Removing the RUB won’t necessarily work as planned

Yesterday Phil Twyford announced that it would be Labour’s policy to abolish Auckland’s Rural Urban Boundary (RUB), as part of a policy to improve housing affordability.

Labour wants the Government to abolish Auckland’s city limits to get people out of cars, caravans, garages and tents.

Labour housing spokesman Phil Twyford said the urban growth boundary had to go because it has fuelled the housing crisis and people would not be forced into bad circumstances if the Government acted.

“The Government should rule out any possibility of an urban growth boundary in Auckland Council’s Unitary Plan if it is serious about fixing the housing crisis,” Twyford said.

“Over 25 years the urban growth boundary hasn’t prevented sprawl, but it has helped drive land and housing costs through the roof. It has contributed to a housing crisis that has allowed speculators to feast off the misery of Generation Rent, and forced thousands of families to live in garages and campgrounds,” Twyford said.

“Labour’s plan will free up the restrictive land use rules that stop the city growing up and out. It will stop land prices skyrocketing, and put the kibosh on landbankers and speculators.”

There’s no doubt Auckland has a housing crisis at the moment, with house prices increasingly dramatically over the past five years. Rents rose more slowly but the impacts for some families are still alarming. There’s also no doubt that planning restrictions have played their part in creating this crisis – by making it too difficult to build the required number of houses that Auckland has needed.

Addressing regional scale issues like housing and transport was one of the key reasons Auckland Council was amalgamated in the first place and why one of its first tasks was to rewrite the city’s planning rulebook through the Unitary Plan.

But will abolishing the Rural Urban Boundary help? To answer that question it’s important to understand what the boundary is, and what it isn’t. As its name suggests, the RUB is the boundary between land where urbanisation is anticipated and provided for over the next 30 years and land which is intended to remain rural over that time. If you take a look at the map below, it is the black dashed line that separates the yellow-coloured “future urban” zoned land from the brown rural zones:

rub

It’s also important to recognise that the RUB doesn’t exist yet as it’s part of the Unitary Plan being decided by the Independent Hearings Panel. It’s quite a different tool to the old metropolitan urban limit (MUL) that was typically set up against the edge of the existing urban area and made any urban expansion a significant challenge.

The RUB, by contrast, isn’t designed as a permanent boundary. It provides for a substantial amount of greenfield growth – enough to meet 40% of Auckland’s growth over the next 30 years. ┬áThe scale of the areas in yellow is highlighted in an Auckland Transport video that looks at the future transport requirements to enable their urbanisation:

The main argument against the RUB is that it creates a scarcity of land where urbanisation is possible, which drives up the price of that land. Over time the high price of land translates into higher house prices and reduced affordability. Fair enough. But what can we actually do about that?

As Auckland Transport’s consultation video above shows, the RUB isn’t simply a line on a map: it’s a plan to provide publicly-funded infrastructure to new urban areas. If you wanted to expand the yellow future urban zoned areas on the map, you’d also have to find the money for additional infrastructure.

In other words, greenfield land is in scarce supply because it’s currently farmland that requires roads, pipes, train stations, parks, schools, hospitals and a myriad of other infrastructure investment to take place before development can actually happen. Making a dent in the housing shortfall by enabling more urban expansion to occur is therefore entirely about speeding up infrastructure, rather than whether or not there is a line on a map.

As we’ve talked about before, the costs of supplying bulk infrastructure to greenfield areas are large. It is time-consuming to investigate, design, consent and build these projects. There’s no quick and cheap way to make a whole heap more greenfield land “development ready”.

In fact, removing the RUB could easily disrupt existing infrastructure plans and slow down overall development. If you take a look at the work that’s been done on┬átransport for future urban growth, the networks are optimised around the location of the RUB. Scattering small developments around the region could force AT and NZTA to react to piecemeal development rather than taking a more strategic approach to infrastructure development.

I suspect that the first thing to get cut due to funding pressure would be the city’s rapid transit plans, which have already been delayed long enough. This would have the perverse effect of putting a damper on the 60-70% of development that’s intended to occur within the existing urban area.

TFUG - Draft Preferred Plan - Northwest

In short, abolishing the RUB isn’t a straightforward proposition. It’s not actually obvious that you could abolish it, as infrastructure plans would simply turn into a de facto RUB.

Ironically, Twyford acknowledges as much in his press release, where he says:

There is a smarter way to manage growth on the city fringes by properly integrating land use with transport and infrastructure planning. There should be more intensive spatial planning of Auckland’s growth areas in the north, north-west and south. Land of special value can be set aside, like the northern coastal strip or Pukekohe’s horticulture soils. Corridors should be acquired and future networks mapped for transport and other infrastructure

Let’s unpack this. First, he says that he’d like to see “intensive spatial planning of Auckland’s growth areas” with “future networks mapped for transport and other infrastructure”. That sounds a lot like the process that Auckland Council and Auckland Transport are currently undergoing for the yellow-coloured future urban land.

Second, he says that “land of special value can be set aside, like the northern coastal strip or Pukekohe’s horticulture soils”. That sounds a lot like some sort of boundary between urban land and non-urban land, which is exactly what the RUB is intended to be. Basically, if you read beyond the headline soundbite, Twyford’s policy starts to sound a lot like Auckland Council’s current policy, just under a different name.

That shouldn’t be a surprise. After all, the current government has been looking at this issue for half a decade now, and they’re pretty critical of restrictions on land supply. If it was a simple matter to abolish the RUB, they probably would have done it by now.

So what could we do differently?

There aren’t necessarily any “magic bullet” solutions to land supply. Greenfield land needs infrastructure to be useful, and infrastructure is expensive and slow to build. Shifting some of those costs onto developers, either through development contributions, targeted rates, or design rules that reduce the need for hard infrastructure (e.g. stormwater pipes) can allow more of it to happen. But the problem is that the developers push back, which limits the gains that can be had in this area.

Consequently, other policies are also needed to enable housing supply. That means relaxing or removing restrictions on building height and density within the urban area. While Tywford and Labour have also said they support this approach, they devoted only a single sentence to it:

Freeing up growth on the fringes needs to go hand in hand with allowing more density – so people can build flats and apartments in parts of the city where people want to live, particularly around town centres and transport routes.

That’s a great aspiration, but to be useful it needs to be backed up by specific policies to limit the use of height limits and other density-killing rules like minimum parking requirements. For example, would Labour lift building height limits throughout the urban area? If so, how high?

Lifting building height limits and density controls would have some immediate benefits for housing supply. For one thing, the transport networks and water pipes have mostly already been built, meaning that there’s no lag time waiting for the infrastructure providers. For another, it would make the housing market a hell of a lot more competitive by opening up lots of new development opportunities in the places that people most want to be.

This would also have the benefit of allowing people to avoid the high transport costs associated with sprawling development patterns. Even given Auckland’s dispersed employment patterns, the further out from the centre people live, the further they need to travel to work. This map from a Ministry of Transport analysis of the 2013 census data which shows how far people travel to get to work based on where they live:

This trend is repeated around the world, with more spread out cities requiring a greater amount of travel and, consequently, a higher proportion of income being spent on transport. In some cases this can end up outweighing any savings in housing costs. If we’re going to lift restrictions on housing construction, it makes sense to prioritise lifting the ones that also pose a barrier to efficient travel patterns.

Development Contributions: The DC Marvel

Man, that’s a bad comic reference in the title of this post. I’m sorry everyone.

But seriously folks, development contributions (DCs) are very important, and I think we should all have a general understanding of what they do and why they exist. This post was prompted by a Herald article where Phil Twyford, Labour’s housing spokesperson, said that the fact that more DCs had been collected across the country meant that “the Government’s reforms have failed”. That’s really twisting the figures. I’ll explain why below.

“Development contributions”are payments which developers have to make to councils, to help fund the cost of new infrastructure. They exist because new houses, shops, offices etc create extra demand for council-provided resources. For example, if we’re going to build another 400,000 homes in Auckland in the next 30 years, the council needs to invest in transport, parks, water reservoirs, and community facilities. The ‘sprawl’ areas alone could cost the council $13.7 billion.

These costs could be funded in several different ways:

  1. General rates. The costs of the new areas are spread across all Aucklanders, but is this fair?
  2. Targeted rates, which are only paid by properties in the new areas.
  3. Up-front development contributions, which end up getting capitalised into the price of properties in the new areas.

A couple of decades ago, most councils essentially used approach #1. And some are even returning to this approach, either to encourage development, or because they’ve got lots of spare capacity so don’t really need the contributions. As one example, Rotorua has recently scrapped DCs.

However, most councils are now using a “user pays” approach, i.e. #2 or #3 above. I think that’s a good thing, but it’s also good that councils have the flexibility to charge less if they want to – it helps Rotorua compete with Tauranga, for example.

As a side note, #2 and #3 have much the same effect, with one main difference – #2 pushes property prices down and has higher ongoing costs (rates), and #3 is the opposite. The “net present value” of each one should be pretty much the same. More on that in a future post.

Development Contributions

Development Contributions: serious business.

The 2014 reforms came about because the government was concerned that DCs were actually being used to fund projects that didn’t actually have much to do with the new developments. The reforms have brought more transparency and accountability, which is good, although some of the other changes could be argued either way (e.g. DCs could previously help to fund a wide range of community facilities. Now, they can only fund very basic facilities with a very local focus. Swimming pools and libraries which might be used by people from further afield have to be funded through general rates).

Because the reforms narrowed the range of things that DCs can be used for, they’ve generally meant that the DCs per new house, or per new building, have declined.

On the other hand, because more development is occurring, the ‘total’ level of DCs being collected has still increased. And that’s the issue with Mr Twyford’s statement. He was quite rightly called out on it by Nick Smith, who replied that “building activity had picked up substantially, yet the increase in contributions was below that pickup level”.

We’re now getting closer to a situation where new development ‘pays its way’, and if it’s cheaper to provide new infrastructure to Grey Lynn than to Greenhithe, for example, that gets reflected in lower DCs for Grey Lynn.

Note that this is only true for council-provided infrastructure. Government infrastructure, like schools and motorways, aren’t funded this way. It might be that these things cost more to provide in ‘sprawl’ areas than in ‘intensified’ areas, so sprawl still gets a bit of a subsidy, but that’s something for the government to consider.

Likewise, there might still be other issues to sort out – e.g. if we’re under-charging for greenhouse gas emissions, there’s more incentive for people to live out on the fringes and drive more. If we can find the ‘right’ charge, whatever that might be, then people face the true cost of their emissions and might choose to live more centrally instead.

At any rate, once we start to untangle these kinds of issues, we might not be so reliant on blunt instruments like urban limits.