Should Auckland still want to be “the world’s most liveable city”?

Indications are that new mayor Phil Goff wants a change to the current vision outlined in the Auckland Plan of becoming the “world’s most liveable city”.

Goff has also indicated that Brown’s slogan “the world’s most liveable city” will be phased out.

“People laugh when they are stuck in hours of traffic congestion about being the most liveable city. They laugh when they see that might be our slogan; but we are the fourth most unaffordable city to live in,” Goff said.

Goff, whose slogan is “a city where talent and enterprise can thrive, said like Brown and mayors who might follow him, he wants to stamp his own mark on the city.

This “slogan” was very strongly linked to previous mayor, Len Brown, so in some ways it’s not surprising that Goff wants to change it. But it’s a hard vision to move away from – do we no longer want Auckland to be the best place in the world to live? Or is it that we essentially want to continue down this path, just under a different name? To explore this question I’m going to take a look at the up-side and down-side of liveability – hopefully leading to a few suggestions for a vision for Auckland going forwards.

At its core, the concept of “liveability” is fairly self-explaining:

liveability-definition

By wanting to be the “world’s most liveable city”, we are wanting to become the best place in the world to live, or the place with the best quality of life. Where it becomes tricky though, is that this concept of “liveability” has been captured by a variety of different organisations to try and compare how liveable different cities around the world are – usually with a fairly narrow target audience in mind. Wikipedia explains this pretty well:

The world‘s most liveable cities is an informal name given to any list of cities as they rank on an annual survey of living conditions. Regions with cities commonly ranked in the top 50 include Australasia, North America, North Asia, Northern Europe, and Western Europe.[1] Three examples of such surveys are Monocle‘s “Most Liveable Cities Index”, the Economist Intelligence Unit‘s “Global Liveability Ranking”, and “Mercer Quality of Living Survey”. Numbeo has the largest statistics and survey data based on cities and countries.[2] Liveability rankings are designed for use by employers assigning hardship allowances as part of job relocation, however the usefulness of using such a ranking to determine salary packaging remains unclear.

The final sentence from the paragraph above highlights the key issue – that these rankings are designed for internationally mobile high-wage employees. Not to give an indication of the quality of life for people doing the “daily grind”. Especially not for those struggling on lower incomes. For example, the methodology of the Mercer survey (which is the one most frequently referred to by politicians, perhaps because it’s the one that ranks Auckland highest?) is briefly outlined below:

Living conditions are analyzed according to 39 factors, grouped in 10 categories:

  1. Political and social environment (political stability, crime, law enforcement, etc.).
  2. Economic environment (currency exchange regulations, banking services).
  3. Socio-cultural environment (media availability and censorship, limitations on personal freedom).
  4. Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc.).
  5. Schools and education (standards and availability of international schools).
  6. Public services and transportation (electricity, water, public transportation, traffic congestion, etc.).
  7. Recreation (restaurants, theatres, cinemas, sports and leisure, etc.).
  8. Consumer goods (availability of food/daily consumption items, cars, etc.).
  9. Housing (rental housing, household appliances, furniture, maintenance services).
  10. Natural environment (climate, record of natural disasters).

The scores attributed to each factor, which are weighted to reflect their importance to expatriates, permit objective city-to-city comparisons. The result is a quality of living index that compares relative differences between any two locations evaluated. For the indices to be used effectively, Mercer has created a grid that enables users to link the resulting index to a quality of living or hardship allowance amount by recommending a percentage value in relation to the index.

Auckland does pretty well, almost by default, on a lot of the factors that actually have relatively little to do with the Council – like climate, political stability, crime, education, personal freedom, healthcare facilities and availability of goods. Where we struggle, transport and housing being the obvious “big two”, seems to get a little bit swamped by these other factors in the overall scoring. Understandably, it’s difficult to fathom how we can be one of the most liveable cities in the world when people are living in cars.

Because the word “liveability” is potentially tarnished by both its association with the Len Brown and misleading rankings, but the concept of Auckland being a great place to live, work, play or visit seems pretty hard to argue against, I wonder whether Phil Goff’s stated vision (which is by law required to be articulated in the Auckland Plan) will pick up on these more generic words and perhaps highlight the need for Auckland to be a great place for everyone (not just those well off). At its core though the vision will probably be similar, just presented differently.

Alternative explanations for Auckland house prices

Last week I took a look at the economics underlying Demographia’s “International Housing Affordability Survey” and found them severely lacking. As it turns out, Demographia’s data isn’t much good as a measure of the costs of poor planning rules – but it does seem to provide some information about people’s “revealed preference” for urban amenity.

To recap: urban economics suggests that differences in the level of the median house price to median household income ratio between cities can be interpreted as differences in livability. All else equal, people should be willing to pay more to live in cities that offer better quality of life.

But how should we interpret changes to the median multiple from year to year? If a city’s median multiple rises from 5 to 5.5, does that mean that the city suddenly got 10% more livable? Or did something else happen?

Demographia is very certain that higher median multiples are the product of one thing, and one thing only: limits on sprawl into greenfield areas. Here’s Don Brash, former Governor of the Reserve Bank of New Zealand and former head of several right-wing political parties, laying out that view in Demographia’s 2008 report:

Once again, the Demographia survey leads inevitably to one clear conclusion: the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.

With that in mind, Demographia’s data seems to indicate that housing in Los Angeles and Las Vegas (as well as many other US cities) suddenly became a lot more affordable in the late 2000s. It’s obvious that they must have removed their Metropolitan Urban Limits – how else to explain such a big drop? Oh, wait…

Demographia Los Angeles Las Vegas median multiple

(It’s slightly disturbing that our Reserve Bank used to be run by a man who doesn’t believe that interest rates and credit conditions can affect house prices. But I digress.)

Here’s a graph of changes in Demographia’s median multiple estimate for Auckland since 2004. We haven’t seen the same drastic swings as in the US, where the housing bubble and bust was pronounced, but house prices have risen relative to incomes. (Although, as Stu found in his analysis of different measures of housing costs, this hasn’t flowed through to rents or mortgage payments, due in part to changes in interest rates.)

Demographia Auckland median multiple

This change has been especially pronounced in the last few years. Since 2012, Auckland’s median multiple has risen roughly 22%. Does this mean that we’ve become 22% more “livable” during that time?

With all due respect to the good work done by Auckland Council and Auckland Transport since their inception, probably not. So we need to look for alternative explanations, of which there are several. I’ll focus on three in particular.

The first potential explanation is that there has been a market failure. Residential construction slumped massively during the Global Financial Crisis, with the most significant reductions occurring in the supply of apartments and attached dwellings. Here’s a graph that John Polkinghorne put together illustrating that trend:

NZ building consents

Incomes and employment have mostly come back from the recession, but construction has been a bit slow to respond. I suspect this reflects technical constraints within the development sector, as it takes a while to organise finance, find sites, and hire the cranes, bulldozers, and blokes/blokesses in hardhats. Until they get into gear, there may be a bit of an undersupply – but one that will tend to sort itself out.

The second potential explanation is that the introduction of Auckland’s Unitary Plan has caused people to expect housing supply to be more constrained in the future. While the Unitary Plan envisages the gradual expansion of the city’s Metropolitan Urban Limit to meet new demand for greenfield suburbs, it maintains extensive controls on the supply of new dwellings in accessible, high amenity areas. Moreover, the plan actually got significantly more restrictive following the consultation process.

Transportblog has highlighted this issue a number of times before. To recap, here’s a map (from Koordinates) that shows where the Unitary Plan got more restrictive as a result of consultation. The areas in red have been down-zoned to restrict development, while areas in green have been up-zoned. The large orange areas show future greenfield land. As you can see, there are not a lot of opportunities to develop new dwellings in the isthmus and lower North Shore, while West Auckland has been happy to facilitate growth:


Unitary Plan changes from draft to proposed version on Koordinates

Timing is important here. Demographia’s figures suggest that there was a jump in house prices relative to incomes between the end of 2012 and the end of 2013. This coincides with the notification of the Unitary Plan in September 2013, which, as described above, will ease greenfield land supply while limiting development opportunities in the inner suburbs.

However, there is also a third potential explanation: that our rising house prices reflect increasing awareness of Auckland’s great quality of life. For most of the last decade, our city has been near the top in Mercer’s Quality of Living Survey. It’s been ranked third for five years running.

So maybe the story is that potential migrants and investors have observed that, by international standards, Auckland offers high quality of life at an affordable price. And they are in the process of arbitraging that away.

I’ve illustrated that process in the following graph, which shows the relationship between Demographia’s median multiple (X axis) and Mercer’s Quality of Living Survey (Y axis). The trend-line is estimated based on 2012 data. I’ve also plotted Auckland’s median multiple and Mercer index in 2015.

The red dot that represents Auckland is moving towards the trend-line, suggest that its prices are catching up with its livability.

Demographia Auckland median multiple change 2012-2015

Previous studies have found that growth in New Zealand house prices is strongly correlated with net migration – i.e. migrants tend to bid up house prices. Net migration to New Zealand did, in fact, start picking up in 2013 – around the time that Demographia’s estimate of the price to income ratio began to rise. Perhaps this is evidence for the “amenity arbitrage” hypothesis?

NZ net migration Feb 2005-2015

So, which explanation is true? Honestly, it’s impossible to say without a lot more detailed analysis. My point in writing this is not to argue that there is a single explanation for changes in Auckland’s house prices, but to point out that there are many possible explanations. Housing markets are affected by a number of factors, and it’s inappropriate to focus on one without controlling for the rest.

This is, essentially, why Demographia’s analysis fails. Rather than articulating a model that encompasses all of the potential explanatory factors, they have settled on a single number and insisted that it must be interpreted in a single way. It’s hard to see the value in that approach. And it’s definitely not good economics.

Demographia fails Urban Economics 101

Every year since 2005, pro-sprawl think-tank Demographia has published a new edition of its “International Housing Affordability Survey“. They report a “median multiple” measure of housing affordability that compares median house prices to median household incomes within a number of cities, mostly in the English-speaking world.

Demographia’s aim, in publishing this data, is to argue that “if housing exceeds 3.0 times annual household incomes, that there is institutional failure at the local level. The political and regulatory impediments with respect to land supply and infrastructure provision must be dealt with.” By this, they mean building car-dependent suburbs on the urban fringe – and nothing else.

Another Demographia-approved urban paradise.

A number of people, including Todd Litman and Stu Donovan (on Transportblog), have taken aim at Demographia’s empirical analysis and choice of metrics. Unfortunately, Demographia is unwilling to open up its analysis and methodology for an independent peer reviewed, so it’s difficult to referee those claims.

Here, I want to take a look at the issue from a different perspective. Basically, the urban economics literature suggests that Demographia’s chosen measures do not mean what they think they mean. And they almost certainly do not prove the case they’re trying to make.Before I explain why, let’s start out with a quick look at the data. According to Demographia’s 2015 report:

  • The most “affordable” cities included the likes of Detroit (median multiple of 2.1), Cleveland (2.6), and Houston (3.5)
  • The “unaffordable” cities included most large Australian cities, including Sydney (9.8) and Melbourne (8.7), many “coastal” North American cities, such as Los Angeles (8.0), San Francisco (9.2), Vancouver (10.6), New York (6.1), and Boston (5.4)
  • All New Zealand cities were on the “unaffordable” end of the spectrum, ranging from Palmerston North (4.1) and Dunedin (4.6) to Christchurch (6.1), Tauranga (6.8) and Auckland (8.2).

In other words, there’s a quite large range of median multiples. This raises a quite obvious question: Why are people willing to pay so much more to live in some places? Why live in “unaffordable” San Francisco when “affordable” Houston is just down the road? Why live in Auckland when housing is relatively cheaper in Dunedin?

IMG_3218

Why would anyone want to live in a large, multicultural city located between two beautiful harbours in a subtropical climate? Sheer madness.

Urban economists have studied this phenomenon in detail, and observed that there is an omitted variable in Demographia’s equation: the differing amenities offered by different cities. If a city offers good natural amenities or consumer amenities, people will be willing to pay more to live there. Conversely, if a place isn’t particularly nice, people won’t be willing to pay much for houses there. (Common sense, really.)

In his fantastic survey of the urban economics literature, Harvard economist Ed Glaeser goes so far as to say that ratio measures, such the median multiple popularised by Demographia, are useless for analysis:

It is quite common in discussions of housing affordability to focus on the share of income being spent on housing, as if this is a natural measure of the degree to which housing affordability is a problem within an area. The spatial equilibrium assumption suggests that this measure is not particularly meaningful or helpful.

In short, urban economics suggests that we should interpret a high median multiple as an indication that a city offers great amenity for its residents, rather than an indication of bad policies. I tested this hypothesis by looking at the correlation between the (2012) Demographia median multiple figures and two international quality of living rankings. I found that there was a positive correlation between median multiples and livability.

Here’s the correlation between the median multiple (X axis) and the Economist Intelligence Unit’s 2012 Best Cities Ranking (Y axis). I was only able to match up 12 cities, but there’s a fairly strong positive trend:

Demographia median multiple vs EIU livability index

Here’s the correlation between the median multiple (X axis) and Mercer’s 2012 Quality of Living Survey (Y axis; lower numbers indicate higher rankings). Once again, a positive correlation, with 31 data points:

Demographia median multiple vs Mercer livability ranking

In other words, high house prices relative to incomes are a good indicator that a city is a nice place to live. Rather than proving that Metropolitan Urban Limits inevitably push up house prices, Demographia’s median multiple seems to simply measure cities’ relative levels of amenity. When they argue that all cities should have a median multiple of under three, they are arguing for an absurdity: that all cities should offer the exact same level of amenity to their residents.

If we wanted to accomplish that, we’d have to destroy most of the things that make great cities great. This might make housing cheaper, but it wouldn’t make us any better off in a broader sense. That’s because it would require us to:

  • Bulldoze the Waitakere Ranges and use the spoil to fill in the Hauraki Gulf – to ensure that Auckland didn’t have any natural advantages over a flat, inland city like Hamilton
  • Dynamite the historic boulevards of Paris and replace them with American-style subdivisions and malls – to ensure that Paris didn’t offer anything that Houston doesn’t
  • Ban any venture capital or startup activity in San Francisco, to ensure that it doesn’t offer any agglomeration economies that don’t exist in Detroit
  • Build large screens over sunny cities like Tauranga and Brisbane – to ensure that they don’t have nicer weather than Moscow or Toronto.

But Demographia’s not aware of this. Their analysis is overly simplistic. The only thing it reveals is the authors’ grievous failure to understand the basics of urban economics. It’s no wonder that Demographia has never tried to have its studies peer reviewed or published in academic journals. Their claims aren’t supported by any valid conceptual model. But I guess that’s what happens when you get an urban planner and a former property developer to do an economist’s job…

The World’s Most Liveable Cities

Auckland has the goal of becoming the World’s Most Liveable City – a goal that is highly achievable given many of our current advantages (natural setting, low crime rates, mild climate etc.) But what makes a truly liveable city? This is something various agencies like Mercer, the Economist and Monocle try to figure out in their annual surveys. Monocle magazine has explained, in the video below, key features that it considers when determining its liveability rankings (their 2014 survey placed Auckland 12th):

Some key matters that stand out for me are:

  • The importance of reliable public transport (the very first thing mentioned)
  • The mix of both “soft” and “hard” measurements
  • The importance of a vibrant heart to a city, and for that heart to be a place where people live
  • The ease of undertaking entrepreneurial activity
  • Access to quality public spaces

It’s also very interesting to see Tokyo – the world’s largest city – excel and reach number two on the list. It seems that cities which embrace their urban-ness, rather than hide from it, are increasingly being seen as particularly liveable locations.

Maybe once CRL is built, the new bus network implemented, the city centre revitalisation advanced further, mass cycle lanes built across Auckland and the numerous other things in the plans made a reality, Auckland will be number one.

Auckland still ranks highly for liveability

Mercer has released their 2014 quality of life rankings and Auckland is third in them once again.

Top 5 Cities

1. Vienna, Austria

2. Zurich, Switzerland

3. Auckland, New Zealand

4. Munich, Germany

5. Vancouver, Canada

Vienna is the city with the world’s best quality of living, according to the Mercer 2014 Quality of Living rankings, in which European cities dominate. Zurich and Auckland follow in second and third place, respectively. Munich is in fourth place, followed by Vancouver, which is also the highest-ranking city in North America. Ranking 25 globally, Singapore is the highest-ranking Asian city, whereas Dubai (73) ranks first across Middle East and Africa. The city of Pointe-à-Pitre (69), Guadeloupe, takes the top spot for Central and South America.

Mercer conducts its Quality of Living survey annually to help multinational companies and other employers compensate employees fairly when placing them on international assignments. Two common incentives include a quality-of-living allowance and a mobility premium. A quality-of-living or “hardship” allowance compensates for a decrease in the quality of living between home and host locations, whereas a mobility premium simply compensates for the inconvenience of being uprooted and having to work in another country. Mercer’s Quality of Living reports provide valuable information and hardship premium recommendations for over 460 cities throughout the world, the ranking covers 223 of these cities.

“Political instability, high crime levels, and elevated air pollution are a few factors that can be detrimental to the daily lives of expatriate employees their families and local residents. To ensure that compensation packages reflect the local environment appropriately, employers need a clear picture of the quality of living in the cities where they operate,” said Slagin Parakatil, Senior Researcher at Mercer.

Mr Parakatil added: “In a world economy that is becoming more globalised, cities beyond the traditional financial and business centres are working to improve their quality of living so they can attract more foreign companies. This year’s survey recognises so-called ‘second tier’ or ‘emerging’ cites and points to a few examples from around the world These cities have been investing massively in their infrastructure and attracting foreign direct investments by providing incentives such as tax, housing, or entry facilities. Emerging cities will become major players that traditional financial centres and capital cities will have to compete with.”

Europe

Vienna is the highest-ranking city globally. In Europe, it is followed by Zurich (2), Munich (4), Düsseldorf (6), and Frankfurt (7). “European cities enjoy a high overall quality of living compared to those in other regions. Healthcare, infrastructure, and recreational facilities are generally of a very high standard. Political stability and relatively low crime levels enable expatriates to feel safe and secure in most locations. The region has seen few changes in living standards over the last year,” said Mr Parakatil.

Ranking 191 overall, Tbilisi, Georgia, is the lowest-ranking city in Europe. It continues to improve in its quality of living, mainly due to a growing availability of consumer goods, improving internal stability, and developing infrastructure. Other cities on the lower end of Europe’s ranking include: Minsk (189), Belarus; Yerevan (180), Armenia; Tirana (179), Albania; and St Petersburg (168), Russia. Ranking 107, Wroclaw, Poland, is an emerging European city. Since Poland’s accession to the European Union, Wroclaw has witnessed tangible economic growth, partly due to its talent pool, improved infrastructure, and foreign and internal direct investments. The EU named Wroclaw as a European Capital of Culture for 2016.

Americas

Canadian cities dominate North America’s top-five list. Ranking fifth globally, Vancouver tops the regional list, followed by Ottawa (14), Toronto (15), Montreal (23), and San Francisco (27). The region’s lowest-ranking city is Mexico City (122), preceded by four US cities: Detroit (70), St. Louis (67), Houston (66), and Miami (65). Mr Parakatil commented: “On the whole, North American cities offer a high quality of living and are attractive working destinations for companies and their expatriates. A wide range of consumer goods are available, and infrastructures, including recreational provisions, are excellent.”

In Central and South America, the quality of living varies substantially. Pointe-à-Pitre (69), Guadeloupe, is the region’s highest-ranked city, followed by San Juan (72), Montevideo (77), Buenos Aires (81), and Santiago (93). Manaus (125), Brazil, has been identified as an example of an emerging city in this region due to its major industrial centre which has seen the creation of the “Free Economic Zone of Manaus,” an area with administrative autonomy giving Manaus a competitive advantage over other cities in the region. This zone has attracted talent from other cities and regions, with several multinational companies already settled in the area and more expected to arrive in the near future.

“Several cities in Central and South America are still attractive to expatriates due to their relatively stable political environments, improving infrastructure, and pleasant climate,” said Mr Parakatil. “But many locations remain challenging due to natural disasters, such as hurricanes often hitting the region, as well as local economic inequality and high crime rates. Companies placing their workers on expatriate assignments in these locations must ensure that hardship allowances reflect the lower levels of quality of living.”

Asia Pacific

Singapore (25) has the highest quality of living in Asia, followed by four Japanese cities: Tokyo (43), Kobe (47), Yokohama (49), and Osaka (57). Dushanbe (209), Tajikistan, is the lowest-ranking city in the region. Mr Parakatil commented: “Asia has a bigger range of quality-of-living standard amongst its cities than any other region. For many cities, such as those in South Korea, the quality of living is continually improving. But for others, such as some in China, issues like pervasive poor air pollution are eroding their quality of living.”

With their considerable growth in the last decade, many second-tier Asian cities are starting to emerge as important places of business for multinational companies. Examples include Cheonan (98), South Korea, which is strategically located in an area where several technology companies have operations. Over the past decades, Pune (139), India has developed into an education hub and home to IT, other high-tech industries, and automobile manufacturing. The city of Xian (141), China has also witnessed some major developments, such as the establishment of an “Economic and Technological Development Zone” to attract foreign investments. The city is also host to various financial services, consulting, and computer services.

Elsewhere, New Zealand and Australian cities rank high on the list for quality of living, with Auckland and Sydney ranking 3 and 10, respectively.

Middle East and Africa

With a global rank of 73, Dubai is the highest-ranked city in the Middle East and Africa region. It is followed by Abu Dhabi (78), UAE; Port Louis (82), Mauritius; and Durban (85) and Cape Town (90), South Africa. Durban has been identified as an example of an emerging city in this region, due to the growth of its manufacturing industries and the increasing importance of the shipping port. Generally, though, this region dominates the lower end of the quality of living ranking, with five out of the bottom six cities; Baghdad (223) has the lowest overall ranking.

“The Middle East and especially Africa remain one of the most challenging regions for multinational organisations and expatriates. Regional instability and disruptive political events, including civil unrest, lack of infrastructure and natural disasters such as flooding, keep the quality of living from improving in many of its cities. However, some cities that might not have been very attractive to foreign companies are making efforts to attract them,” said Mr Parakatil.

That’s a good result for Auckland although no change from previous years. The next highest Australasian city was Sydney at 10 followed by Wellington at 12. It’s also important to remember what these rankings are actually designed for which is to help large companies work out how much of a premium to pay employees they send to work in foreign countries i.e. you would have to pay someone a lot more to go and work in one of the bottom 5 countries than you would to work in one of the top 5. The bottom 5 is:

219. Sana’a, Yemen Arab Republic

220. N’Djamena, Chad

221. Port-Au-Prince, Haiti

222. Bangui, Central African Republic

223. Baghdad, Iraq

The rankings are done by scoring cities across 39 different criteria across 10 different categories. They are:

  • Political and social environment (political stability, crime, law enforcement, etc.)
  • Economic environment (currency exchange regulations, banking services)
  • Socio-cultural environment (media availability and censorship, limitations on personal freedom)
  • Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc)
  • Schools and education (standards and availability of international schools)
  • Public services and transportation (electricity, water, public transportation, traffic congestion, etc)
  • Recreation (restaurants, theatres, cinemas, sports and leisure, etc)
  • Consumer goods (availability of food/daily consumption items, cars, etc)
  • Housing (rental housing, household appliances, furniture, maintenance services)
  • Natural environment (climate, record of natural disasters)

You have to buy the full report at US$499 to see all of the rankings but in the past it has been noted that while Auckland ranks 3rd overall, the one area we fell way behind on wass infrastructure for which we ranked 43rd. I don’t know if that ranking has changed at all but I suspect not that much (it will probably be a few years before the current tranche of transport projects are completed before that happens).

Also I note that Mercer have provided the top and bottom 5 cities for each region. For North America one in the bottom 5 is one that a few commenters have been bringing up recently saying that we should emulate. That city is of course Houston which ranks at 66th overall.

The Sun rising over the CBD

Photo is credited to Craig

Why being a liveable city is important economically

Len Brown made a big deal in his first term about making Auckland the world’s most liveable city and projects like the CRL are key to that vision. But when it comes to business and Auckland’s economy is that vision worth it or should we instead be focused on keeping rates as low as absolutely possible – as the likes of Cameron Brewer would have us do.

Well a study just released out of the US suggests the focus on liveability is exactly what we should be doing if we want to build the economy and attract entrepreneurs. Richard Florida writing at the Atlantic Cities:

Creating high-growth, high-impact entrepreneurial enterprises has become a common goal of cities. Metros and states have cut taxes, implemented entrepreneur-friendly business policies, launched their own venture capital efforts, and underwritten incubators and accelerators – all in the hope of creating the next Apples, Facebooks, Googles, and Twitters.

But what really attracts innovative entrepreneurs who create these economy-boosting companies?

The answers: talented workers, and the quality of life that the educated and ambitious have come to expect – not the low-tax, favorable-regulation approach that many state and local governments tout.

These are the findings in a new report from Endeavor Insight, the research department of the non-profit Endeavor, which focuses on fostering and mentoring “high-impact” entrepreneurs. Based on surveys and interviews with 150 founders of some of the country’s fastest-growing companies, the report answers the basic question, “what do the best entrepreneurs want in a city?” It offers basic evidence that cities should focus on factors and conditions that attract the talented, educated workers that fast-growing entrepreneurial enterprises need.

Looking at this sample of America’s most successful new businesses, Endeavor identified two fundamental patterns.

For one, size matters. These top business-creators gravitated towards cities with at least a million residents in the metro area. This offered the scale and diverse array of offerings needed to attract talent.

A city also needs to be able to appeal to the young and the restless. The entrepreneurs surveyed were a highly mobile bunch when they first started out. They moved often and easily in the early phases of their careers, following personal ties or certain lifestyle amenities while also seeking the right environment to launch their enterprises. But eighty percent of respondents had lived in their current city for at least two years before launching their companies, meaning that cities had to catch them early. And once they started their first company, these business leaders rarely moved. So attracting this mobile group at an early age is key.

That talent is the most important aspect is common sense but the key is that it’s much easier to attract talented workers to an liveable city than one that’s not – although in Auckland’s case we probably have to be even more liveable to make up for our geographic isolation. Of course the idea that talent is key is something many larger businesses have understood for some time and in a local context it’s one of the reasons behind a number of big corporate office developments in recent years. EY is one of the companies that falls into that bucket and this video from just over a year ago talks to some of these factors for why they chose to be where they are.

Other important factors included access to transport networks and proximity to customers/suppliers. And at the bottom of the list of most important

Perhaps even more interesting from the perspective of urban policy are the location factors that did not make the cut – those that high-growth entrepreneurs found to be of little consequence in their location decisions. At the very bottom of the list were taxes and business-friendly policies, which are, unfortunately, exactly the sorts of things so many states and cities continue to promote as silver bullets. Just 5 percent of the respondents mentioned low taxes as being important, and a measly 2 percent named other business-friendly policies as a factor in their location decisions.

To drive this point home, Endeavor tracked more than 100 of the most common descriptive words that entrepreneurs used to answer the question, “Why did you choose to found your company in the city that you did?” Tax doesn’t make the top 50, falling below “rent,” “park,” “restaurants,” and “schools.” In fact, it barely manages to edge out the word “girlfriend.” Of the top ten most popular words, “lived,” “live,” and “living” all make the cut. Talent takes the first slot.

Here’s the list of the top 100 words.

Entrepeneurs list

Of course having a vision for the most liveable city is one thing, it’s a completely different thing to actually deliver on that and that’s something that’s still seems a long way off in Auckland.

Auckland ranked 10th most liveable city once again

The Economist’s Intelligence Unit have once again released their global liveability rankings which ranks cities all around the world.

The concept of liveability is simple: it assesses which locations around the world provide the best or the worst living conditions. Assessing liveability has a broad range of uses, from benchmarking perceptions of development levels to assigning a hardship allowance as part of expatriate relocation packages. The Economist Intelligence Unit’s liveability rating quantifies the challenges that might be presented to an individual’s lifestyle in any given location, and allows for direct comparison between locations.

Every city is assigned a rating of relative comfort for over 30 qualitative and quantitative factors across five broad categories: stability; healthcare; culture and environment; education; and infrastructure. Each factor in a city is rated as acceptable, tolerable, uncomfortable, undesirable or intolerable. For qualitative indicators, a rating is awarded based on the judgment of in-house analysts and in-city contributors. For quantitative indicators, a rating is calculated based on the relative performance of a number of external data points.

The scores are then compiled and weighted to provide a score of 1–100, where 1 is considered intolerable and 100 is considered ideal. The liveability rating is provided both as an overall score and as a score for each category. To provide points of reference, the score is also given for each category relative to New York and an overall position in the ranking of 140 cities is provided.

The top 10 cities have seen no change in their scores and therefore positions over at least the last two years. Auckland still sits in 10th place with the key issue for Auckland remains it’s infrastructure, even just improving that result from 92.9 to 95 would see us move up to 7th in these rankings. The real changes have happened lower down the order, especially at the bottom where Damascus has taken the worst spot due to the issues in Syria at the moment.

Economist Liveability Rank 2013

In terms of how the scores are assessed.

The liveability score is reached through category weights, which are equally divided into relevant subcategories to ensure that the score covers as many indicators as possible. Indicators are scored as acceptable, tolerable, uncomfortable, undesirable or intolerable. These are then weighted to produce a rating, where 100 means that liveability in a city is ideal and 1 means that it is intolerable.

For qualitative variables, an “EIU rating” is awarded based on the judgment of in–house expert country analysts and a field correspondent based in each city. For quantitative variables, a rating is calculated based on the relative performance of a location using external data sources.

Economist Liveability Rank measures 1

Economist Liveability Rank measures 2

It would be interesting to get a full list of all of the rankings but unfortunately you have to pay a fairly hefty sum to get that.

I imagine that once Waterview (and therefore the motorway network) is completed, if we build the Congested Free Network and with the fibre-optic rollout completed, Auckland’s infrastructure ranking will rise substantially and with the other rankings already being fairly high, we should move up the list quite a bit.