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By Patrick Reynolds, on May 14th, 2013  Prepare To Stop! Over on the excellent The Conversation website is a post by Melbourne researcher Leigh Glover entitled:
New freeways cure congestion: time to put that myth to bed.
In which he runs through the usual myths about road building and congestion in the Australian context, where of course everything is bigger, more expensive, and more dramatic.
Myth #1: New freeways reduce congestion
“Not only is this not true, but new freeways increase overall road use and contribute to worsening congestion. If you want to reduce road congestion — an understandably popular goal in our car-dependent capital cities — the only viable option is to reduce the demand for road space.
Not only does international research support this fact, local anecdotal experiences reflect it. We are living through an era of urban freeway building, yet congestion is worsening and travel times are lengthening.
Why does this happen? New roads don’t just divert existing traffic but also attract new users and keep on doing so until they reach capacity. In transport planning jargon, this is the effect of “induced traffic”. The more roads you build, the more traffic you have.
There are also associated effects that flow on from building freeways, such as land use decisions that then reinforce car use and car-dependency.”
This is the point that I like to sum up with this observation: What you feed; grows.
We have observed this with the resurgence of bus and train use after investment in Auckland this century, and of course we have seen it for the last 60 years with driving in Auckland. We have fed it and it has grown. And as Matt showed here, we also dismantled and downgraded transit networks at the same time which of course further reinforced this growth.
This problem is especially exacerbated if we now only invest in the one already dominant mode so that there is little effective choice. Congestion is bad in Auckland, despite the city’s small size internationally, because there is largely little option but to partake in it.
Still the mad logic of investing more in something we have too much of to try to solve the problem of this excess is not confined to this country. Both Sydney and Melbourne have huge urban motorway projects on the books that are likely to proceed simply because they will attract Federal money despite being highly questionable at best. This is the same situation that local bodies in NZ are in; enormous practical pressure to support national government agendas even when they are likely to work in direct opposition to agreed local aims because they come with their own funding. The additional Harbour Crossing and the amount of parking at the new Convention Centre are examples of this.
But also there is the uneven economic situation of these two types of projects.
Here is Alan Davies the Melburbanist discussing the recent crazy urban motorway decision in Victoria, where he includes this image of causality:
This pic shows one of the on-going prices of auto-dependancy that never gets included in any benefit cost analysis of urban motorway projects: so much precious building going to house those individual vehicles.
He then goes on to ask why do road projects of poor value get funded over long discussed rail ones, and it is this point that stands out for me:
The advantages of rail over roads are mostly in economic costs i.e. externalities. Many of these costs are diffuse and don’t affect the state budget directly, or if they do it’s often well into the future when “it’s somebody else’s problem”.
This I think is exactly true, the economic costs of road building are huge but external to the projects directly; they fall to property owners having to build so much parking, to people who die and are maimed in crashes, to the city in its loss of value through auto-domination of urban place, to the environment, to or balance of payments through oil dependancy, to individuals having to buy, run, and insure so many expensive vehicles. These are dispersed costs, and therefore easily ignored and glossed over.
And likewise the economic benefits of Transit infrastructure are huge but also easily downplayed and dismissed, as they to do not immediately arrive in an account like a lotto prize, but rather accrue over time in an equally dispersed way. And if the projects are never built then the whole idea of such value can be dismissed as unlikely or only ever happening in other countries where conditions are always different.
But also we have the peculiar situation of the national [and National] government choosing projects in Auckland knowing that these externalities fall largely locally. Both the costs of the mode they favour and the benefits of those that they don’t. We really need to become much more sophisticated in our economic evaluations, or resign ourselves to life in an underperforming and slowly choking city.
By Patrick Reynolds, on April 4th, 2013 Somehow over the last 60 years it became an orthodoxy that the only way to deal with the problem of too many cars on our roads is to spend ever greater sums of money on more roads for more cars [and more parking, more fuel use, more accidents, more obesity, more pollution]. I have always found this to be a curious idea; there’s too much of something so let’s make more of it possible. Ah but of course, I’m just looking at it all wrong, congestion isn’t ever about there being too many vehicles, no, it’s only ever about there being insufficient road space for whatever number of vehicles can be imagined. Really, is there never a point that we might say; the problem here is that we are trying to squeeze too many vehicles into this place for it to function well, we need to supply this place with alternatives to driving as well?
This odd orthodoxy is behind the latest muddled-headed transport plan for Auckland, quoted here in the Herald by Brian Rudman:
“Even with the fully funded programme,” admit the authors, “road congestion levels will deteriorate with volume/capacity ratios exceeding 100 per cent on most of our arterial road network by 2041 and emission levels exceeding current levels”.
Clearly business as usual; building more roads everywhere, isn’t going to work even on the terms of those who promote these plans, so it was very interesting to see a new study out of LA on the impact of Transit systems on road congestion. Researchers there were able to use the 2003 shut down of the Transit system by a strike for 35 days to compare the impacts on the city both with a functioning Transit system and without one. From the National Bureau of Economic Research here [USD$5].
Also there’s a summary here on Atlantic Cities which I’ll quote as there’s no paywall:
The intuition is straightforward: Transit is most attractive to commuters who face the worst congestion, so a disproportionate number of transit riders are commuters who would otherwise have to drive on the most congested roads at the most congested times. Since drivers on heavily congested roads have a much higher marginal impact on congestion than drivers on the average road, transit has a large impact on reducing traffic congestion.
And tellingly:
Contrary to the conclusions in the existing transportation and urban economics literature, the congestion relief benefits alone may justify transit infrastructure investments.
Of course LA is a big car town, it has massive driving infrastructure, the Transit Systems there are improving, and have improved a great deal since 2003, but there is no way that you could claim that it is like London or Paris and completely dependant on well developed Transit systems built over a century or more. So the figures did vary. For arterials and Interstates that were close to shut down Transit routes the numbers were huge; the morning delay on the 101 was up 123 percent during the strike [90% average for the day], and 56% on freeways that didn’t parallel closed Transit routes.
Proof that even in this most auto-dependant city of the value of investing in quality Transit systems: yes a fully supported Transit network, especially one with its own right of way is the car users’ best friend. Investment in better Transit is almost certainly the best way a city can improve the quality and utility of the driving experience. Can somebody tell the AA?
Remember, when driving and experiencing congestion, you’re not stuck in a traffic jam; you are the traffic jam. Despite all the help those Transit users are trying to give you.
 I 405 California
By Stu Donovan, on February 28th, 2013 In this recent post Matt collated some stunning photos of Auckland. More than most cities, Auckland is blessed with a wonderful natural environment. But some of the comments on Matt’s post gave me cause to pause, because they noted that all the stunning photos of Auckland were taken from approximately 300m up in the air and/or at night.
“bbc” put it this way:
All cities look picturesque from above at night, the issue is at street level which is where you actually interact with a city. At the fine-grained level Auckland is a particularly ugly city, and has a long way to go.
To which “Steve West” responded:
So true. São Paulo for example looks awesome at night yet it is a bit of a hole too. New Zealand does not have attractive cities – it is only the natural backdrop which offset the harshness of the 1980s era concrete and glass box prefab which continues to this day. Thanks Rogernomics. Recent article in a UK paper to that point – natural scenery nice but Auckland a bit crap.
Having read Steve’s comment I went off scurrying for the article he was referring to. Instead of finding that one however, I uncovered another two recent articles in U.K. that discussed Auckland. The first one was published in The Sun and made particularly positive claims about Auckland being “hobbit forming”. Nice, we’re obviously doing something right.
I then stumbled across this article in the Guardian, which was rather bluntly titled “How cities fail their cyclists in different ways.” It started off discussing Hong Kong, which was interesting, but scrolling down the page a little more you find a sub-section titled “Cities where cycling should be more popular than it is. Example: Auckland“. The content that follows is, I think, worth repeating in full:
Yes, it’s hilly in places and, once you reach the suburbs, very spread out, but Auckland really should be awash with cyclists. It has suitably temperate weather and that same spread out-ness leaves plenty of potential space for bike lanes.
But wander, with the eye of a regular cyclist, around the city centre, and you’re almost immediately struck by the lack of bikes on the road. Outside peak times they’re almost non-existent, barring the occasional cycle courier. Those you do see generally sport the Lycra garb and haunted expression of the cycling enthusiast in a bike-unfriendly environment.
The city is trying to boost numbers and, according to the most recent annual cycling survey, with some success, with 30% more riders on the roads than five years ago. But the numbers remain fairly small – just under 13,500 “cycling movements” observed on one day at 82 monitoring sites. It’s not helped by a compulsory helmet law, in place since the mid-1990s.
I was aghast to learn that the city’s harbour bridge, the main link between the centre and suburbs to the north, has no way at all for cyclists to cross. They must either plonk their bike on a ferry or take a fairly long detour. As an emblem for a city dominated by cars and roads it’s hard to beat.
Like with Hong Kong, it’s not as if Auckland couldn’t do with more cyclists. New Zealand might more or less define itself through sport but it’s simultaneously one of the more obese nations on earth.
The more I thought about it the more I found myself agreeing with the basic premise of the above article: Auckland is quite suited to cycling. One of the benefits of our geography is that there are pleasant views (like the ones shown in Matt’s photos) waiting at the top of most hills and around most corners. And it’s not like we have a winter that’s quite as cold as Amsterdam, where I used to live (and cycle!).
I know we talk about public transport a lot on this blog and it is true that Auckland can do much better in this regard. However I’m increasingly wondering if we’re not over-looking opportunities for Auckland to become more of a cycling city.
A recent presentation on the Integrated Transport Programme, for example, apparently made no mention of walking or cycling, instead referring only to major (read “expensive”) road and public transport projects. I know it’s only a presentation and that we should hold fire until the ITP itself is released, but what message does it send when the summary to a 30-year strategic document developed by almost all the government agencies involved in transport planning does not identify one signature walking/cycling project? It’s amazing to me that walking in particularly can be so over-looked given that it still contributes almost 10% of journeys to work.
And the failure to mention walking/cycling projects from the ITP presentation came hot on the heels of this month’s AT business report, which also left out cycling statistics altogether. It seems like Auckland Transport is suddenly afraid of using the “c” word?
As a cyclist myself I’m obviously “biased” – but on the other hand let’s not ignore than a person on the other side of the world felt sufficiently motivated to use Auckland as an example of a city where “cycling should be more popular than it is.” This point is worth ramming home: A journalist in the U.K. - who could have chosen any city in the world – choose Auckland. That’s not something to be proud of my friends, and it’s not something that will help us to become the world’s most livable city. While Auckland has and continues to make progress on many transport fronts, in my view our investment in cycling still lags.
In my opinion Auckland needs to become vastly more welcoming to cyclists before it can lay claim to being the world’s most livable city. And only then might you start to see beautiful photos being taken at ground level.
By Stu Donovan, on February 24th, 2013 Several recent posts have extolled the merits of “better buses” for Auckland. These posts have generally focused on the following issues:
- Corridor infrastructure - as discussed in this post, there are strong arguments in favour of expanding Auckland’s bus lane network so as to improve bus speeds/reliability.
- Network structure – as discussed in this post, Auckland Transport’s draft RPTP has proposed a network of frequent bus lines which are designed to support the rail and busway networks.
- Vehicle technology - as discussed in this post, bus operators in Auckland are just about to trial double-decker buses, while this earlier post discussed rapid developments in hybrid/electric bus technologies.
Improved corridor infrastructure, a better network, and newer/larger vehicles should all drive bus patronage higher. Complementing these bus improvements will be a vastly improved rail network – sporting fast, new trains that operate at high frequencies – and integrated ticketing/fares – enabling people to travel seamlessly across the network irrespective of mode or operator.
The “take-away message”, as they say, is that many more people are likely to be using Auckland’s buses in 10 years time compared to now. And we’ll also be using buses in subtly different ways: Rather than staying on the bus for long trips, more people will be catching the bus for a short distance and then connecting to a faster rail or busway service. On the surface this all sounds like good news.
But hold on a second – all this seems to be overlooking something. More specifically, if we have more people using buses and they are using them for shorter trips, then does this not mean that the rate of passenger movements per bus-kilometre traveled will increase by a disproportionate amount? This in turn means, holding other factors constant, the time buses spend dwelling at stops will also increase. The irony here is that all of the aforementioned initiatives, which are designed to improve the attractiveness of the bus system, will – if they are successful at attracting passengers – tend to place inexorable downward pressure on bus operating speeds.
That’s the vicious cycle on which I think we should focus our collective attention.
In the last few years I’ve had the pleasure of residing in a number of cities. Two of these stand-out for the way they have treated their buses with dignity, namely Brisbane (pop ~2 million) and Edinburgh (pop ~600,000). Both of these cities have bus networks that carry over 110 million trips per year, i.e. twice as many bus passengers as Auckland. And for this reason both Brisbane and Edinburgh have had to grapple with gnarly issues that Auckland may need to confront in the future.
In Brisbane they’ve gone for what could charitably be described as “infrastructure intensive” solutions. This has seen them spend not considerable sums of money on extremely high quality grade-separated bus infrastructure in the city centre. One of the most recent shining (if spending money is to be applauded) examples of this infrastructure is King George Square Station, which is illustrated below. This underground bus station connects via a tunnel to Roma Street and Queen Street Stations to the north and south respectively. KGS apparently has a design capacity of about 300 buses per hour, or 20,000 passengers per hour, however achieving this through-put would require modifications to the approaches and platforms.
Edinburgh, for their part, have opted for slightly less infrastructure. Their main trick has been to develop a network of on-street bus lanes on major arterial roads leading into the city, which converge on Princes Street. The latter then becomes a bus/taxi only mall at peak periods, as illustrated below. Edinburgh has in turn developed a network structure that enables them to “through-route” almost all services (NB: It’s worth mentioning that this kind of network structure, which results in relatively long routes, is aided and abetted by Edinburgh’s relatively compact and symmetric urban form and not necessarily something that can be replicated in cities like Brisbane and Auckland).
In terms of what’s best for Auckland, my gut feeling is that our bus sweet spot lies somewhere between Brisbane and Edinburgh. That is, as a relatively large and rapidly growing city we will need some high-quality, possibly even underground, bus infrastructure in our city centre. It’s notable that the two major bus corridor initiatives implemented in Auckland in the last decade, namely the Northern Busway and the Central Connector have piked out completely as they approach the City Centre. Right where you need the priority treatment the most is where we have waved the white flag.
And unfortunately the consequence of failing to provide adequate bus infrastructure has not been pretty: It has exacerbated bus congestion in the core central city area which in turn further detracts from urban amenity. Ironically, the congestion arising from inadequate bus infrastructure in Auckland has prompted some people to (naively) call for banishing buses from the city centre altogether. While our historical reluctance to provide appropriate facilities for buses says a lot about our collective unwillingness to recognise the contribution buses make to the city centre, it now creates an opportunity for us to develop something better – something that can support our existing bus corridors while accommodating those that we expect to develop in the future, as per the new bus network.
But enough about infrastructure! The primary point of this post was actually to identify a range of “softer” initiatives that have been implemented in cities overseas, which Auckland could adopt to maintain bus speeds as patronage grows, namely:
- Wider stop spacing - Brisbane’s high-frequency routes tend to follow a limited stopping pattern, which sees them stopping every 800m or so. Stop spacing is even longer on the the City Glider services, which provide an inner-city cross-town function. This typically means that you sometimes have to be prepared to walk a bit further, but when you do you have access to services that are frequent and fast. Moreover, these services are complemented by all-stop services operating underneath, which typically focus on providing local access and coverage. By way of comparison, light rail lines often tend to have stop spacings approaching 1km.
- Managing cash payment - Many services in Brisbane are “pre-pay only”, which simply means you have to have a smart card in order to board. Edinburgh has taken a slightly different approach: Passengers can still pay with cash on all services, but if you do then you don’t get any change. Instead, passengers paying by cash simply have to throw the money in an automatic cash counter, which then automatically tells the bus driver whether they have paid enough for the fare that they have requested. Again, this drastically reduces dwell times (customers paying by cash board almost as fast as those using a smart card) and also increases revenues.
- Vehicle configuration - This has multiple dimensions, but generally involves vehicle designs that enable much quicker loading and unloading. Key features include double-door entry/exit, so that passengers paying by cash do not block other passengers that are paying by smartcard. Similarly, double-door exit at the back enables quicker unloading of passengers, which is especially crucial when operating a tag-off system – as Auckland is doing. Another common aspect of buses in both Brisbane and Edinburgh is wider aisles, especially towards the front, which enables speedies loading – particularly for people with wheelchairs and prams.
Given that buses have a lifetime of 12-15 years Auckland Transport and the bus operators would ideally be thinking about these issues now, so that they can be incorporated into vehicle procurement and contracting policies from at an early stage. Some of this is happening already – as per the double-decker bus trial noted above. But on the other hand I do wonder if Auckland Transport should develop some form of operational plan (i.e. non-infrastructure) that analyses our current bus system, identifies where time is being lost, and identifies/prioritises some the issues that will need to be tackled to accommodate up to 120 million bus trips per year. Of course, there may be things that Auckland can implement now in anticipation of higher patronage.
As an aside, Auckland really needs to take a leaf out of Brisbane and Edinburgh’s bus book. As these cities have shown, appropriately sized and designed bus infrastructure will reduce the impact of buses on the city centre. Sure, some negative impacts remain, but that’s more the result of the eternal tension that exists in urban environments between mobility and accessibility, between movement and exchange, than something that is intrinsic to buses per se.
Be interested to hear what other initiatives people think could be used to make Auckland’s buses better …
By Patrick Reynolds, on February 19th, 2013 It is increasingly clear that there is a common theme to almost all of the major differences of opinion around the issues we cover on this site. The same theme that I think sums up the contrasting world views of the Auckland Council and the current government. And that is basically around questions of the idea of the city. Is a city a good and valuable thing? Do we really want to encourage it?
It is likely that our background as a small agrarian society makes these questions and the fears they express understandable. These suspicions are probably experienced in all the urban places in New Zealand, but it is particularly evident now in the case of Auckland because of its unusual size and rate of growth in the NZ context. It certainly seems to be behind the idea that I have experienced many times travelling around the country that there is something deeply wrong with Auckland; that it isn’t really part of ‘real’ New Zealand at all. Sometimes expressed as polite bafflement; sometimes as angry rejection.
And often the angriest commenters on this site essentially don’t want more city, they talk up anti-urban solutions to urban issues like ‘decentralisation’ or expanding the Urban Limit to keep growth at a low density.
So it is reasonable to ask; is Auckland a good thing? Is its size and growth desirable or even inevitable?
But then by comparison to most of the world Auckland is a small city and its growth rate pretty slow. And that these other places are getting even bigger faster. So why is urbanisation accelerating? Is bigger always better?
We have looked at the value of cities before through the work of economists for example here. I am pretty much persuaded by the simplest answer of all: Many [perhaps most] people see value [in the broadest sense] in being near other people, ergo; cities. Too simple? Cities can be pretty isolating too and many people only face very tough choices in their lives so:
Is there some universal pattern behind the success of cities?
Well it turns out this is a question that a big team of researchers in the US set out to test and came to the conclusion that the value [and cost] of cities is even quantifiable, their attraction [and burden] reducible to one number.
This is pretty interesting and I think it’s best if you watch Theoretical Physicist Dr Geoffrey West talk you through it. He and his team analysed vast amounts of data across the world to come up with a scientific theory of cities.
Additional introduction from the NYT:
West set out to solve the City. As he points out, this is an intellectual problem with immense practical implications. Urban population growth is the great theme of modern life, one that’s unfolding all across the world, from the factory boomtowns of Southern China to the sprawling favelas of Rio de Janeiro. As a result, for the first time in history, the majority of human beings live in urban areas. (The numbers of city dwellers are far higher in developed countries — the United States, for instance, is 82 percent urbanized.) Furthermore, the pace of urbanization is accelerating as people all over the world flee the countryside and flock to the crowded street.
For West, this first meant trying to gather as much urban data as possible. Along with Luis Bettencourt, another theoretical physicist who had abandoned conventional physics, and a team of disparate researchers, West began scouring libraries and government Web sites for relevant statistics. The scientists downloaded huge files from the Census Bureau, learned about the intricacies of German infrastructure and bought a thick and expensive almanac featuring the provincial cities of China. (Unfortunately, the book was in Mandarin.) They looked at a dizzying array of variables, from the total amount of electrical wire in Frankfurt to the number of college graduates in Boise. They amassed stats on gas stations and personal income, flu outbreaks and homicides, coffee shops and the walking speed of pedestrians.
Here’s the results:
If the embeded video doesn’t work then go here.
[PS the answer is 15% or x 1.15]
By Stu Donovan, on January 24th, 2013 Yesterday’s post considered the recently released Demographia survey on housing affordability. Thanks to everyone who commented; the discussion was useful for honing my thoughts on follow-up posts. Such as this.
But first let’s re-cap: Demographia’s key findings were 1) New Zealand has increasingly unaffordable housing and 2) this is the direct result of urban containment policies.
The main issue I took with the Demographia report in yesterday’s post was 1) the lack of strong economic justification/references supporting their housing affordability indicator of choice (namely the median-multiple ratio) and 2) the lack of discussion/investigation of potential alternative indicators.
Indeed, my quick web search threw up at least two alternative indicators of housing affordability, namely the rent-multiple ratio and the home affordability index, neither of which appeared to lend much support to Demographia’s findings. Of course, this does not prove their conclusions are incorrect, but it does suggest they are premature.
In this post I wanted to look beneath the hood of Demographia’s housing affordability indicator a little more. The reason being that when you do you start to see what they are measuring and, perhaps more importantly, what they are not measuring. In Demographia’s case, they calculated their housing affordability indicator as follows:
Median-multiple = median house price / gross median household income per annum
This then measures, in a simple sense, the cost of the median home relative to the median household income. While that may sound reasonable enough on the surface, the devil is in the detail. Two of the more obvious issues with Demographia’s indicator that spring to my mind are discussed in the following paragraphs.
Demographia’s definition of “income” excludes taxes and transfers. This is pertinent for at least two reasons:
- First, some taxes have direct impacts on property prices, e.g. local rates. These will simultaneously tend to affect property prices (higher rates = lower property prices) and post-tax income (lower), but not gross income. Somewhat perversely, this would mean that jurisdictions with higher property taxes would tend to exhibit more affordable housing, at least according to Demographia’s indicator.
- Second, most taxes directly impact on a household’s disposable income and in turn affects their ability to afford housing. In New Zealand tax rates have changed considerably over time, especially for different segments of the population. Consider for example the impact of Working for Families on demand for certain types of housing.
Such issues mean that the median-multiple housing affordability indicator, as it appears that Demographia have applied it will not pick up on relevant differences in taxes and transfers, both spatially and temporally.
The spatial differences are likely to be fairly minimal within a country like NZ – where local taxes don’t vary that much from place to place – but this is certainly not the case when making international comparisons. Many countries have much higher rates of property taxes (and even local income taxes) that will tend to impact on house prices and thereby affect their housing affordability relative compared to New Zealand.
On the other hand, the temporal differences introduced by changes in domestic tax and transfer policies are likely to be fairly large, even within a country. The potential impacts on housing affordability of recent tax changes to the top personal tax rate, ability to claim capital depreciation on properties, and commercial tax rates are hard to predict in advance. Tax impacts may well spill over national boundaries as well; NZ’s lack of capital gains tax, for example, is frequently quoted by my Australian colleagues as a primary driver of their decision to invest in New Zealand’s property market.
These issues would make me extremely cautious about drawing broad, sweeping conclusions on trends on housing affordability both within and between countries simply based on the median-multiple indicator.
“C is for cookie and that’s good enough for me” – The following (deliberately facetious) statement helps I think to highlight a dimension of the housing affordability debate that is all too frequently glossed over, namely:
You don’t measure the affordability of cookies based on the cost of buying the cookie factory.
The point is that housing is a actually a type of good, or more specifically a service, which is “produced” by a house. You can gain access to housing without necessarily buying the factory that produces it, i.e. rent a house. Obviously, some people do this already and they’re called “renters.” Like me.
Even in New Zealand many people rent by choice. And in many countries in central and northern Europe renting is even more prevalent. But the key takeaway message is that the affordability of housing, which is what Demographia sets out to investigate, is probably better measured (from an economic perspective) using rents rather than house prices. This is especially true for low income households that are more likely to rent.
And that’s why I’d place more emphasis on the graph produced by the Productivity Commission, which calculated the ratio of rents to household disposable income over time than the median-multiple indicator presented by the Demographia study. This showed the rent to income ratio in New Zealand declining since the 1990s, contrary to Demographia’s findings and casting some not inconsiderable doubt on their conclusions.
My preference for using rents is also related to the first point on the impacts of taxes on house prices: Unlike houses, which are an asset, rents measure the cost of housing services. I suspect it’s far easier to “net out” the impact of services taxes in various jurisdictions, i.e. GST, on rents than it is to adjust for changes in the myriad of other income and asset taxes that might affect house pricing.
That’s all for tonight, but tomorrow’s another day and I’m already fomenting ideas on the next Demographia post; in the meantime I’d welcome your comments/suggestions/criticisms.
By Stu Donovan, on January 23rd, 2013 *** Spoiler alert: The title of this post is somewhat hyperbolic ***
Demographia’s “9th Annual International Housing Affordability Survey” has just been released and is receiving a lot of attention in various media outlets, such as the NZHerald. Indeed, NZ ‘s connection to the report is relatively strong – it was co-authored by a kiwi and the foreword is written by our very own Minister of Finance.
For those not in the know, the primary objective of the Demographia report is to evaluate housing affordability across a selection of “anglo” countries, namely Australia, New Zealand, Canada, the U.S., the U.K. and Ireland. This is a very admirable objective; after all if policy makers can better understand the complex range of factors affecting housing affordability, then this can in turn support more informed debate and policy settings.
Demographia measure housing affordability using the so-called “median-multiple” indicator, which they define as follows:
Housing affordability = Median house price / Median household income.
This is a pretty simple indicator: Take the median house price and divide by the median household income and, voila, you have a multiple describing the price of housing relative to incomes. Demographia then collect a swathe of data on house prices and incomes for all cities with populations of 1.0 million or more in Australia, New Zealand, Ireland, U.K., Canada, and the United States. Their results over time are shown below.
Since 2004 the trend in the median-multiple measure has diverged between countries; it increased in Australia, New Zealand, and Canada; stayed broadly constant in the U.S.; but declined in the U.K. and Ireland. While these are fairly innocuous results, the Demographia report then concludes (p. 3):
Overwhelming economic evidence indicates that urban containment policies, especially urban growth boundaries raise the price of housing relative to income. This inevitably leads to a reduced standard of living and increases poverty rates, because the unnecessarily higher costs of housing leave households with less discretionary income to spend on other goods and services. The higher costs ripple into rental markets, tightening the budgets of lower income households, who already suffer from lower discretionary incomes. The principal problem is the failure to maintain a “competitive land supply.” Brookings Institution economist Anthony Downs describes the process, noting that more urban growth boundaries can convey monopolistic pricing power on sellers of land if sufficient supply is not available, which, all things being equal, is likely to raise the price of land and housing that is built on it.
I read that and thought “hmm, that’s fairly strong stuff.” So at this point I thought it was worth stepping back a little.
First let’s examine the two key arguments the Demographia report advances in support of the median-multiple measure of housing affordability (p. 6):
- It is used by other reputable organisations, such as the World Bank, the UN, and Harvard; and
- It is simpler than other measures, which are “often not well-understood outside of the financial sector.”
The second reason given is rather vacuous and, frankly, a little condescending to anyone who does not work in the financial sector. And believe me, many economists do not work in the financial sector; at least not anymore.
On the other hand the first reason offered as justification for using the indicator is more understandable: If the median-multiple indicator is used by a range of reputable international organisations then it likely has more merit as measure of global differences in housing affordability.
At that point I tried to follow the sources provided in the Demographia report. Doing raised some fairly important issues: The World Bank link, for example, takes you to a relatively obscure web-page that appears to date from 1992, while the Harvard link appears to be an on-line catalogue of the indicators used in the U.N. report, rather than an independent publication attesting to the merits of the median-multiple indicator.
That leaves us with one “independent” reference, namely the U.N., lending credibility to the use of the median-multiple indicator of housing affordability. Following that link, however, reveals that the median-multiple indicator is but one of a myriad of indicators and checklists identified by the U.N. And perhaps more importantly, the U.N. do not present the median-multiple indicator in isolation, but instead consider it as one of two possible “housing affordability” ratios, as illustrated below.
Righto, so the median-multiple measure can be calculated using either median house prices or house rents. At this stage I was perplexed: Why does the Demographia study not (from what I can tell) mention the ratio of house rents to income as as a possible alternative indicator?
So I did some more digging, and found this graph in the Productivity Commission’s final report on housing affordability in NZ, which considered median rent to household (disposable) income, as illustrated below. In many ways this indicator is more comprehensive than that originally identified in the U.N. report, because it considers after-tax income.
 Based on this graph the Productivity Commission concludes (p. 4):
During the house price boom, rents increased at around the same rate as generalised inflation. Across territorial authorities, rents grew in a relatively tight range of 2.3% per year (in Dunedin City) to 8.2% per year (in Buller District). In all cases, rent increases were significantly less than real house price inflation and the ratio of house prices to rents increased markedly, a departure from the long-term broadly stable relationship.
This apparently benign aggregate situation disguises a more difficult position for renters on lower incomes. In particular, people in the lowest two income quintiles spend a much higher proportion of their income on rent than people on higher incomes (Figure 0.5). Even though the situation appears to have improved since the late 1990s, those in the two lower income quintiles still spend, on average, more than 30% of their disposable income on rent, after allowing for government assistance.
Oh dear Daisy: It seems that the Productivity Commission has – using the other housing affordability indicator recommended by the U.N. study referenced by the Demographia report – come to a different conclusion: That housing affordability in NZ has been improving since the late 1990s.
Now at this point I want to caution that these other indicators do not prove that Demographia is necessarily wrong, only that their use of indicators may be too limited. Usefully, the Productivity Commission includes another indicator of housing affordability, namely the “home affordability index” (compiled by Massey University). This index considers the relationship between the costs of servicing a mortgage on the median house and median household income:
 This indicator suggests that home affordability has been declining for about the last 4 years. Perhaps more importantly, the 2008 peak in the home affordability index (indicating relatively unaffordable homes) does not seem to be significantly higher than earlier peaks in, for example, 1989 and 1996.
So where does this leave the Demographia report? Well on I’m afraid to say that a first investigation throws up very little corroborating evidence to support their key conclusions, namely that the current price of housing in New Zealand is “unaffordable” relative to historical norms. That’s not to say that they’re wrong, only that their conclusions are not fully supported by the available evidence.
Nor is this to suggest that more affordable housing is not a valid objective: I certainly think it is. And just because the current price of housing is comparable to historical trends, we should still be interested in making housing more affordable, because as Deomgraphia note it is perhaps the most basic of human needs. So while I question Demographia’s analysis and conclusions, the subject is nonetheless very important and worth considering in more detail.
I only wish that 1) they had the time/energy to analyse these issues in more detail within their existing research and 2) news organisations did a little more research before reporting the results of studies like this. While I have more to say on this issue (and hope to do so in future posts), it’s now time for me to up stumps and head for tea (i.e. bed). Until next time …
By Stu Donovan, on January 15th, 2013 Yesterday’s post on population loss from rural areas generated some really interesting comments.
My main goal was to highlight some of the potential challenges facing rural areas, which I think is important. But as some people rightly pointed out: My home town of Waiuku is not exactly struggling to survive. Indeed, unlike much of rural New Zealand Waiuku’s population has been increasing and the general consensus is that it will continue to grow.
As I expect will the populations of many similar smaller rural towns in the Auckland region, such as Clevedon, Warkworth, and Helensville. And the growth is not just limited to the Auckland region; Kerikeri and Whakatane are two small rural towns that have been on my “superstar” list for a long time now.
But how, you might ask, can I be worried about population decline in rural areas while simultaneously observing that some small rural towns are growing gangbusters? General answers to that question is what this post is about, namely economic patterns in urban development. My main suggestion is that the rapid growth of a few of these small towns can be explained by their proximity to a larger urban area.
Economic patterns in urban development are important because they help you to understand the shape and structure of urban areas. Of course there’s other random things at play, most obviously geography, but there’s also underlying patterns that crop up with unerring regularity. I’m not an expert on all of these patterns, but I know enough to find them interesting.
The first, and probably most important, pattern to observe exists between what economists refer to as land rents and distance to the city centre. Below is a map of estimated land rents [$/sqm] in Auckland, which I made as part of my masters thesis. I say “estimated” because land rents are not often able to be observed independently from the physical improvements that they support, as such you have to “net out” the value of the improvements.
What you see here is a pretty clear trend towards declining land values as one moves away from the city centre. Several plausible economic factors contribute to this decline, such as transport costs and agglomeration economies. There are also historic advantages that come from being the city centre, such as proximity to cultural amenities, which push up land values there. This pattern of declining land rents is usually referred to as the monocentric city pattern.
At this point you might be thinking “gotcha!” – what about sub-centres? Surely they prove the monocentric city theory wrong. Well, not really; the theory has over time been adapted, or more appropriately said extended, to deal with what is technically known as polycentric urban areas with multiple sub-centres.
Glaeser and Kahn developed an economic model of urban development that allows for the emergence of sub-centres at a certain distance from the city centre, in response households and business seeking to minimise their transport costs. This manifests as sub-centres located at a certain distance from the city centre, as illustrated in the slide below.
In the image land rents are on the vertical axis and distance to the city centre and on the horizontal.
This shows declining land rents around the city centre and an emerging sub-centre. The catalyst for the development of the sub-centre is when the economic benefits of doing so (i.e. the capitalised value of the transport cost savings attributable to the sub-centre, which is represented by the area of the small triangle) exceed the fixed costs of setting it up – usually the residual value of agricultural land and any infrastructure costs (represented by the horizontal p_agr line).
Voila! We now have a plausible economic explanation for Manukau, Albany, and Henderson. What’s important to note is that the emergence of sub-centres is above has been simplified to two (d,p) dimensions, whereas in reality cities grown in three dimensions (d,y,p). Not only does this hint at the presence of multiple sub-centres all located a specific distance from the city centre, but layers of sub-centres around sub-centres. Think of it as a Russian doll of sub-centres, if you like.
Which brings us to the interesting topic of “fractals”, which are a field of mathematics that considers self-repeating complex patterns. Wikipedia defines fractals as follows:
The general consensus is that theoretical fractals are infinitely self-similar, iterated, and detailed mathematical constructs having fractal dimensions, of which many examples have been formulated and studied in great depth.[2][4][5] Fractals are not limited to geometric patterns, but can also describe processes in time.[3][6][11] Fractal patterns with various degrees of self-similarity have been rendered or studied in images, structures and sounds[12] and found in nature,[13][14][15][16][17] technology,[18][19][20][21]art,[22][23][24] and law.[25]
Fractals are relevant to economic patterns in urban development because they seem to explain the patterns seen in sub-regional development, as seen below for Tokyo (source) from 1960 to 1995. Here you see a pattern of the central city with radial transport links connecting to peripheral sub-centres.
Over time the transport links are extended and the more sub-centres tend to develop, athough these new centres seem to be usually smaller and less dense than the ones closer to the city – exactly as we would expect from the simple two-dimensional model presented by Glaeser and Khan.
This is actually an example of an “adaptive nework”, which given a certain starting point (population and network) describes the process by which urban areas and their transport networks might expand. And perhaps even more interestingly, such networks are found in natural structures as well.
A group of Japanese researchers, for example, found that “brainless slime” was able to replicate the structure of the Tokyo subway. The reserachers duplicated“the layout of the area around Tokyo: They placed the slime mold in the position of the city, and dispersed bits of oat around the “map” in the locations of 36 surrounding towns.” This (somewhat over the top) article described the process as follows:
The mold explored slowly at first, but like any good transportation engineer it began to figure out traffic patterns. To continue growing and exploring, the slime mold transforms its Byzantine pattern of thin tendrils into a simpler, more-efficient network of tubes: Those carrying a high volume of nutrients gradually expand, while those that are little used slowly contract and eventually disappear [ScienceNOW Daily News]. When the mold got its system settled, researchers say, it looked rather similar to the actual Tokyo subway system, as you can see in the illustration.
The result is illustrated below (source). If one was being cheeky one might say that the mould developed a more efficient network than your average transportation engineer  .
Not that I think we should read too much into the ability for mould to replicate a subway network (this seems vaguely reminiscent of a Simpons episode, or maybe it was SouthPark?)
But how does all of this relate to Waiuku?
Well, let’s be honest and accept that Waiuku, and most small towns in New Zealand, were probably established by people who weren’t thinking too much about these types of economic patterns.
Waiuku’s initial settlement was probably in response to its geographical advantages, and the original residents were probably just looking for a place to stick a spade in the ground and call home. From these humble beginnings Waiuku probably developed as a local town servicing surrounding agricultural hinterland, a small localised example of Krugman’s theories on new economic geography (i.e. regional/peripheral economic interactions).
Then came an external shock in the form of the Glenbrook Steel Mill – which had two major economic impacts. First, it greatly increased the supply of relatively well-paid manufacturing jobs in the area and hence in turn increased the residential population it could support. Second, it catalysed major improvements in transport infrastructure connecting Waiuku to the rest of the country. Indeed, it was only around the 1960s that the road from Waiuku to SH1 was first sealed.
Meanwhile, however, a more gradual external economic shock was looming on the horizon: Auckland continued to grow, especially to the south. This – in combination with the improved transport links – enabled residents to shop further afield, in places like Manukau. This in turn led to the gradual erosion of the intensity and diversity of commercial activity in Waiuku. The town was increasingly dependent on Auckland for employment and general retail activities.
And that’ trend has continued: Waiuku is a residential satellite town whose ability to support its population is almost entirely contingent on two things: 1) the Steel Mill and 2) metropolitan Auckland. Naturally, as the local residential population has grown the town’s ability to support more diverse commercial activities has also increased. But this growth is not attributable to Waiuku itself, but more the combination of its proximity to Auckland.
The key point is this: While the geographic, historical, and socio-economic factors influencing urban development are many and varied, some regular patterns/processes seem to emerge. In particular, small rural towns on the periphery of larger urban centres will become increasingly dependent on the latter for their well-being and growth. But this growth is not independent from the growth of the nearby city; it’s intrinsically linked to it.
It also suggests that places like Waiuku and Whakatane, which do have growing populations, may be the “rural” exception, rather than the rule.
PS. Those with a bit more time and interest in these things might enjoy reading this chapter on urban morphology, which is written by a lecturer in geography at the UoA, namely David O’Sullivan.
By Patrick Reynolds, on December 19th, 2012 Which city is this?:
“Like most cities, X once had an extensive streetcar system, but as in most of them, this was essentially destroyed after World War II. From the 1950s to the 1980s, as X was ringing the entire metropolitan area with freeways, public transport was limited to an inadequate and generally unreliable bus network.”
Well it is Auckland almost exactly [although we're still building the freeways] but the quote is about Houston, Texas. Yes the big oil capital of America, one of the those southwest ‘air-con and auto’ sprawl cities and is just one example of how similar forces shape very different and distant places in similar ways through time.
There was, of course, a demographic shift that accompanied this big transport technology change [as both cause and effect] the famous ‘flight to the suburbs’. And what is especially interesting about the book that this quote is from is that it clearly lays out how the 21st century has witnessed the reversal of that post-war phenomenon across the entire range of cities in US. Instead of the significant aspirational movement heading out to the edges we are seeing what the author, Alan Ehrenhalt, is calling The Great Inversion; a return to the centre.
 The Great Inversion His thesis is best summed here:
Just a couple of decades ago, we took it for granted that inner cities were the preserve of immigrants and the poor, and that suburbs were the chosen destination of those who could afford them. Today, a demographic inversion is taking place: Central cities increasingly are where the affluent want to live, while suburbs are becoming home to poorer people and those who come to America from other parts of the world. Highly educated members of the emerging millennial generation are showing a decided preference for urban life and are being joined in many places by a new class of affluent retirees.
Ehrenhalt is a very careful student of place, this is not a work of speculation but of fine grained analysis and observation. He is also no old city urban snob, he does start his list of case studies in Chicago and New York but the bulk of the book is spent looking at the changes going on in places that are hardly on anyones list of urban successes; Houston, Phoenix, Denver, Cleveland, even ex-urban Atlanta. And in fact while some attention goes to the surprising case of Manhattan’s Wall St district being invaded by baby strollers [something even Jane Jacobs dismissed as impossible] the examples in Chicago and NY are both suburban.
His description of the changes in property value and demographics in Sheffield an inner suburb of Chicago pretty much describes similar changes we can see in say Grey Lynn in Auckland. The upgrade of ‘workingmen’s cottages’ to highly sought after homes by exactly the same cohort of affluent younger singles, couples, and, increasingly families, displacing poorer students and working class families. There are even all the same issues; complaints around gentrification, building heritage, fear of higher density. It is striking just how similar these movements and issues are.
Of course Sheffield’s change grew around the L stations that Chicago didn’t abandon and that are now being invested in and attracting increased ridership. Like the other NY example the very grim Brooklyn suburb of Bushwick, a post industrial wasteland of poverty, dependency, and drug crime on the ‘wrong’ side of that borough, ie unlike fashionable Williamsburg it is facing away from Manhattan. But it is on the subway and therefore directly linked to the centre:
“The train is the entire reason this is happening,” says loft entrepreneur Kevin Lindamood, echoing the flat pronouncement of real estate agent Ted McLauhglin that “these days, convenience trumps aestetics.”
He is very clear about the role of Transit and driving amenity in demographic movements and opportunity but this isn’t a transport book, interestingly, his main conclusion is that it is really all about choice. Enough people just want to have more intense urban living, working, and playing opportunities, not everyone, but there is plenty of suburbia and exurbia for those who don’t :
“I would go so far as to say that choice is what urbanism of the next generation is all about.”
Or this quote from Architecture professor Tom Diehl about the changes in Houston, in particular the tentative and fiercely contested new Light Rail investment:
‘The people who want to live close in are finally getting something now. The people who want to live on the freeway already have what they want.”
And he is very clear that he is not seeing an abandonment of suburbia, that demographic inversion is not the same as mass migration. But that, interestingly, a sizeable proportion of both the kids of the suburban era and their now downsizing parents are shifting in. The suburbs they are leaving are often being occupied by new immigrants and by the less affluent families who used to occupy the rundown inner suburbs.
For someone who grew up in a totally monocultural and suburban Howick and first came [escaped] to Ponsonby when it was a multicultural and undervalued inner suburb, the relevance of this book to Auckland is more than obvious; it’s biographical [my parents, ahead of their time, downsized to an inner city apartment too]. Perversely Howick is now multicultural and Ponsonby more monocultural than it has been since the Edwardian era. And Ehrenhalt has described how: immigration in Auckland largely [but not only] has a suburban locus and many ex-suburbanites have upscaled inwardly.
Exactly what we can see in Auckland: A big enough proportion of the Millenial cohort and their baby boomer empty-nester parents leaving the outer ‘burbs for the inner ones to drive up prices there. And new New Zealanders filling in the old boom-burbs of the previous era along with displaced working class populations from older Victorian and Edwardian inner Auckland. Having until recently not been a city of apartments Auckland is getting those again too.
Because of the way he has structured the book around very close analysis of parts of very different US cities it is a really good way to understand how vitally important the specifics of physical geography, climate, historic patterns, previous infrastructure investments, local institutions, local leadership, and employment changes are to the forms of each city. Yes he shows a very clear collective theme, a zeitgeist, that is undeniably occurring, but how it plays out, and what should or could be done in each city is strikingly different. This, in many ways, makes it a very powerful tool for local understanding wherever you are.
My favourite observation in the book is one that I’ve expressed here before. We are heading back to the future: Even sprawl cities and smaller suburban centres are aspiring to a condition closer to the city streets of the early 20th and 19th Centuries than the totally auto-dependent ones of more recent times. But of course with contemporary technology. Ehrenhalt quotes the urban historian David Olsen who perceptively wrote in 1986:
“If we are to achieve an urban renaissance, it is the nineteenth century city that will be reborn.”
Not of course the crushing social inequality nor environmental carelessness of that age but a return to urban vitality; the city as “centre of commerce and sociability, of nonstop human drama,of endless surprise and stimulation. One might call it, as many did at the time, a theatre of living”. Ehrenhalt also makes the point that those old city streets were way beyond “mixed use” in the modern sense: “This was essentially “all use” urbanism.”
This is, after all, how progress works, change is never linear; all those predictions from the 50s of flying cars and jet packs really express the obsessions of their age, not only a dated technophilia [nuclear everything] but also a horror of social intensity that many now crave. Really it is those still fantasising about driverless pods that are the old fashioned ones. The future ain’t what it used to be.
There’s a brief interview here that expands a little on his themes, including a polite reposte to Joel Kotkin’s standard inability to imagine change. But most of all I strongly recommend anyone interested in what the future holds for cities everywhere should read this book. Especially in Auckland because it is happening here and although like all change there will be some good things that are lost, it describes a mostly exciting and optimistic future for this increasingly urban century.
By Peter M, on December 8th, 2012 An interesting Australian article highlights something that has perhaps slipped under the radar of many – that a huge implication of economies in countries like New Zealand shifting away from manufacturing and more towards knowledge industries is a likely changing of the geography of employment. The Australian Federal Minister of Infrastructure and Transport, Anthony Albanese, notes that Australian cities are facing increasing competition from growing cities in Asia, while at the same time facing the aforementioned shift in employment types. Let’s pick up a few key paragraphs:
Albanese noted that Australian cities will continue to face competition from a growing number of larger cities in the region.
“That puts a major incentive in dealing with how we position ourselves in our increasingly urbanised and increasingly affluent region,” he said. “Our cities have to be more productive. Productivity isn’t everything, but in the long run it’s nearly everything.”
Albanese added that the changing nature of cities will mean more need for inner-urban medium density housing as work increasingly shifts away from outer urban areas toward city centres.
“In terms of economic functions, our cities are shrinking in on themselves,” he said. “The forces which drove the spread of our cities in the post-war period, predominately manufacturing, are being replaced by knowledge industries – the banking, legal, insurance and myriad of other business services.”
Albanese pointed out that the changes will continue to influence the shape of cities in Australia.
“Whereas manufacturing plants which are traditionally located on the city fringe or in industrial zones, the job-rich knowledge industries tend to concentrate in the heart of our cities,” he said. “As the State of Australian Cities reports, this trend is seeing more and more workers commuting into our city centres.”
There’s a bit of a myth (perhaps another one for our list) that Auckland’s city centre is somehow dying and becoming increasingly irrelevant as employment disperses wider and wider throughout the region. Furthermore, there are often quotes that only 13-15% of Auckland’s jobs are within the motorway ring that’s generally used to define the CBD. Yet as Matt showed in a recent post, the city centre and its fringe is actually still by absolutely miles the largest concentration of employment in Auckland. Furthermore, as shown in the map below, by far the greatest concentrations of employment – in terms of jobs per hectare, are in meshblocks located in the CBD:
There has long been debate between the Council and Central Government over the future projections for employment numbers in the city centre, which seems to be quite critical to how well the business case for the CRL stacks up. If we follow the trends that are increasingly seen in Australia – and which just seem pretty logical as our economy transitions more and more to a post-industrial state – then a reconcentration of employment downtown seems likely (and also incredibly desirable in terms of economic productivity). Which, of course, makes the case for CRL even more compelling.
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