect an uptick in demand after the construction of Waterview finishes off Auckland’s motorway network. While Waterview is a sensible stopping place for expansions of Auckland’s motorway network, it is at best a marginal improvement in the city’s road networks. There are already a number of roads that connect the north and northwest to the south.

Second, in public transport, I would argue that we are probably on the tipping point to sustained rapid growth:

  • We’ve got an existing bus network which supports steady if not spectacular growth in demand. Auckland Transport is currently in the process of reorganising it into a New Network that provides more frequent all-day services that serve many more destinations than before. This could easily lead to a boom in bus trips.
  • We have an existing rail network that has experienced a revival in demand since the development of Britomart in 2003. The City Rail Link will transform the usefulness of the rail network by breaking out the bottleneck in the city centre and enabling a doubling in train frequencies.
  • New rapid transit infrastructure can capture significant new demand when it’s made available – as the Northern Busway has done.
perth-patronage

Improving rail networks can experience big jumps in demand.

Third, the cycling network is probably a few steps behind in the process. There’s likely to be a period of steady if not spectacular growth in demand as new projects come online, but under NZTA and AT’s current investment plans there will be gaps in the network for a number of years. At a certain point, though, the gaps between safe cycle infrastructure will be filled in, enabling rapid growth in demand as cycling becomes safe and useful for many more trips.

When cycling seems safe and easy, lots of people cycle.

When cycling seems safe and easy, lots of people cycle (Source)

In short, the “S-shaped pattern” of uptake for new transport networks will shape demand within New Zealand’s cities following new investments in public transport, walking and cycling, just as it has done on previous infrastructure networks. The only question is: Are we willing to invest in our “missing modes” to make them increasingly useful for more and more trips?

Does intensification increase traffic congestion?

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:

Changing density in large NZ cities chart

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.

MoT Congestion Index chart

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?

Arguing for sprawl with “strategic misrepresentations”

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

McDermott 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:

Auckland Wellington Christchurch charts_Page_1

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.

Dumbaugh congestion and productivity chart

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

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…