Sylvia Park growth plans

Sylvia Park is already Auckland’s largest shopping centre, but it’s likely to get even bigger in the next few years. Kiwi Property, who own the centre, have plans to expand the retail offering, as well as adding office buildings. In the long term, even things like apartments or hotels could be added, although those aren’t part of the current plans.

A recent Kiwi Property presentation shows what’s planned for the ground floor of the centre:

Sylvia Park 1

On the ground floor, H&M and Zara are already under construction, but there are plans for a major new office building of 11,200 square metres (about half the size of ASB North Wharf, or a little smaller than the new Fonterra building). The building will be next to the “dining lane” area which will also be given a makeover – perhaps something like the new Brickworks precinct at Lynnmall, also owned by Kiwi Property.

The office building could get underway as early as late 2016, wrapping up in 2018.

From the same presentation, showing the upper floor:

Sylvia Park 2

This is a major retail expansion, with 20,000 square metres – adding another 25% to the existing mall. Next to it, there are plans for a multi-deck carpark, adding another 500 parks to the current 3,900. Multi-level retail has had a pretty mixed history in New Zealand, and there aren’t that many examples where it’s been successful (St Lukes is one). Kiwi Property will be hoping that they can support the new upstairs shops by connecting them to the new carparks, and I’d expect that those two developments would happen at the same time.

Although the total number of carparks is increasing, Kiwi Property is adding many fewer parking spaces than would have been required under the old Auckland isthmus plan. The mall expansion will add one new carpark for every additional 40 square metres of retail space.

By contrast, Section 12 of the old Auckland isthmus district plan, which dealt with parking requirements, required one parking space for every 17 square metres of retail space:

Auckland isthmus district plan MPR for retail

Before the Unitary Plan, which will remove MPRs from major retail centres like Sylvia Park (assuming the hearings panel approves the change), Sylvia Park basically hewed to those ratios. At present, it’s got one parking space per 18.5 square metres of retail space.

The Unitary Plan seems to have changed that – Kiwi Property is planning to expand retail space while providing less than half as much parking as would have been required under the previous district plan. This isn’t a case of maximum parking rules restraining development, either. The proposed Unitary Plan sets a maximum parking rate of one carpark per 20 square metres – a lot more parking than Kiwi Property is planning on building.

The irony is that Kiwi Property was among the major retailers arguing against the removal of MPRs from retail centres in Unitary Plan hearings. In their corporate submission and in their planning evidence, they argued that removal of MPRs would make it difficult for retailers to invest in centres:

Kiwi Property Group planning submission PAUP 1

Consequently, they proposed a minimum requirement of one carpark per 30 square metres of retail space – i.e. a higher ratio than what they’re now planning to build, although the centre as a whole will still fall within these ratios:

Kiwi Property Group planning submission PAUP 2

Now, it looks as though Kiwi Property – and their customers – stand to be among the first big beneficiaries of a policy change that they opposed. But while that’s ironic, this is an excellent development. It’s a perfect illustration of the benefits of a more light-handed approach to parking policies – and of the benefits of providing good transport choices to retail centres.

Sylvia Park is lucky enough to have a train station right next door, and bus links which are likely to get a boost in the next few years. As the centre keeps growing and public transport keeps improving, Sylvia Park will increasingly rely on its transit links to support its growth. Other retail centres are likely to follow the same pattern as Auckland rolls out its new bus network and continues integrating rapid transit into the city fabric.

The strange side effects of parking subsidies

Parking policies are frequently bizarre. Parking is, after all, a private good – it is both rivalrous (two cars can’t park in the same space at the same time) and excludable (if you don’t want someone parking in your space, you can keep them out). In that respect, it is more like a refrigerator than a public park.

But unlike a refrigerator, there are all sorts of public subsidies and regulations affecting parking. Although refrigerators are arguably more of a necessity of life than parking, councils don’t impose minimum refrigerator requirement for homes and offices. Central government doesn’t provide a tax subsidy for employer-provided refrigerators. And councils don’t invest in (or subsidise) public refrigeration facilities.

And if they did, it would almost certainly result in some perverse outcomes.

A recent NZ Herald story provided an example of how parking subsidies can lead to odd outcomes. (It was also a fine example of meaningless “gotcha” journalism, but never mind that!)

They are the crack team of economic and planning experts charged with sorting Auckland’s future growth.

But a member of the Unitary Plan independent hearings panel has fallen foul of the city – after sneakily parking a jetski in a central city council carpark for almost a month.

The mystery jetski appeared three to four weeks ago, taking up a Queen St park reserved for the panel listening to submissions on the future of the city.

Here’s the jetski in question:

IHP jetski

The article implies that the panel member in question is rorting the system or acting unethically by using their employer-provided carpark to store a jetski. But, if you think about it, it’s actually a good illustration of the poor logic behind many existing parking subsidies.

Let’s back up a step: what subsidies are we talking about, exactly?

In the Auckland city centre, carparks have a market value, which is a good thing. The removal of minimum parking requirements in the 1990s led to an increase in the price of parking – and also to increased development as new buildings weren’t encumbered by the need to provide unnecessary but costly carparks. At present, Auckland Transport is leasing downtown carparks for between $110 to $490 a month – although the cheapest ones are fully sold out. Private operators seem to be supplying them at around $250-$300 per month.

So an employer-provided carpark in the city centre is likely to be worth somewhere in the range of $3000-$6000 per annum. Because fringe benefit tax isn’t levied on carparks, this is worth the equivalent of $4500-$9000 in salary for people paying the top marginal tax rate (33%). (As the panel members probably do.)

That’s a large public subsidy for a small bit of concrete!

In theory, the rationale for the tax subsidy on employer-provided carparks is that it makes it less costly for people to commute to work, and hence encourages people to enter the workforce. But the panel member’s jetski illustrates the absurdity of that approach.

For one thing, people have (or should have) a range of choices about how to commute. Some prefer to drive. Others may take the bus, train, or ferry, or walk or cycle to work. Consequently, a significant share of commuting trips don’t end in a carpark. Based on Census data, around half of the people working in the city centre in 2013 didn’t drive to work. A bit over one in four workers throughout Auckland didn’t drive to work.

Census journey to work Auckland mode share chart

Consequently, trying to subsidise commuting by subsidising parking is likely to be a distortionary and inefficient policy. Some people will change transport modes in response to cheaper parking, resulting in additional road congestion in peak periods. Others will be left with a subsidised parking space that isn’t much use to them.

The panel member who used their parking space to store a jetski probably falls into the latter category. They might walk to work, or take the bus or train. This leaves them with a bit of costly concrete that they don’t need to store a car – so why not use it to store another vehicle instead? I can’t blame them for that.

The jetski has apparently been removed from the parking space, but the policy distortions that led to it being there in the first place remain. So what could we do about that?

The key is to realise that our ultimate aim is to enable mobility, not to simply provide carparks, and make policy accordingly.

For some people, mobility means a monthly public transport pass, or a bicycle and access to a shower at work. But current fringe benefit tax policies discourage employers from offering those solutions to their employees – an employer-provided PT pass would be taxed as regular income, while a carpark is exempt from tax. We need to level the playing field.

The best way of doing so is by removing the fringe benefit tax exemption for carparks, but if that’s not political possible then a good alternative would be to exempt PT passes from FBT, as the Green Party has proposed.

Another alternative would be to offer people the option to “cash out” employer-provided carparks. It’s especially bizarre that employers aren’t required to offer this choice, as the current government changed employment law to allow people to exchange one week of annual holiday for the equivalent in cash. Why not adopt the same approach for carparks, which could easily be worth more than holiday pay for many workers?

Lastly, we also need to make some choices beyond how we price and subsidise parking. Getting a great range of transport choices will often require us to use existing road space differently. Sometimes the only way to get a dedicated bus lane or a safe, separated cycle lane is to remove a few on-street carparks. We need to look at those choices in a holistic way – i.e. do they improve overall mobility and access to destinations – rather than simply insisting that all carparks must stay in place.

How do you think we should address parking subsidies?

Houston and the fallacy of “roads first” transport policy

Over the last 50 or 60 years, the United States, Australia, New Zealand, and a number of other countries have pursued a “roads first” approach to transport policy. There have been significant public investments in (generally un-tolled) roads, and relatively few investments in competing transport modes.

It’s hard to justify this approach based on preexisting travel patterns. Take Auckland as an example. According to Paul Mees [Transport for Suburbia, p. 21], in 1954 Auckland’s public transport network “accounted for 58 per cent of trips by motorized modes, private transport only 42 per cent. When walking and cycling, which were not surveyed, are taken into account, it is likely that fewer than a third of daily trips were by car.”

However, from this date onward roads – not public transport, and certainly not walking or cycling – have dominated transport spending. Spending on a new system of motorways and arterial roads was considerably higher than spending on other modes that carried more journeys. In other words, public spending to enable car travel did not respond to existing demand – it was intended to shape future demand. (And in doing so, change the shape of the city.)

Another potential justification for disproportionate spending on roads is that it’s just what people wanted. Cars were invented and then cheaply mass produced, people wanted to use them to travel everywhere, so transport agencies had to build more roads.

There is some truth to this. Cars are very convenient for many journeys. But it can also be convenient and cost-effective not to own a car. PT tends to be cheaper than driving to places where you have to pay for parking, and cycling is often quicker than driving, and more enjoyable if there are enough safe bike lanes.

But this argument also ignores other policy factors that shape transport demands. In particular, planning regulations enacted and progressively tightened throughout the 20th century have tended to:

  • Make it more difficult for people to live near where they work, by zoning different areas exclusively for different uses
  • Discourage people from living at medium or high density by limiting building heights and setting minimum lot sizes for dwellings
  • Subsidise the ownership and use of cars by requiring all new buildings to have a significant amount of on-site parking.

But what, then, should we make of Houston, which lacks a zoning code but nonetheless has ended up with lots of driving, low public transport ridership, and a low-density urban footprint? Is Houston evidence that in the absence of planning regulations that distort people’s location choices, people will choose to live at a distance and drive to get around?

Source: NASA Earth Observatory

Houston from space. This image is 100km across. Source: NASA Earth Observatory

In a word: no.

It turns out that Houston is not actually as unregulated as people make it out to be. While the city lacks a comprehensive zoning code that rigorously separates different uses, several other planning regulations (and similar measures) have distorted its urban form and transport choices. A 2005 article by law professor Michael Lewyn identifies four important ways in which planning has influenced transport outcomes in Houston:

  1. Houston enforces a byzantine and quite restrictive set of minimum parking requirements (MPRs). As I discussed last year, these include a parking requirement for bars that defies all concepts of prudent regulation. These requirements make parking cheap, and walking to the shops hard.
  2. While Houston doesn’t formally limit building height, it does establish a minimum lot size of 5000 sq ft (or around 460m2) throughout most of the city. This discourages PT, walking and cycling by increasing the distance between dwellings and discouraging space-efficient typologies like terraced houses and small apartment buildings.
  3. Houston requires streets to be wide, blocks to be long, and buildings to be set back a considerable distance from arterial roads. All of these policies make it dangerous and unpleasant to walk there.
  4. Lastly, new developments in Houston make extensive use of private covenants that restrict uses and building designs. These agreements often simulate zoning, with the result that Houston has similar levels of racial, income, and housing segregation to (zoned) Dallas. Houston has chosen to imbue private covenants with the force of public authority – the city will pay to enforce them even if the people subject to the covenant would rather not.

As a result of these policies, Houstonians cannot make free choices about where to live, where to work, and how to get around. Their decisions are strongly influenced by a suite of planning regulations that, as in many other cities, conspires against density and against non-car travel. Houston’s heavy use of the car is not a natural outcome, but one that has been engineered by policy.

Seen from this perspective, “roads first” transport policies seem less like an exercise in meeting demands, and more of a component of a large social engineering programme.

The results are not necessarily stellar. While the city is known for low house prices, Todd Litman points out that Houston is relatively unaffordable for its residents, compared with other large US cities, once transport expenditures are factored in:

Litman US city housing and transport costs chart

Furthermore, Houston’s commuters experience more hours of delay in traffic than most other US cities. New York, on the other hand, looks pretty good. Although it is large and congested, many commuters choose to opt out and take the subway instead. In Houston, they lack that choice:

Litman US delay hours per commuter chart

What do you think would happen if we tried to facilitate choice instead?

Parking must pay its way

Parking, parking, parking! In many places in many cities – even eco-friendly German cities – the price of parking is distorted by minimum parking requirements (MPRs). In these places, local governments regulate an over-supply of parking, which in turn holds down prices.

The Auckland city centre is not one of those places, as MPRs were removed from the area inside the motorway cordon in the late 1990s. As a consequence:

  • New developments provide a lot less parking. For example, the new Commercial Bay building would have had to provide over 2000 carparks if it was subject to the same MPRs as the rest of the Auckland isthmus. It’s actually providing 278 carparks – 85% less.
  • The price of parking is higher, as new parking garages must “compete” with other land uses, such as valuable commercial, retail, and residential space. If parking doesn’t pay its way, it doesn’t get built.

Furthermore, the price of parking will tend to rise over time as a result of supply and demand interactions. New demand for parking will tend to be met with increased supply. However, new parking supply will tend to be costlier, as cheap surface carparks are likely to be redeveloped and new city centre parking will increasingly be provided in expensive structures.

In fact, parking fees has been rising. In November 2014, Auckland Transport announced that it would end earlybird discounts – meaning that all commuters would pay an all-day rate of $17 to park. In July 2015, AT hiked the all-day price to $24. Other operators have followed suit. For example, Sky City now charges $22 for earlybird parking – whereas it only charged $14 in 2013.

Of course, not everybody pays to park. According to a 2007 survey of city centre parking spaces summarised in a recent report, there were 22,639 public carparks in the city centre, and 22,121 private non-residential carparks attached to businesses. Here’s the table:

Auckland city centre parking supply 2007

In the Auckland city centre, it is almost always necessary to pay to use public parking – e.g. parking garages or on-street parking. Private carparks attached to businesses may be offered as part of compensation packages, which means that people give up a bit of salary in exchange for a carpark that they don’t have to pay to use on a daily basis. Alternatively, employers may choose to rent them out for a monthly fee.

But here’s the thing. This data suggests that at most 50% of the nonresidential parking in the city centre is being offered free of charge. People using the other 50% must pay to park, either on an hourly or daily basis. The price to park for a day is now in the range of $20, and hourly prices tend to be higher.

In other words, the average price that people pay to park in the city centre could easily be $10/day or more, assuming that 50% of drivers get “free” employer-provided carparks and the remaining 50% pay market rates of around $20/day. Furthermore, the cost for the marginal parking user will tend to be higher, as the removal of MPRs means that they will be more likely to pay full market rates for parking.

This leads me on to the curious case of the Additional Waitemata Harbour Crossing (AWHC). Or rather, the peculiar assumptions about city centre parking prices that are incorporated into the transport modelling for AWHC.

If constructed, AWHC would be New Zealand’s most expensive single transport project – coming in at a cost of $5-6 billion to bore road tunnels under the Waitemata Harbour. A project of this magnitude demands extra-special care to validate all the model inputs and workings and ensure that they are as realistic as possible. Errors on a major project can have costly ramifications.

With that in mind, here are the parking price assumptions from the 2010 business case for the project. (They can be found on page 42 of the project’s transport modelling report.) They assume that the average price to park in the city centre was $2.83 in 2006, rising to $7.72 in 2041:

AWHC parking price assumptions

It is not clear how these assumptions were chosen, but they do not seem plausible. As I discussed above, the average parking cost in the city centre today could easily be higher than the modelling is assuming for 2041. Getting parking prices back in line with the modelling assumptions would require them to fall by perhaps 30% over the next decade.

A reduction in parking prices is highly unlikely without a major policy shift and a boat-load of investment in uneconomic city centre parking garages. In the absence of MPRs, parking must pay its way. It will not be built if it does not provide a competitive return to business or residential floorspace. This means that new parking will tend to be supplied at a considerably higher price than the AWHC modelling envisages.

Lastly, it is worth noting that parking prices can have a significant impact on transport outcomes. Public transport tends to be cheaper than driving if you have to pay for parking – but more expensive otherwise. Consequently, unrealistically low parking price assumptions will bias transport modelling results by inflating demand for driving and depressing demand for public transport and other non-car modes.

What do you think will happen to city centre parking prices?

The high cost of free parking

The announcement of the Commercial Bay development last week got me thinking about minimum parking requirements.

MPRs were removed from the city centre back in the late 1990s. Prior to that point,all new developments were required to provide parking at roughly the same rate as suburban developments. After that point, individual developers, businesses, and residents got to choice how much parking they wanted.

I’ve always thought that this was a strong factor in the downtown revival we’ve seen since then. If they hadn’t been removed, money that has gone into developing housing and space for businesses would have been diverted into unproductive parking spaces instead.

City Centre Population - 1996-2015 2

Precinct’s new 39-storey tower on the waterfront shows what a difference MPRs make to development. Commercial Bay will ultimately have 39,000 m2 of commercial office space, 18,000 m2 of retail space, and 278 carparks. It’s going to be a big, bold addition to the waterfront. But it simply wouldn’t be possible if MPRs were still in place.

Tower 1

To get a sense of the difference that MPRs would make, I went back to the Auckland isthmus district plan, which will soon be replaced by the Unitary Plan. For developments outside the city centre, it required:

  • one carpark for every 40m2 of office space, and
  • one carpark for every 17m2 of retail space.

In other words, if those MPRs still applied to the city centre, Commercial Bay would have required over 2000 carparks. That’s seven times as much parking as the developers actually want to build. Effectively, it would mean constructing the equivalent of AT’s Downtown Car Park at the bottom of the tower. Say goodbye to ground-floor retail. Say goodbye to laneways through the building. Say hello to bad air quality and inhospitable accessways cutting up the footpath.

Furthermore, MPRs would have dire financial implications for the project. According to Precinct, Commercial Bay will cost $681 million to build. If MPRs required the development to include another 1750 carparks, at a cost of $30-50,000 apiece, it would add $50-90 million to the cost of the project. That suggests that MPRs would impose a “regulatory tax” of  7-13% on downtown development.

But would all those extra carparks have any value? In a word, no. The fact that Precinct chose not to build them suggests that they don’t see the value in providing parking spaces rather than office or retail space. And, as a corollary, it’s likely that their tenants and customers don’t see the value in having seven times as much parking, either.

It’s not as though there are any pressing social requirements for another 1750 carparks, either. Three six-car electric trains can deliver the same number of people to the city centre. At present, Britomart can do that every ten minutes at peak times. After the City Rail Link is constructed, it will be possible to double rail frequencies through the city centre. And our public transport system can do all of this without adding to road congestion – which you can’t say about people driving into the city centre.

AT Rail Capacity Image

The high costs of minimum parking requirements aren’t limited to the city centre. Down in Christchurch, for example, a neighbourhood bar and restaurant is having to shut up shop due to MPRs:

Two Christchurch business owners are “disgusted” by the city council’s ruling they need to create 62 extra car parks to continue operating as is, saying they will likely close their bar.

Dwayne and Tiffany Vaughan, who run Kaizuka Eatery and Garden Bar in Cashmere, have been engaged in a year-long stoush with the Christchurch City Council over its licensing arrangements.

The council said the owners changed the scale of the business operating under the on-licence. The cafe was initially a small part of a garden centre but had grown to take over the premises.

The owners needed an on-licence variation that would in turn trigger resource management and building consent requirements.

According to the City Plan, 10 carpark spaces were required per 100 square metres of public floor area, but reductions could apply. The 800sqm bar had 18 car parks, meaning it would need another 62 to meet the requirements.

Setting aside the complete insanity of even having MPRs for bars – why on earth would we want to encourage people to drive to the pub? – this requirement imposes large costs for parking spaces that don’t seem to be necessary for the business. (After all, it’s been operating since March 2014 with the current number of parking spaces.)

It would probably cost over $1 million for the bar’s owners to comply with MPRs, assuming that they would have to spend around $20,000 to buy land and build carparks. The benefits of this policy are vaguely defined and potentially negative, if abundant parking encourages more people to drive and drink.

All of which begs the question: Why do we still have this costly and useless policy?

Minimum parking requirements in Parliament

Minimum parking requirements have been getting some long-overdue attention at central government level after the release of the Productivity Commission’s report recommending their removal from district plans.

Binthemins-FB-01 copy

Finance Minister Bill English has also expressed his support for binning minimums. So last week Green Party transport spokesperson Julie Anne Genter – a longtime advocate of removing MPRs – asked Housing Minister Nick Smith whether the government had any plans to legislate to remove them from district plans:

Smith’s responses were a bit evasive but there were still a few interesting points raised in the back-and-forth:

  • Smith said that it would be complex to legislate to remove MPRs as they are in district plans rather than the RMA. However, back in 2012 the government changed the RMA to specifically rule out blanket tree protection rules in district plans. So I can’t see why it wouldn’t be possible to do the same with MPRs.
  • He also said that the government was developing a National Policy Statement on Urban Development, presumably to encourage better, less costly rules. That’s the first we’ve heard of that – I wonder who they’re consulting?
  • Smith also criticised heritage protection rules as a barrier to intensification, which he described as “part of the answer”.

Overall a pretty interesting exchange, and it’s good to see the issue getting more attention.