What do garage bands and tech startups have in common?

Russell Brown’s Public Address article on the impending closure and redevelopment of the King’s Arms music venue got me thinking. Russell highlighted the importance of certain types of physical spaces for a music scene’s ongoing vitality:

What the King’s Arms and the Powerstation have in common is that they are reasonably large rectangular boxes, which makes them ideal rock ‘n’ roll venues. That’s a hard kind of building to find – and an even harder one to build – in the current environment. While the Wine Cellar and Whammy have done a good job of making the most of their space and Galatos seems to work well, the only real “big box” on K Road is The Studio.

As the article investigates, a confluence of positive and negative trends is putting pressure on spaces for live music at the centre of Auckland. On the one hand, the success of the city centre as a place for both employment and residential living means that redevelopment is spilling out to the city fringes that traditionally served a mix of cultural purposes. On the other hand, the city-wide housing affordability crisis is putting the screws on rents.

As I discussed in another recent post, when rents rise faster than general consumer prices across the entire city, it’s a sign that there is a shortage of housing supply relative to current housing demands. In other words, we haven’t built enough. In Auckland, if rents had kept pace with consumer prices since 2001, they’d be $120 per week lower than they actually are, or $6240 per annum. Here’s a chart:

auckland-mean-real-rents-01-16-chart

Russell doesn’t mention it in his article, but rising rents have a second negative effect on the sustainability of a local music scene. They make it more difficult for people to start bands, as the time that would have gone towards practicing, writing songs, and hustling for gigs and recording time goes towards paying the rent instead.

David Lowery (Camper Van Beethoven frontman and one of my favourite musicians) neatly set out the link between low rents and dynamic music scenes in a 2011 blog post about the Santa Cruz milieu that spawned his band:

…music scenes rely on low property values in particular transitional neighborhoods.  Neighborhoods that had once had another purpose but now had fallen out of primary use.  Cheap space and a tolerance for noise are important commodities for bands.

You could argue that the old beach rentals along the lower end of Ocean street and the neighborhoods clustered around the old harbor qualified as in transition.  Too seedy and rundown for beach rentals these houses were subsequently occupied by the more adventurous.  Arty students, musicians and other slackers now occupied many of these cottages.

But our cottage was effectively cut off from these neighborhoods by the river levee.  In retrospect I now see it was very Dungeons and Dragonsish of the locals to refer to the homeless population that slept in hideaways along the river as “trolls”.  Indeed walking to my house at night I learned to steer clear of these trolls as many were quite aggressive or totally insane.   You definitely felt penalized after unexpectedly making contact with these folks.

But the isolation was very good for a couple young mathematicians and songwriters. I was able to really dive into the most difficult proofs and songs in that cottage.  Later when I moved to a better part of town I found that I had to go to the science library to get any deep thinking done.

If you want a vibrant music scene, you need a combination of young people – university towns are great for this – and low rents. That was the recipe underpinning the Dunedin Sound in the 1980s, and pretty much any other successful music scene.

But this isn’t just about cultural vibrancy. The same factors underpin long-run economic success, as they affect people’s willingness and ability to start and grow new businesses in a city. Entrepreneurship is very important. Economies thrive not by continuing to do the same thing over and over again, with minor refinements and productivity increases, but by generating new ideas and making new goods and services.

Affordable rents aren’t the only factor that contributes to a vibrant startup culture, but they are an important one. In this respect, tech startups are similar to garage bands: in the early stages, they need a bit of cheap space to allow them to experiment.

steve-jobs-and-wozniak-1977

Apple Computer, 1977

(Other factors that probably matter include an educated population, low levels of corruption, support for primary science and research and development, an active venture capital market, and good access to markets. New Zealand does well on the first two, and iffy on the last three.)

Data on growth in inflation-adjusted mean rents suggests that constraints on housing supply in Auckland over the 2001-2016 period have imposed an implicit ‘tax’ of around $6000 on someone living here and trying to start a business. Possibly more, if you’re trying to pay the rent and rent commercial space for your business. There are obviously other advantages to being in Auckland. It’s got the best international connectivity, access to a large and growing urban market, and a talented and diverse pool of workers.

However, we can’t be sanguine that those advantages will outweigh the ‘tax’ that a lack of housing places on new businesses or creative endeavours in Auckland. Left unaddressed, rising rents will dissuade startups, resulting in a less dynamic, less prosperous economy. (And fewer good bands.)

Fortunately, there are things we can do to address this issue. The most important is to let more housing and commercial space get built, especially in areas that are accessible to jobs and other good urban things, as that’s a key factor in getting rents back in line with consumer prices. The Unitary Plan does quite a bit to enable more construction, but reforming and fine-tuning our urban planning system will be an ongoing challenge.

Improving transport choices is another key priority. The city fringe area is an attractive location for live music because it is both relatively dense (by Auckland standards) and very central. When you put on a show, people can get to it. (And, depending upon when it ends, you can get a drink and still be able to take the bus or train home.) Other parts of the city aren’t as well-connected, which serves as a barrier. Fortunately, we can fix this by improving transport choices throughout the city – more frequent bus routes, more rapid transit corridors, more safe cycleways.

What do you think about the prospects for starting bands or businesses in Auckland?