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One for the commenters... PhD student Kade Sorensen uses 10 interest.co.nz comments to jump into the debate on a fuel tax, B&T sales data, the minimum wage, interest rates and more

One for the commenters... PhD student Kade Sorensen uses 10 interest.co.nz comments to jump into the debate on a fuel tax, B&T sales data, the minimum wage, interest rates and more
13th Apr 18, 9:59am by Guest

This week's Top 10 is a guest post from Kade Sorensen, a PhD student in the economics department at the University of Auckland. Kade's specific research interest is in empirical urban economics.

As always, we welcome your additions in the comments below. If you're interested in contributing a Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

With interest.co.nz I seem to always find myself coming for the articles and staying for the comments.

As such, this one is for you; the everyday commentator. I’ll look at a selection of comments from the past few weeks and examine their respective merits.

Disclaimer: I have tried to represent all quoted comments in the spirit that they were presented. None are examined out of context, but some are truncated for practical reasons.

Firstly, a bit of motivation...

1. A comment on why commentators comment

Unsurprisingly, academics are very intrigued by news site comment sections. These reports - here and here - provide some interesting insight into the demographics of news site commentators and the reasoning for posting comments.

Read into them what you will.

2. Another one of those comments

Article: OECD working paper on automation of jobs highlights 'the interesting case' of NZ where growth of cognitive jobs, professionals & managerial roles has workers among the best placed in the OECD

Comment by Gareth Vaughan:

“A reminder. Please try to keep comments on the topic of the article you are commenting on. If you want to make more general comments, or peddle your personal theories about life and the universe, you can do so on 90@9, what happened today & Top 10 when it runs. Thanks.”

Exactly.

I guess all comments have their place at least somewhere in the deepest, darkest corner of the internet.

Is interest.co.nz really that dark corner?

So before you post that next comment, stop and think whether a 100 line discourse on Russian spy satellites is going to elicit an audible sigh from Ed. If the answer is yes, perhaps refrain from posting.

The juicy stuff - in no particular order...

3. Fuelling tax and spend policy

Article: Ministry of Transport says the burden of the Auckland fuel tax could actually fall on people in rural communities – Minister of Transport brushes off concerns

Comment by Foxglove:

“New government mission statement. Tax first, think later.”

Ugh. Taxes.

Everyone hates taxes.

Though, like you, I have a suspicion that politicians love them. Well, the National Party certainly did.

In saying this, I don’t think that taxes are inherently bad. So long as they are levied in a smart and fair manner.

A blanket fuel tax/levy is not a smart tax. This is because the usage of fuel is not limited to only powering road-using vehicles. Think lawnmowers, off-road vehicles, trailer boats, etc. Consumers of fuel for these deserve a tax rebate. The issue is that this rebate is almost always going to represent a substantial administrative burden.

Additionally, it doesn’t address the core issue; the improper pricing of road infrastructure. Congestion is simply a supply and demand imbalance of roadways. Both history and economic theory tells us that it is neither fixed by building new roads nor introducing a fuel levy.

The solution is targeted congestion charging. Unlike the fuel levy this sends a direct signal to the vehicle user that certain roads are more costly to use at certain times of the day. Road users then pay commensurately for the imbalance in supply and demand if they choose to drive at that time.

It’s simple, fair, and these days relatively easy to implement and administer.

4. Lies, damned lies, and B&T sales results

Article: Barfoot & Thompson's sales finish the summer selling season on a soft note with sales volumes well down for the time of year and inventory levels rising

Comment by Eco_Bird:

“Oh No… Both Auckland average and median prices are higher that July 17… bummer!” (sic)

True. Average or median prices may be higher.

And, a lot of people echo sentiment on the whim of the monthly and quarterly data. However, they do so ignoring some fundamental principles of statistical inference.

At the core of statistical inference is the expectation that characteristics of a given sample converge to the characteristics of the true population. Can we assume this with the Barfoot & Thompson monthly data?

Firstly the average index is hugely volatile, period on period. This is likely stemming from differences in quality and mix among the transacted properties. Therefore the index is measuring different things, period on period. Simply put if you can’t guarantee that you are comparing apples in one period with apples in the next, your ability to make inference is hugely limited.

Secondly Barfoot & Thompson account for only 35% of the transacted properties in the Auckland region – a sparse amount of data for a property market with a huge amount of geographic, economic, and demographic variation. What’s more, overall lower sales numbers in the market are accentuating this sparsity issue. Less data equals less reliable inference.

Although useful to gauge the market, I think its best that we use REINZ hedonic or QV SPAR indices as the basis for informing any argument or opinion on the direction of the market.

5. KiwiBuild can do no wrong

Article: Getting 4000 homes on the first KiwiBuild site at Mt Albert may not be as difficult as some people are making out, and it could be a godsend for the banks

Comment by Houses_Overpriced:

“People with vested interest who want prices to stay high will discredit the governments efforts to bring affordable homes to the market.” (sic)

I think the Government is discrediting itself.

If there is to be any cooling in property prices, it won’t be due to central government policy. Why not? The determination is just not there to reduce real prices. Although it is great that a government is finally acknowledging this critical issue, the KiwiBuild solution just doesn’t seem to stack up. Their first proposal is a solution that is offering us oranges at apple prices.

I say this because in no way does the Unitec KiwiBuild case address the core issue. This project isn’t necessarily making housing more affordable, at all. Although it may be allowing people with tighter income constraints to access ownership, it’s doing so by changing the housing stock characteristics and not by decreasing the marginal cost of property characteristics. It should be apparent that a strategy based on successively building lower spec houses has a very limited natural lifespan.

Highlighting this is the fact that the cost of KiwiBuild construction is expected to be on par with the current average cost of basic construction in New Zealand. Plus, Phil Twyford seems to think that removal of the Rural Urban Boundary is the fix all for high land prices. This seems unwarranted because:

1 – The Auckland Unitary Plan (AUP) has a huge amount of land (around existing infrastructure) that is zoned for future urban development.

2 – Removing the RUL simply incentivises sprawl and all the bad things associated with it.

3 – The cost of land is not necessarily the issue. It’s the cost of regulatory hurdles that has been the biggest component of property price in Auckland.

Perhaps instead of aimlessly advocating sprawl Twyford needs to be instead focussing on lowering overall construction costs, while monitoring the performance of the AUP in addressing the third point above.

6. Interest rates are no longer mean reverting

Article: Hard on the heels of changes by Westpac and TSB earlier in the week, BNZ strikes with a market-leading low one year 'special' home loan rate

Comment by THE MAN 2:

“Sorry to disappoint but interest rates will not be rising very much at all, if at all!” (Truncated)

It’s always interesting when this comment is made.

Firstly, I always find myself asking which interest rates in particular. Then I wonder why people could possibly think that this is a good thing.

Do you mean market interest rates, in general? Or, do you refer to the central bank target interest rate? We only have to look at bond yield curves to see that they are rising overseas. Plus listening to any central banker will highlight that they expect rate rises.

If indeed you ignore this though, the bigger question to ask is whether permanently low interest rates are a good thing.

To answer this, let’s simply frame what interest rates really represent; an indication of expected future productivity. In the case that they are high, it implies that we have confidence in the fact that future wealth is increasing. In the case that they are permanently low, wealth has, essentially, peaked.

Neither of these situations are good for us in a housing bubble. On the one hand, think of first home buyers with $800k+ mortgages. Upwards pressure on interest rates will stress their finances significantly. An increase from 4% to 6% on such a mortgage represents around a $1k increase in payments per month.

On the other hand, permanently low interest rates imply that we cannot rely on the benefits of inflation and productivity increases to, effectively, decrease debt burdens over time. Purchasers today, can only expect wage increases to come in the form of hierarchical advancement and not some general benefit from an overall increase in productivity.

So, I say be careful what you wish for regarding interest rates.

7. Minimum wage advice

Article: National’s Judith Collins says the likely small size of the dwellings in the new Unitec development housing area will put pressure on borrowers, as it means banks will require a larger deposit

Comment by THE MAN 2:

 “Spoke to an owner of a coffee franchise in a ChCh who told me that when wages increased to $20 he has done the sums and he will need to be charging at least $8 for a coffee.” (sic) (Truncated)

It’s proclaimed that a 60% (from $5 to $8) price increase in lattes will come from a 25% increase in labour costs. I’d suggest someone checks their sums or refrains from hyperbole.

This does however offer a segue into the debate for minimum wages based on the living wage target. Some think that this is the magic bullet. Some do not.

I tend to fall into the latter category. There are a few reasons for this.

  • The premise is incorrect.
  • Wealth isn’t generated by simply increasing a price floor in the market.
  • Disproportionate increases don’t incentivise increased productivity.
  • It can act as a barrier to work for those it aims to protect.

The premise of targeting some living wage estimate as a minimum is intuitively wrong. This is because the two concepts represent different things. Whereas the minimum wage effectively represents the lowest cost to supply labour, the living wage is equated as that cost plus various additional costs. The notion of equilibrating the two to increase overall welfare is something that can only ever work in the mind of an idealist.

Increasing the minimum wage doesn’t necessarily increase the wealth of those it affects directly. Workers reliant on the minimum wage also consume products that are heavily affected by minimum wage increases. The only way arbitrage can occur for the low income worker is if existing prices can absorb input cost increases.

The signal of disproportionate minimum wage increases is wrong. It doesn’t incentivise the development of one’s marketable skills. When minimum wage growth outpaces general wage inflation (as with the living wage argument) it tells workers that they can bank on real wage increases without developing their marketable skillset.

Finally, the minimum wage acts as a barrier to working for those with low skills. Essentially it prevents the person worth $10 p/h from working at that rate. Instead it forces them to compete for work with $20 p/h workers. Who will employ the $10 per hour worker when they can employ a $20 p/h worker for the same cost?

I’m all for increasing our economic wellbeing and wealth. I just don’t think the solution is to successively raise minimum wage faster than general inflation.

8. Killing trucks to save cars

Article: Associate Minister of Transport Julie Anne Genter says a target of zero road deaths would be “audacious, but ambitious targets are needed to focus the resources of both central and local government to save lives on our roads

Comment by murray86:

“…Take the trucks off the roads for a start. I heard an interview on national Radio with the chap from the Dog and Lemon Guide and he identified then that trucks figure disproportionately in road accident.” (sic) (Truncated)

Proposing to take trucks off the road is not a sensible argument.

Firstly, correct, trucks do account for a disproportionate amount of deaths on the road. In 2016 trucks accounted for 6% of total vehicle miles travelled, but had a hand in around 20% of the road deaths. This doesn’t mean that trucks are inherently at fault, though.

Think about what a truck is. It is a large, heavy, vehicle that at highway speeds carries a huge amount of momentum. Thus when they crash into other, smaller, vehicles, they tend to devastate. I don’t know why we would assume truck drivers to be worse drivers. In fact given their experience and various competency requirements, they are likely the safest drivers.

In addition, trucks are the primary method by which our goods transport network operates. The rail network is no way developed enough to compensate. Likewise with coastal shipping. Essentially without trucks there is no point in having high quality roads because private and light commercial vehicles wouldn’t be able to exist.

The answer, isn’t to vilify those who we think are the issue but, as the Minister proposes, to educate all road users through the advocacy of a more holistic road safety strategy.

9. The ministry of mismanagement

Article: Gerry Brownlee speaks out on EQC: “I just think people aren’t seeing the wood for the trees here. And in this case the wood - Megan - is making a whole lot of mischief"

Comment by Pharos:

“…There is a cost to taxpayers of $270 mill, and still counting, arising out of gross mismanagement on the watch of the previous government. Not long ago Mr Brownleee palmed this off as in the vicinity of $60 mill.” (sic) (Truncated)

I agree.

But are we surprised by the actions (inactions) of politicians without consequence?

I mean. We all seem to be pretty okay with them doing as they please. We don’t really appear to incentivise them to do anything productive. About the only thing we do incentivise them to do is to pay off mortgages with tax payer dime and ensure that they are well set up for when it comes time to abandon their electorates.

When issues with their portfolios arise we allow them to explain it away as “a good problem to have” or proclaim a lack of awareness. One of the ways we validate these type of responses is by allowing them to shield themselves from politically neutral advice through a buffer of ministerial staff. Gareth Morgan has written a must read on this.

I’m not sure what the fix all solution is. However I do think it involves the electors paying closer attention to the powers of the elected.

10. That evil leftist agenda

Article: ANZ says first home buyers are becoming more active, but fewer home owners moving up the property ladder in Auckland

Comment by Ex Expat:

 “…I'm sure you know it was a reference to the Leftie bedtime book, 'Of Mice and Men'. My son came home last month asking for $4 to pay for a copy pirated by his teacher for class study. I refused on the basis that it's wrong to pirate, but it was really a passive aggressive way of saying I don't want my child reading that type of literature. He's not destined to be part of the hive.”

I agree. It is bad to pirate.

Lessons learned from The I.T Crowd.

As for the real reasoning, though. Is it appropriate to be forcing your opinions and ideology upon your child? Naturally it happens in a subconscious manner, but to actively filter like this is akin to indoctrination.

The formulation of ideological opinions and perspectives is based on the digestion of a range of influences. Personally I would think that reading ‘leftist’ literature is just as likely to reinforce someone’s current perspectives as it is to compel them to the radical left.

Plus, Of Mice and Men isn’t an overtly leftist tale. What it deals with is a pursuit common to all of us; our dreams and how difficult it is to attain them in the face of (to us) seemingly random exogenous circumstances. An important lesson, I would have thought.

It sounds like an incredibly narrow minded approach to educating a child. If you were so worried about the influences of that dirty leftie Steinbeck, surely the logical thing would have been to prescribe some Fitzgerald and Hurston to balance it out? The same motifs could then be examined from three very different social and ideological perspectives.

I don’t think there is any moral highroad in telling people what to think. Only in being able to accept that they can think for themselves. Children included.

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111 Comments

by  Cowpat  |  13th Apr 18, 10:24am 1523571841

Ex expat decides whether to become Ex ex expat or attend parent -child counselling sessions.

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by  Ex Expat  |  13th Apr 18, 1:39pm 1523583598

In a different time zone and need to get some breakfast or even better a drink at Raffles before reading my mention in dispatches on an iPad and replying.

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by  JB  |  13th Apr 18, 10:35am 1523572501

What is so often overlooked as it has been here that it’s generally minimum wage workers receiving the income tested accommodation supplement.

An increase in the minimum wage will not therefore have the desired effect of a higher net income unless equivalent adjustments are made to the accommodation supplement.

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by  Hardly  |  13th Apr 18, 1:09pm 1523581759

It should decrease cost to govt though then?

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by  Lapun  |  13th Apr 18, 1:37pm 1523583446

and WFF.

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by  mfd  |  13th Apr 18, 4:38pm 1523594333

The alternative effect of shifting the burden of funding these workers from Government to their employers isn't so bad either.

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by  unaha-closp  |  13th Apr 18, 10:39am 1523572756

Don't read the comments.

Fixed it for ya:

1 – The Auckland Unitary Plan (AUP) has a huge amount of land (around existing infrastructure) that is banned from future urban development.

2 – Removing the RUL simply dis-incentivises sprawl and all the bad things associated with it.

3 – The cost of land is an issue. But the cost of regulatory hurdles that has been the biggest component of property price in Auckland.

The southern limit of the Auckland RUB is in Pukekohe and the northern limit is in Warkworth. Auckland is engaging in world record sprawl, spreading a city over 100 km with just 1.6 million people is extremely ambitious. The RUL is the mechanism Auckland Council is using to drive sprawl.

Auckland City bans development at Taknini/Ardmore, adjacent to existing infrastructure (motorway, railway). Auckland City bans development at Swanson, directly adjacent to a railway station. Auckland bans development southeast of Kumeu, because it is closer to existing infrastructure than northwest of Kumeu (where development is funded).

Auckland's incompetence at general regulation does not excuse its incompetence at land use regulation.

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by  k_s  |  13th Apr 18, 10:58am 1523573938

Are we looking at different maps?
There's about 650 hectares of future urban zoning in Takanini - relatively close to motorway and rail.
https://geomapspublic.aucklandcouncil.govt.nz/viewer/index.html

Swanson - Look on google maps to see the terrain.
Building up that area would mean extensive land works and clearing the native bush.

South of Kumeu - Sure, there's a train line...But there is absolutely no arterial roading infrastructure.

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by  unaha-closp  |  13th Apr 18, 12:49pm 1523580598

https://unitaryplanmaps.aucklandcouncil.govt.nz/upviewer/

This map is a better.

Takanini - the majority of the Takanini area you refer to got bumped from an initial release of 2023 back until after 2043 by the Auckland Future Urban Land Supply Strategy modifications of July 2017.

Swanson - the terrain is sort of hilly like SE Pukekohe (2023) and Warkworth NNE (now). Swanson has a brand new railway station and horse paddocks within 50 m.

Kumeu doesn't have a lot of infra-structure around it. The council bless-em enforce a RUL that means we can only build to the North and West of the town. Removing the RUL would let people build SE of Kumeu, in places closer to Westgate, thus reducing sprawl.

And I can go on.

Greenhithe is inside the RUL, but everything has been made Large Lot to block development. Large Lot is a designation to preserve intrinsic character of the land for future generations, next to a busy motorway.

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by  k_s  |  13th Apr 18, 1:40pm 1523583602

I suggest you have a think about what the AUP aims to do, first and foremost.
By implication it intends to increase effective land area via increasing density. There are some very intuitive reasons for this.
A secondary intention is to signal future development areas where infrastructure investment will be focussed.
Is it a perfect plan? No.
However, I do think it is a better option than allowing free for all unstructured development.

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by  unaha-closp  |  13th Apr 18, 4:31pm 1523593909

What the AUP does is elevate the cost of Auckland land, whilst subsidising the development of large exurban sprawls. You can tell this is true, because Auckland has very high land costs whilst the city triples the size of Warkworth/Huapai/Pukekohe.

To say this is a plan "to increase effective land area via increasing density", will require some evidence that it is doing so. Good luck.

The AUP is a plan for building more sprawl than free for all unstructured development can muster. On a per capita basis - Auckland builds less apartments than Houston; Houston sprawls less than Auckland.

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by  k_s  |  13th Apr 18, 5:16pm 1523596603

Without a doubt the AUP has increased the value of upzoned property vis-a-vis non upzoned property. More so, dependent on intensity of property - Ryan Greenaway-McGrevy wrote about that last year. I see you feature prominently in the comments of that article, too.

If they were incentivising sprawl why didn't they simply do as you propose? i.e. remove the RUL and forget about upzoning huge swathes of existing developed area.
The ratio of low density to high density zoning (given I haven't calucluated it) in Auckland must be so small just by looking at the maps. So I just can't see how that is incentivising sprawl.

My ultimate point is the intention is to increase density. The policy is but 18 months old. What we require is constant assessment of it's performance. If it works, great. If not, let's look at removing the RUL.
Aimlessly advocating for removal of the RUL is just another knee jerk reaction similar to the banning of foreign investors. At least get some data before you make such decisions.

We will probably get nowhere arguing about it on here. It's quite possible that I am wrong and I'm not seeing your perspective correctly.
You are more than welcome to come and see Ryan and I at the office and talk about it, however.

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by  unaha-closp  |  17th Apr 18, 11:33pm 1523964794

Without a doubt the AUP has increased the value of upzoned property vis-a-vis non upzoned property.

Yes, and as you can see from my previous comments i think that is bad result as i disagreed with Ryan's reasoning. I believe the policy is a good one, but think that his math is wrong. There needs to be decrease in relative values, not an increase (but let's not rehash that argument).

If they were incentivising sprawl why didn't they simply do as you propose? i.e. remove the RUL and forget about upzoning huge swathes of existing developed area.

Because removing the RUL from Auckland would result in less sprawl than the council is trying to create.

The reforms increased greenfield land supply inside the Auckland region to levels never witnessed before. The Warkworth, Orewa, Huapai and Pukekohe exurbs inside the RUL shall double or more in size, paid for by Auckland Council. And the RUL was eliminated from every other town, there was an interesting court case about Waiheke where the council won the right to have pavement over every piece of farmland on the island.

BTW - removing the RUB is not preferred, it just happens to be a solution that delivers intensity an order of magnitude better than what Auckland Council are doing. My preferred solution would be to have Auckland planning rise to the standard of mediocrity..

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by  RickStrauss  |  13th Apr 18, 10:45am 1523573112

Shots fired.

Re Steinbeck, I haven't read Of Mice and Men but was indeed surprised to hear it might be almost as evil as Das Kapital.

Just finished reading my first Steinbeck novel yesterday - East of Eden. If that's anything to go by, Steinbeck is an excellent writer and his acclaim quite justified.

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by  ngakonui gold  |  13th Apr 18, 10:52am 1523573567

Can't beat the GRAPES of WRATH.Excellent book (Pulitzer Prize) and a pretty good film with Heny Fonda.

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by  RickStrauss  |  13th Apr 18, 10:54am 1523573647

Will check that out next, potentially. Cheers.

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by  Andrewj  |  13th Apr 18, 12:21pm 1523578918

I enjoyed 'Travels with Charley: In Search of America ' read it last year on a trip.

”My wife married a man; I saw no reason why she should inherit a baby. I knew that ten or twelve thousand miles driving a truck, alone and unattended, over every kind of road, would be hard work, but to me it represented the antidote for the poison of the professional sick man. And in my own life I am not willing to trade quality for quantity. If this projected journey should prove too much then it was time to go anyway. I see too many men delay their exits with a sickly, slow reluctance to leave the stage. It’s bad theater as well as bad living. I am very fortunate in having a wife who likes being a woman, which means that she likes men, not elderly babies. Although this last foundation for the journey was never discussed I am sure she understood it.”

“I have always lived violently, drunk hugely, eaten too much or not at all, slept around the clock or missed two nights of sleeping, worked too hard and too long in glory, or slobbed for a time in utter laziness. I've lifted, pulled, chopped, climbed, made love with joy and taken my hangovers as a consequence, not as a punishment.”

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by  Gillybee  |  14th Apr 18, 10:43am 1523659413

'Sweet Thursday', a favourite of that notorious lefty Bob Jones ;-)

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by  Withay  |  13th Apr 18, 12:11pm 1523578294

It is an interesting discussion to have though. Our education system would be left leaning in general, is it appropriate to have left leaning literature outside of a structured class which then you have an alternative view presented for discussion and development of you own thoughts and leaning? I’m not saying there’s a leftist conspiracy as I don’t have kids and it’s been a while since I’ve been at school so I’m making a few leaps here but looking overseas especially with universities there is serious indoctrination of the left wing happening.

Ex expat was accused of indoctrination however it may be a case of both the pot and kettle being black? At least this way expats child will have both sides presented!

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by  RickStrauss  |  13th Apr 18, 1:14pm 1523582063

Would've thought the best way to have both sides presented is to encourage children to read from all perspectives - not to create a safe space at home where only one side's perspective is encouraged because the evil different out there might swoop one's young away.

You'd arguably have to expect the education system to lean left rather than right. It would be rather self-defeating for it to lean right, given it is publicly funded and rests on a core assumption that the cost of education is better spread across the many than funded each to his or her ability - for the good of both individuals and society.

You might expect private schools to lean more right, but even in NZ these receive taxpayer subsidies and, really, it doesn't seem like many on this forum are holding their professed right-leaning ideology tightly enough to go off and pay for their own private education.

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by  J.C.  |  13th Apr 18, 1:22pm 1523582549

If you drew a map of the associations, you would probably find that the "family funding" for private school education has vast conecttion with public policy.

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by  Withay  |  13th Apr 18, 2:14pm 1523585697

Thanks for the reply Rick

1st paragraph; I agree, presenting both sides is what I am after and wrote accordingly. I’m not into safe spaces at home or at school so maybe we see eye to eye on that.

2nd paragraph; I think being publicly funded isn’t making our schools better. Innovation doesn’t come from homogeneity hence why diversity is persued in most other aspects of our life (persued incorrectly many times though). I would rather have a greater gap between schools but with a higher overall level than everyone being more or less equal but at a lower level.

3rd paragraph; We have money taken from us to pay for education without choice. Many on the right I imagine would love to have that money back and spend it on their selected private school rather than being forced to pay twice by our current system.

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by  RickStrauss  |  13th Apr 18, 7:14pm 1523603698

Thanks too, Withay.

2nd paragraph; I'm interested in ideas on funding. Are there any places with a better funding (and as measured how)? Educational measurement seems to place the well-public-funded countries consistently higher:
https://www.independent.co.uk/news/education/11-best-school-systems-in-…
https://www.theguardian.com/news/datablog/2010/dec/07/world-education-r…

If we go full private won't we just exacerbate current inequality rather than giving people a reasonable chance to social mobility?

3rd; Yeah, I admit to on the odd occasion facetiously winding up the all-on-my-own-two-feeters for their benefiting from public services.

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by  Withay  |  14th Apr 18, 7:42am 1523648562

Hi Rick, good to hear back.

I might try and tackle the inequality side first then funding. Inequality by itself is not inherently bad and often signals advancement. Take phones for example; the iPhone revolutionised phones, you can now buy a smart phone for what we used to pay for a “dumb” phone. Even though not everybody has an iPhone the people with a basic smartphone are better off than they would have been if the iPhone never existed. By forcing schools to be public and standardised, it limits opportunity for innovation but decreases inequality (in this case not good).

Regarding funding, I’m an advocate for change but not radical change. Thanks for the interesting links by the way, particularly the second as it compared apples with apples (you can clearly see the Swiss are teaching their kids to be bankers!).

Hear me out with the below as I’m trying to flesh out a better system but it’s not a fully formed idea yet:

Initially, choice would be the mechanism for improvement. Let charter/private schools operate and fund them no more or less than public schools. If people want to top that funding up out of their own pocket more power to them.
Secondly, some sort of tax credit given to parents (only usable for education) to then allocate to their selected school. The aim of this is to increase competition between schools as there is in business. I also think this would drive more positive engagement between parents and schools as people care more when we feel we’re spending our own money and we accordingly would be more interested in the outcomes. As educational success is as much a cultural priority as anything (as seen in your links) I think this would help reinforce that. (Teachers would also become more valued)
Thirdly, transition from tax credits only usable for education to an outright tax credits to complete the change.

The above is in no way perfect but I honestly think we can improve upon our current and decent school system and this would give incentives and flexibility where we are currently lacking. Feedback welcome

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by  PocketAces  |  14th Apr 18, 9:04am 1523653441

Inequality is quite natural, it is the degree to which it manifests itself that is the problem. It is a problem today. Back when it was less so, pretty much everyone could afford some sort of holiday every year, now we have kids whose parents can not even afford to take them to a beach for the day. We must address this, phones are not the issue.
Schools are not a business, not everything in this world is. Tax credits for schooling for the poor would make no difference as they would still be confined to the school that is closest, it is best to see to it that schooling available to people least able to choose is of best possible quality. Education should not be a competitive thing. Teachers are most highly valued in Finland, their methodology is probably the best to try to emulate, their results are also the highest. Flexibility is the preserve of the wealthier and they already have that.

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by  Withay  |  14th Apr 18, 12:18pm 1523665126

Hi PocketAces. Agree with your comments about inequality which is why I try to delineate between good and bad inequality in my comments. Bad inequality is due to our monetary system and the creation of credit by banks or government. This topic wasn’t about that so I left it out.

You’ve disagreed with my idea which is fine, a lot of what you’ve said is more along ideological lines (schools are not a business for example). I was trying to have a conversation of how to improve it so specifically the poor have a higher quality of education i.e the smartphone example. I feel reading through that most of your reply is based around the dislike of inequality rather than what I outlined?

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by  PocketAces  |  15th Apr 18, 7:12pm 1523776364

I have no problem whatsoever with alternative education, all of my grandchildren receive it, one family uses the Steiner system, the other home schools.What I have a problem with is education from public funding being provided for private profit ie shareholders, same thing for elder care and more especially ECE.
You may or may not be aware, but holding leftist views is perfectly legal. I believe there are some things need to be provided from the public purse and there are others where people can go knock themselves out making a profit.

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by  Withay  |  15th Apr 18, 7:39pm 1523777975

“What I have a problem with is education from public funding being provided for private profit“ - Even if it could improved the service being offered (hence why your family members opt for Steiner Etc)? Again, I feel this is ideological over pragmatic.

“You may or may not be aware, but holding leftist views is perfectly legal” - I didn’t mean to offend, just question. What frustrates me with leftist policies is that they impose more on people than rightist policies. Small government gives much more freedom for everyone, you are still free to pursue your leftist interests but with more money in your pockets!

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by  murray86  |  13th Apr 18, 11:01am 1523574063

I wonder if Kade is making the same mistake many of us also make - taking part of a comment out of context, and then jumping to a conclusion from that position. For example my comment about the trucks, while including the accident stats, was more about the fact that trucks are subsidised, by having the damage they do to the roads paid for by all road users. Subsequent comments clarified this. But despite the apparent polarised perspective i do understand that ALL trucks cannot be taken off the roads, but was only suggesting that a more balanced approach that ensures rail, which is also a more ecologically friendly, and efficient approach, is properly utilised as well.

I suspect the polarisation of many comments by a lot of commenters is there for the same reason I inject them. Not to deride opposing views, but to stimulate debate, and thus learn. I have learnt so much from the commenters. I really do enjoy the often facetious humour, but i also enjoy being challenged on my comments.

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by  J.C.  |  13th Apr 18, 11:14am 1523574894

I think you make a good point. People have their own narratives, regardless of what is expressed in any source content. Their narrative is not necessarily "dumb" nor is completely irrelevant, I think you will find that most people intuitively believe that when they use internet forums they're free to express themselves and measure what they write based on their own boundaries.

In the case of interest.co.nz, the topic of high house prices or changes to house prices inevitably will attract narratives that are emotionally loaded, for good reason. It's a subject that instills fear in many while promoting a false perception of self worth in others. You have to accept that trolls are going to exploit this. It is what it is.

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by  KH  |  13th Apr 18, 11:29am 1523575749

Shudda been titled. "Overly serious Phd student corrects sarcastic and facetious comments. And misses the point of most of them". Murray's explains it well. Comments are necessarily short, and I see them as part of a bitsy rich and diverse conversation, which in a comments stream does not need to reach a conclusion. Or even a correct conclusion.

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by  NoFax  |  13th Apr 18, 11:05am 1523574354

Interesting enough. I think though that a parent has the right and duty to educate his or her child which includes values. That will happen no matter what so to call that indoctrination implies that the OP's approach is not indoctrination. But of course it is.

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by  Zachary Smith  |  13th Apr 18, 2:20pm 1523586059

This reminds me of a conversation I had long ago where I suggested that schools no longer teach values and then had to endure an angry rant about why schools should never teach values.

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by  B-Rocker  |  13th Apr 18, 11:09am 1523574540

On number 3 - the argument of road congestion frustrates me.
You say: "it is [not] fixed by building new roads".
I have heard this argument before, and it makes no sense to me. Logic suggests that if you build more roads, all else being equal, then congestion will be eased. Are you sure you are looking at this on an "all else being equal" basis? Of course, if the population increases at the same time, the effect is not seen, but this doesn't mean building more roads hasn't worked. What am I missing with this one?

Your "simple and fair" congestion charging is relevant in some sort of utopia where people have real choice about where and when they drive. Ummmm.... do you really think that the Auckland motorway is jam packed on a work day morning because all those suckers have CHOSEN that moment as the best time to drive? No. They are just trying to get to work on time, and this is the ONLY way to do it. You might think penalising them with another charge is fair, but I don't.

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by  rastus1  |  13th Apr 18, 12:18pm 1523578717

..what are you missing? Build roads and they wil come. Plenty of info on this phenomena out there..such as..

".........what they call the fundamental law of road congestion: New roads will create new drivers, resulting in the intensity of traffic staying the same"

https://www.wired.com/2014/06/wuwt-traffic-induced-demand/

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by  B-Rocker  |  13th Apr 18, 1:31pm 1523583099

Thanks, you have just provided proof that this analysis is not on an "all else being equal" basis.
i.e. the new road takes increased demand.
You seem to argue that the increased demand is actually CREATED by the new road being built. This is only true in as far as the new road:
1. Unlocks existing demand from a static population (in which case the new road has had a positive effect by removing a barrier to freedom of movement); or
2. Attracting more people and businesses.

All else being equal, a new road means more capacity for people to move.

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by  rastus1  |  13th Apr 18, 1:45pm 1523583903

The new road creates demand - so back to square one. Keep googling.. the penny will drop..

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by  B-Rocker  |  13th Apr 18, 2:12pm 1523585520

Surface level argument from Rastus. What a surprise.
Maybe you should stop googling and think on it.

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by  k_s  |  13th Apr 18, 2:30pm 1523586637

We do not live in an "all else being equal" world, B-Rocker.
People act on incentive.
A publicly funded roadway is one huge incentive for people to drive more. It all stems from the fact that people love to get a bargain.

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by  JimboJones  |  13th Apr 18, 2:02pm 1523584965

Yes for congestion charging to work their either needs to be a whole heap of people driving on the roads at rush hour when they don't need to (which seems like a pretty silly thing to do), or a whole lot of people quitting their jobs and going on the dole.
It might work in other cities where there is a good public transport alternative, but not Auckland.

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by  profile  |  13th Apr 18, 11:17am 1523575051

How the green economy works - "Britain's biggest solar farms receive more cash from green subsidies than from selling the electricity they produce, figures reveal.
Energy producers were encouraged to start solar farms with generous handouts funded by a ‘green levy’ on taxpayers’ bills.
But many of them now make the majority of their cash from the subsidy – instead of the electricity they produce."

http://www.dailymail.co.uk/news/article-5592691/Solar-farms-receive-cas…

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by  KH  |  13th Apr 18, 11:33am 1523576026

Always been lots of subsidies Profile. Look at all the old power generation here in New Zealand which was built by the government in the 30s- 40s- 50s. Do you think the Clyde Dam of the 80s was ever economic from the eleciticity income it produced. Huge cost, and then given away to other owners.

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by  Andrewj  |  13th Apr 18, 11:29am 1523575796

We need a happiness survey, are people who don't have the internet or get newspapers happier, I suspect so.
Personally, I only comment for the likes, I really need those likes, that and the fact everybody else is wrong.

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by  Kate  |  13th Apr 18, 11:31am 1523575908

I just 'liked' you - happy to spread the cheer :-).

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by  Henry_Tull  |  13th Apr 18, 1:14pm 1523582089

I just like to like. Its a thing.

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by  Kate  |  13th Apr 18, 11:30am 1523575805

Enjoyable read. I so agree with the point that it's the articles that bring you back to the site and the comments that keep you here longer than you had intended :-).

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by  Alter Ego  |  13th Apr 18, 11:34am 1523576078

https://www.marketwatch.com/story/panicked-about-a-stock-market-crash-w…....

Written please note...2018-02-08

Please note...QE, where did the money go.???

Please note today's Date.

Friday the 13th.......

Why buy houses, when a card will settle yer nerves, fix yer money with a QE loan.......and wait for QE2019.

It is in the cards, on the cards, 21.3trillion and rising.

http://www.usdebtclock.org/

I am forever in your debt...Mr Trump... You are such a card....(But with a Big Bang Fetish).
I am forever in your debt Mr Xi...You are such a card.....we owe you lots.
I am forever in your debt Mr Putin...You are such a card...(But with a big Bang Fetish).
I am forever in your debt Mr Taxman....You are such a card...(But with an eternal...Super growth Fetish)

This funny munny is no laughing matter....but I thought I might get a rise out of you all....Friday the 13th...don't come around too often.

Please do not pull the trigger today.

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by  Andrewj  |  13th Apr 18, 11:42am 1523576566

It's interesting how we like to focus local when the SHTF in Syria, which could lead to global issues not seen in a generation or two.

https://www.rt.com/news/396142-china-naval-drills-mediterranean/

Lots of these guys have been seen in Syria
http://nationalinterest.org/blog/the-buzz/all-the-reasons-why-america-s…

with these strapped underneath

http://missiledefenseadvocacy.org/missile-threat-and-proliferation/miss…

Russia is flabbergasted?

http://thesaker.is/the-russians-are-flabbergasted/

But lets focus on the guy who likes to grab p**sy and is hated by the establishment, could he be the first of a long list of anti establishment presidents voted in by the people?
Perhaps the people are trying to say something and perhaps we should all listen, governments need to be for the people.

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by  Noncents  |  13th Apr 18, 12:16pm 1523578613

An interesting article. It would be good to see some similar articles based on comments (as there are some gems out there)

The important thing with comments is
a) To remember they are just an opinion, and
b) You/me/we have no choice but to take them at face value - i.e. you don't have the full back story of the poster, or an understanding of what experiences they may have had to lead up to that comment.
c) Also they only provide a limited insight into the opinion. I don't think it is valid or fair to expect detailed analysis, rebuttal, citations, etc... in the comments section. Agree or disagree (A thumbs down may help the rage a bit) and leave it at that.

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by  Hardly  |  13th Apr 18, 1:08pm 1523581701

Did you see there are three holes in the sun and that the rapture is coming?

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by  Pragmatist  |  16th Dec 19, 1:31am 1576413076

.

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by  Hardly  |  13th Apr 18, 5:11pm 1523596292

Not on earth one but if you pop over to earth two my double there has been and he hacked my interest.co.nz account!

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by  Squishy  |  13th Apr 18, 1:31pm 1523583098

I enjoyed the Top 10 this week, would Kade consider a more regular feature? Question about #7, I'm no coffee expert (prefer tea myself!) but isn't it entirely possible coffee production costs could scale exponentially based on wages because you cumulative costs passed through? Not that I disagree with an improved minimum wage, actually I hope the government go further towards structural improvements in the employment market as well.

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by  Ralph  |  13th Apr 18, 2:29pm 1523586573

If some tax is good then more tax is automagically better

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by  THE MAN 2  |  13th Apr 18, 4:44pm 1523594657

Kade Sorensen, with respect, you may well have a PHD in economics, that in itself doesn’t exactly make you an expert in running a business.
If a business owner has done the sums on how much he needs to charge for a coffee, I would believe him over you as he has the figures that he runs on.
If they do not sell as many coffees due to higher Prices then on his figures he needs to charge $8 per coffee.
There are going to be many business’s that just won’t stack up as many workers actually earn more than what the business owners get!

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by  k_s  |  13th Apr 18, 5:15pm 1523596536

FYI:
I do not have a PhD. Read the headline a bit more carefully.
I actually have a substantial amount of business experience.

True. My calculation might be wrong, too.
I just assumed it to be priced at the marginal cost - probably not an unfair assumption with a commodity such as coffee.
The point was that a 60% increase coming from a 25% increase in marginal costs doesn't sound too believable (at least to me).

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by  Hardly  |  13th Apr 18, 6:47pm 1523602052

60% increase off a 25% increase in wages is ridiculous. How could a price increase be greater than the cost of the component increase?

Anyway, costs don’t equal prices.

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by  RickStrauss  |  13th Apr 18, 7:16pm 1523603775

Mojo apparently has only been able to justify a $0.10 increase. They seem to be doing pretty well as a business, even if they consistently seem to have the highest-priced coffees anyway.

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by  Cowpat  |  13th Apr 18, 6:45pm 1523601928

Kade, how do you define affordability in relation to house prices. With affordability in mind , would a prolonged period of rising mortgage rates in New Zealand lead to higher home ownership (owner occupier ) rates or possibly lead to a further fall. In a global environment of rising rates which countries are more likely of having to reverse course earliest

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by  THE MAN 2  |  13th Apr 18, 10:41pm 1523616111

Kade, you have substantial business experience first prior to being a PHD student in economics?
That is probably an odd order of doing thi gs!
However, the owner of a major coffee franchise that we go to very often has done his figures and says that once the minimum wage is $20 he will need to charge $8 per coffee.
I have not got his figures but if that is what he says, then who are we to not believe him.
Bear in mind coffee shops have peak times and so Labour is variable.
Problem is that the ones who are paid $20 already will then want $25 etc so it isn’t just the ones on minimum that will be costing the business owners!
We will notice price rises in everything as each business has to raise wages and so is anyone actually better off?

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by  Hardly  |  14th Apr 18, 12:41pm 1523666516

You will often find business - see landlords and warm house regulation - don’t provide an objective view of what the impact of what regulation will be.

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by  Ex Expat  |  14th Apr 18, 2:43pm 1523673794

I’m honoured to be mentioned in an article, especially concerning parenting.

During our expat years, we consumed various brands of education, all of them Private. We had experience with American, British and NZ schools. Given the fees were generally $35,000 per year, the children were surrounded by relatively wealthy peers. They were taught to a good standard and given the little things that matter to me e.g. a firm handshake, looking a person in the eye when talking to them and the respect to use a person’s correct title.

Despite that schooling environment the children also knew the other side of the fence. We visited villages, poorer areas and they knew that we supported some disadvantaged children in their schooling. They also knew that they couldn’t have everything they wanted, even if other parents gave their peers the latest and greatest.

Upon returning to NZ, we were dismayed to find our children shunned for having Asian and Pacific Island friends, not being rugby mad and not having the ‘right’ NZ schooling background. We changed to State schooling, even though it gave us less control over what they were subjected to in the class.

In the last couple of years, we have found our children have become incredibly impressionable. When we sit around the dinner table and everyone discusses their day, they tend to recount something they saw on YouTube, not a first person experience. They are sitting ducks for targeted social conditioning and things like Taxinda visiting multiple schools are not a coincidence in my opinion.

If the school was balanced in its portrayal of political thought I wouldn’t mind so much but I’m not seeing it, which is why I get wound up about teachers pushing their leftie dogma. Selwyn got rid of a leftie principal some years back and damned if I’ll let that creep back in to the school.

For those that think I’m conditioning my children, I make no apologies. I’m not raising them to be part of the hive. They will hopefully be self reliant respectful members of society. They already make friends across the range of ethnicities and have a strong sense of self worth. What they don’t need is indoctrination in the politics of envy.

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by  lesnakey  |  14th Apr 18, 4:07pm 1523678853

Who comments on the commenters?

LOL. Nice work, Kade.

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by  Dale Smith  |  14th Apr 18, 9:44pm 1523699054

5.1 – The Auckland Unitary Plan (AUP) has a huge amount of land (around existing infrastructure) that is zoned for future urban development.

An AUP is a restriction because it starts with the presumptive right not to build (ie zoned for when you may be allowed to development in the future, ie not NOW).

For prices of land to be more affordable, the land has to be available as a presumptive right to build excluding restrictions for environmental, protected soils, future right of ways etc.. This would in effect make a lot more land available NOW, and remove the ability of landbankers to game the present system.

5.2 – Removing the RUL simply incentivises sprawl and all the bad things associated with it.

Since the price for all land is set on the fringe, then removing the RUL helps make land relatively cheaper, or at least slow or stall any further increases going back into the center, allowing those that really want to move in closer, to do so at more affordable prices. This of course is run parallel with freeing up of density controls going back into the city. Resulting in cheaper prices for all, irrespective of where you want to live, In spite of what you say this is a good thing.

5.3 – The cost of land is not necessarily the issue. It’s the cost of regulatory hurdles that has been the biggest component of property price in Auckland.

Any monopoly or restriction anywhere in the system is bad, and since the land is the first security, if this is restricted, then this ideology is reflected right through the chain. And any saving you might try to make via, lower construction costs, innovated building methods, lower interest rates, home start grants etc. gets capitalized into the land price. The only winners being the land owner, or the councils if they can claim value gain capture.

So perhaps instead of aimlessly advocating sprawl Twyford needs to be instead focussing on lowering overall construction costs, while monitoring the performance of the AUP in addressing the third point above.

No, what Twyford, needs to do first is open up the RUL, and then what he would find it would be a lot less expensive to buy inner city land like Unitec. In stead what do we get, pay today's inflated land price, and then claw back the difference by making houses less expensive by reducing the size of them, and packing more in. Of course, since the Govt. is one of the largest land owners, they might see allowing prices to naturally be more affordable, as not a good thing for their business.

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by  k_s  |  15th Apr 18, 12:17am 1523708275

It's not clear whether you are advocating the repeal of the AUP or to maintain it but with the RUB removed. In the latter case, it is counter intuitive to the goals of the AUP.

You also have to remember that we are dealing with some pretty significant resource constraints. In some perfect Laissez-faire system with perfect ramping, removing the RUB may make sense. However, we are naturally limited by resource and the idea that a city should be somewhat functional.

1 - As I alluded to in another comment, infrastructure is key.
Simply opening up land now with no regard for future infrastructural considerations is madness.
And, again, the AUP is focused primarily on density. If you don't increase this now, you will never get it with the option of sprawl. Removing the RUB just makes no sense if you maintain the same goals of the AUP.

2 - Sure, increased supply is going to have downward pressure on prices. However, hedonic prices of land are actually very low in comparison to house price (Maybe 5-7% if you are to believe Kirdan Lees). That is the estimated real value of exogenously and endogenously limited land supply. So, I don't know to what extent you will get substantial gains if you aren't also addressing regulation burden. This sets up for my third point.
Also, simply opening up low density land at Swanson doesn't necessarily imply that the elasticity of supply of land suitable for high intensity development is increasing.
Sprawl is not better for everyone when it comes time to start paying for public services.

3 - I don't know where you are going with this point...My point here is that we need to address issues that drive a wedge between construction costs and prices. That is taking cost that has been capitalised into 'land' value out.

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by  Dale Smith  |  15th Apr 18, 12:16pm 1523751419

Yes the AUP goals are counter to achieving truly affordable housing, as you state it is about forcing higher density, by restricting the boundaries. All the AUP is the RUL on steroids. IE more command and control.

The AUP restrictions will increases house prices, which the proponents countered by reducing house size to make it ‘affordable’, to the point they cannot afford private transport, and therefore need to live with the support of public transport. This is well in good if small houses and no cars are what you want, but under the AUP model, you are still paying far more than you need to achieve this.

You would find whether people truly wanted this lifestyle if you made all housing more affordable, and let them have a choice that wasn’t made by having to pay far more than you need to.

Of course, the same argument can be made by offering people only McMansions on the fringes. What I am saying is allow the people to do either or, but what ever they chose they can do at a lot more affordable price.

Which brings me on to your point about infrastructure. If you break down infrastructure into its main components, namely transport, and the three waters. Then things like waste and storm water are easily handled in new, and to a certain extend in brownfields developments, by STEP systems and catchment planning. Potable water is easily enough to supply.

Roading will always be an issue in Auckland, due to its historically poor planned city footprint. And this is where if the land prices were ‘allowed’ to be truly competitive, then you would also get the price of the land reflecting any negativity due to poor surrounding transport links, this would then allow the land to be purchased at a better price and then allow council to capture any gains by improving the infrastructure, and or the landowner, having paid less for the land, has the extra money to develop the needed roading, with the resulting price still being affordable without the need for Govt. subsidy. Also with pricing being more affordable, then what deposits purchasers have will more easily meet the banks tougher LVR limits.

All the restrictions allow for is for the super profits to be captured by the land owners who are mainly private.
And all the Govt. are proposing is to supersede the private landowner and capture the Super profit for themselves, some of which they will give back as a subsidy. Swapping a private(landowner) monopoly for a public (Govt.) monopoly.

The main resource we are lacking, is the open minded ability to look at those jurisdictions were what I am suggesting provides housing at far more affordable pricing, without the need for continual Govt. involvement.
You miss my point in your Swanson analogy, it’s about making all housing more affordable. If people truly want to buy high density based on the its advantages, then they will be able to do so at a lower price, or will be able to buy a bigger, or in a better location for the same price. But if they don’t want that, then maybe they won’t.

Kirdan is incorrect in that having been a developer in jurisdictions with high restrictions and low restrictions, I can tell you the land price differential is at least 10x in its raw land form, and 2x its developed form ie land and regulatory burden.

My point on development costs, is that you can make all the savings you like on the construction and regulatory consenting side, but unless you have first sorted out the restrictive land side, then any saving will get capitalized into the land side, for no benefit in making the price more affordable, all the benefit going to the land owner.

Further, if restrictive boundaries are removed, then the ideology change in mindset for this to happen, will also allow the successful remove of regulatory construction burden. You cannot remove the capitalized costs in land by first removing the cost of regulatory burden, it has to be the other way round.

And I am not advocating a Laissez-faire approach at all, as I mentioned 'a presumptive right to build excluding restrictions for environmental, protected soils, future right of ways etc.'

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by  k_s  |  15th Apr 18, 2:50pm 1523760650

Again, you sound like you are thinking in a hypothetical situation.
We have constraints that we need to work within.
Tell us what you propose - keep the AUP, or scrap it in favour of removing the RUB?

Also, sure, the AUP has increased the value of rezoned properties. But only really on property that is ripe for redevelopment. I doubt you could argue that an upzoned property with high multi story site coverage has increased as a result of the AUP.
Also bear in mind that this is the foreseen short term impact.

The impact of the RUB (in the context of the AUP) is going to be most prevalent only on the lower valued properties which are already on the fringe of the city. This is where the poor people already are. Again, you need to understand what the rural land is a substitute for in this context.
All it does is incentivise these people to become even more private vehicle dependent and move further away from the core of the city or the areas where the wealth generation is centralised. This transfers huge burden onto the already lower income individual. Firstly, you remove a huge amount of their existing property equity (if land owners). Secondly, you burden the new and existing geographically proximate with increased transport costs to realise their incomes.

I still don't see where you are going with the construction capitalisation argument.
'Land' value (in theory, at least) is a marginal cost of land plus a fixed regulatory component. It would require a bit more delving into the microeconomic theory to prove that that the individual landowner faces an inelastic demand.

And I am not advocating a Laissez-faire approach at all, as I mentioned 'a presumptive right to build excluding restrictions for environmental, protected soils, future right of ways etc.'
Sorry, I did miss this point.
But, this just sounds like a huge amount of restrictions? And leg work. You want to scrap the AUP and spend another 5 years going through a planning and consultation phase? Because that is what is required to do this to ensure we don't end up with 50 more Pokenos scattered around the place.

I don't care where people live, I just think we should realise that we have some existing constraints. Additionally we need to abandon the notion that a quarter acre section should be favoured over urbanism. Which is, I think, what a lot of these arguments boil down to.

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by  Dale Smith  |  15th Apr 18, 4:24pm 1523766287

Have a read of what Phil Hayward says below, and tell me if any of that helps.

Why is it hypothetical, when other jurisdictions do what I am suggesting and achieve very affordable housing.

And who says we have to work within the constraints, the laws are an arse, change them. It is no point saying you want affordable housing then, as the evidence shows, you continually do things that make them less affordable.

Re zoning does not necessarily make a property 'ripe for development.'. Half of CHCH was built on land that should never have been built on, and the only ripeness about for it to be developed was it was adjacent to the last developed piece of land. If it was a swamp they just drained it.

This is the same problem the Pukekohe soils have, council are rating them as future development zoning, with the rates making it uneconomic to farm. Farmers are being forced to sell out (ok there are some crocodiles tears amongst them). The only thing that makes them ripe for development are man made constraints.

The utility of a property to be developed is inherent in the property irrespective of whether it has zoning or not. What gives it a value added price is when you develop it and add value by doing so. To restrict the zoning only adds non value added costs, ie the land goes up in price with no addition tangible amenity being added. This is like saying the value of house and land package exists just as much before the house is built as it does after it is built.

What poor people living on the fringe, you mean on the 4 ha blocks. The homeless shelters are in the centre, not on the fringe.

And if you read Phil Hayward below, he covers off the nonsense of sprawl making people more car dependent, when it is the present system that does that.

And the theory that land is a marginal cost. Yes it is in jurisdiction where the zoning is less restrictive, but you can hardly claim that in Auckland where the cost of a section can make up ½ the cost or more of the total house and land price. The land component on a detached dwelling should not exceed 15-20% of the total price.

And as for wealth generation, only 15-20% of employment is generated in the CBD, and most of it is spent outside the CBD ie providing employment for people that don’t work there.

And we are not here to protect any investment where the profits/equity are derived from non-value added costs (revenue to those that get to charge for these costs). This is about providing land and housing at its true value adds costs, and then what you would find that people can live closer to employment, in the density they prefer, and the side benefit being that they have more disposable income for other’s things like health, education, more leisure time.

You say you don’t care where they live and then support proposals that do.

It would take less than 12 months to show designations to protect the likes of environmental zones, sensitive lands, roading corridors etc, as they have already been identified. And once designations are locked in, then there is no need for all the micro management that goes on. Again Phil H cover this off.

And you don’t get 30 Pokeno’s (not that is a problem if you did, which you will anyway over time under any system), as land will become more affordable going in just as much as going out, so those that want to move closer in will.

Get rid of the AUP, and RUL as Twyford has promised, allow a presumptive right to develop, subject to limitations, allow up and out.

Anything else is a deliberate attempt not to allow truly affordable housing on a value added basis.

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by  Brendon  |  15th Apr 18, 4:39pm 1523767189

Dale, Phil H and Kade have you listened to this interview of Phil Twyford. He covers many of these issues and indicates the first problem to be addressed is infrastructure financing before he tackles restrictive zoning -which he does attribute as causing land prices to be over valued. The really interesting stuff starts about the 11 mark, although I found the whole interview worthwhile. https://www.interest.co.nz/opinion/93194/brendon-harre-sees-many-reform…

What do you think of his arguments?

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by  k_s  |  15th Apr 18, 4:59pm 1523768375

It's pretty good, actually. And, it is a bit clearer coming from him as opposed to other channels.

It sort of reiterates what we have said, right?
Removing the RUB is a pipe dream without the underpinning infrastructure.
My first point above was based on exactly this - infrastructure is key. Without any planning and signalling as to how this is going to work, removing the boundary isn't a great idea.

He signals a move away from the car based sprawl that we currently have - something you propose has reached it's limits (and I totally agree).
Removing the RUB without planning around this will inevitably just result in car based sprawl.

Restrictive zoning - of course. Again, as both you and I seem to agree on.

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by  Brendon  |  15th Apr 18, 5:21pm 1523769710

I agree Phil Twyford seems to on the ball with these issues.

I am hoping that Phil and the clever officials he deals with can solve the infrastructure financing problem.

Also I am hoping that Grant Robertson is not too miserly with his allocation of funds for needed public works. I worry that Grant is perhaps too proud of his Scottish/Presbyterian traits....

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by  Dale Smith  |  15th Apr 18, 6:13pm 1523772836

This is what I heard.

They will make some progress this term on removing the RUB, after they have sorted out infrastructure finance, but in the meantime they will do the high density.

LOL.

So to put it another way, they are paying today's inflated prices to buy land of the likes of Unitec, to build high density, some of which will be sold with subsidized entry, but the majority sold on the open market at today's high prices.

You would have to have rocks in your head to buy one of these on the open market, when according to Phil T, he will introduce measures on the fringe within a couple of years that will directly impact ie lower these prices .

Did you hear something different?

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by  Brendon  |  15th Apr 18, 6:50pm 1523775012

Well that depends Dale. I certainly wouldn't advise anyone buy a place in Unitec if their real preference was a larger place with a bigger garden further from the city. Also anyone who believes that a home in Unitec is guaranteed capital gains should rethink their plans. But if someone wants to live in that particular suburb and likes medium or high density housing close to the city then it might still make sense for them.

Strangely enough, potentially I could be in the third category as I am an experienced forensic psychiatric nurse so I could work in the Mason Clinic which is next to the Unitec site.

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by  Dale Smith  |  15th Apr 18, 7:12pm 1523776346

Unitec was only an example.

How keen would you be to buy if you were going to lose money on it?

My point being that many first home builders (non subsidized) are at risk of buying like this.

The pointer is already there with how the banks will set the LVR on these developments.

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by  Brendon  |  15th Apr 18, 7:38pm 1523777920

Dale it all depends on the location, the buyer and their particular needs/preferences.

But they should also bear in mind that fringe development is likely to decrease in price, countering that commuting costs to the centre is likely to increase due to congestion charges that are almost certainly coming.

Further considerations is that upzoning (removing restrictions on building up) increases site values -Greenaway-McGrevy research shows this. So inner city property is subjected to two countervailing forces -cheaper greenfield competition which should as you say lower land prices across the whole urban area. The other force from upzoning -has the effect of increasing property values.

It is not clear how this will all pan out. Probably the best advice is to stick with your personal preferences wrt to type and location of house one wishes to reside in and not try to game the market.

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by  Dale Smith  |  15th Apr 18, 8:20pm 1523780419

London has congestion charging, has that lowered fringe prices?

The people that try to game the system get what's coming. It's all the other people that just want a truly affordable house with a stable market like other jurisdictions have that I am referring to.

And the ''it is not clear how this will turn out,' is the worry bit. I would like to think that someone that is organizing all this knows what they are doing. But the outcome is more certain to me.

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by  Brendon  |  15th Apr 18, 8:52pm 1523782330

London has massively restricted development both up and out. So its land value are all distorted. So who knows what its real values are... and what impact congestion charging had.

As to *it is not clear how this will turn out* I would imagine that the soviet bread maker who contacted the London planner in 1989 to ask them who was in charge of bread production was worried about what was going to happen when the 5 year production plans were thrown out the window.....

That is is the thing about moving towards a system where space -not just land for residences, but all the different types of space -road spaces, car parking spaces etc are allocating by individual preferences and market mechanisms not prescribed by some top down central planner. It is a complex system that will self order......

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by  Phil Hayward  |  15th Apr 18, 9:38pm 1523785092

While London has "massive restrictions on building up", it remains true that most of the upzoning that does occur, and it is substantial, does not result in actual redevelopment in the volumes that the planners intended. It does however result in the price of land going up to incorporate the "development potential". So ironically this means that the existing housing stock is more expensive because of the upzoning. I think we are seeing the same thing in Auckland - old railway cottages inflating in "value" to $500,000, then $1,000,000, then $1,500,000 - which is probably far more volatile because of upzoning that has taken place. But as in London, it doesn't mean actual housing supply is going to eventuate. The capital gains from investing in "urban sites" is far greater than the returns to actual development and provision of floor space. In fact this becomes ever-riskier, the higher the initial site purchase price that must be paid. The developer doesn't capture unearned gains, he has to take massive risks and carefully plan and execute projects as efficiently as possible and work his butt off (and expect his workforces to do the same) to make a modest profit, all the while that incumbent property owners are creaming it for doing nothing.

I suspect Phil T does understand this, so he must be playing a game of "the politically possible" or something.

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by  k_s  |  15th Apr 18, 10:47pm 1523789276

Can you give some more specific examples of 'London' rezoning?
I'll assume you mean the greater London area.
The reason the redevelopment is not stimulated is likely due to the fact that the site intensity is already (effectively) very high in many of these areas. Redevelopment of terraced or adjoined property is inherently difficult. You can relax all the restrictions you want, but if you can't get the buy in of adjacent property, it's going to be very difficult to redevelop.

Not all existing housing stock increases in value due to upzoning. It is going to be relative to the actual site intensity - high intensity, the relative inflation is low due to upzoning. Low intensity, as in the case of the railway cottage, is relatively high.

The difference in Auckland is that the Railway cottage is easily redeveloped within the bounds of the AUP. Perhaps the more pertinent point is whether we actually have resource to redevelop this or not (Architects, builders, etc) and whether this is the true hold up. Not the planning system, itself.

This is the original point of the brief overview I gave - We have a plan in place and it needs to be constantly monitored to actually assess it's performance in achieving it's goals. The policy has only been active for 18 months and no real analysis of it has been undertaken, yet. In order to understand what does and doesn't work, we cannot tangle up several different policy approaches for the same target. Ironically all this talk of removal of the RUB might be what is impacting supply under the AUP - think of the developer right now who is faced with that uncertainty.

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by  Phil Hayward  |  15th Apr 18, 11:16pm 1523790965

Your point about London's existing density is a good one. In fact I have discussed this with Issi Romem in the context of very low density US suburbs, by way of agreeing that mass upzoning of these suburbs would be close to greenfields rural land for development potential. Auckland's existing density is nowhere near as low as typical US suburbs, with common minimum sizes up to 4 acres, and 1/2 an acre being common. The average suburban lot in Boston is 2/3 of an acre.

But the NZ Herald ran an article a few years ago where they had looked for sections of 1/4 acre and larger still existing on the Isthmus. They found 7. SEVEN. It is a myth that the 1/4 acre was ever common, but those that did exist have long since been chopped up into smaller units. We have already done half-pie intensification and this has eroded the potential for doing it again "properly". One of the reasons it is so successful in the fast-growing low-cost US cities is that there are so many excellent large sites. It is seldom necessary to "assemble sites" and risk being gouged by one or more holdouts.

Another thing you may not realise about Auckland, is that it has an outlier-low proportion of its surface area dedicated to streets (UN Habitat Program, "Streets as Public Space and Drivers of Urban Prosperity"). This has to represent a choke on the efficiency with which intensification can be done, including the expansion of underground infrastructure that was intended for lower density.

I like your point about other, non-planning chokes on the rate of redevelopment; I have raised this in the past myself - whether it is practical to expect to be able to overcome these chokes. I remain skeptical that the effect can be averted, that upzoning just drives site values up, except in the case of very low density as in US cities suburbs. I hope you are not one of the people who believe that there is any comparison between their "low density sprawl" and our sprawl. In fact the USA is unique in having this absurdly low density sprawl; NZ, Australia, Canada, France, Germany, Sweden, most of western Europe, all tended to have "suburban sprawl" of sections around 1/8 of an acre. The reason that western European urban areas are denser is that they started with extremely dense old cores. Our suburbs are very similar. They also had better and tougher "planning" than nations with Anglo Property rights traditions. Compulsory acquisition has always been common and non-controversial for the greater good, which has made "integrated public transport and planned new development" that much more successful. They have also planned highways earlier, bigger and better - it is a myth that Auckland has "too much" and European cities "work better with less". They don't have less, they have more. They have more PT too, but this is not "instead of highways".

I appreciate the way you are engaging with my points and clearly thinking through the complexities. By the way, I just posted another long comment down the bottom, by way of reply to yours below, so the thread doesn't get too skinny.

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by  k_s  |  15th Apr 18, 5:14pm 1523769265

Get rid of the AUP, and RUL as Twyford has promised, allow a presumptive right to develop, subject to limitations, allow up and out.

You cannot grow up and out by repealing the changes under the AUP. Only out.
Unless, of course you mean we remove it all together? i.e. no restrictions? Sure, that would be great for the existing infrastructure. Schools, hospitals, and every other public good operating over capacity.

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by  Brendon  |  15th Apr 18, 5:24pm 1523769889

What do you mean Kade? There are plenty of rules in the AUP restricting intensification -rules on height, density, setbacks, ground floor outlook requirements, balcony requirements, viewshaft restrictions, site coverage restrictions..... Some of these could be removed, which would make intensification more competitive and therefore tilt the city towards growing up more. Wouldn't it?

Then there are things like hyperlocalism or urban development authorities with planning power, which if enacted might make intensification more attractive, which again could tilt the city towards growing up more.

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by  k_s  |  15th Apr 18, 5:29pm 1523770181

Yes, sorry. I was clarifying whether we were talking about repeal or removal.
I meant in the case that the AUP was repealed and we went back to the original plan(?) - that would limit the ability to grow up.

Definitely more can be relaxed in the AUP.
I am just against total removal.

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by  Brendon  |  15th Apr 18, 5:40pm 1523770820

In the past Phil Twyford and David Parker have indicated they would use National Policy Statements in the RMA to remove Urban Growth Boundaries -that could apply to restrictions going up as much as out. so there would be no need to repeal the Unitary Plan. Long term NZ might benefit from one national system of urban zoning. something like what Japan has.
http://urbankchoze.blogspot.co.nz/2014/04/japanese-zoning.html

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by  Zachary Smith  |  14th Apr 18, 11:58pm 1523707132

2. I would like to take the credit for starting the sub-thread that led to the admonishment.

I think one of the reasons news comment threads are interesting is that we can read some unorthodox thoughts. Academia and journalism are rather restrictive places where rules have to be followed and an accusation of "wrongthink" is greatly feared. One wrong sentence and your career is over. However in anonymous comments sections dangerous ideas can be published. This is probably one of the reasons why public comments are of great interest to researchers.

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by  Phil Hayward  |  15th Apr 18, 1:51pm 1523757106

Actually Phil Twyford is correct that abolishing the growth boundary is the only way to restore affordability. His intellectual curiosity is exemplary. He has got himself an excellent understanding of the reality and the evidence versus the shallow assumptions and wishful thinking that underlies the "compact city" planning model. He is rare among politicians for that. But whether he has the political clout to make it happen, I am not holding my breath to see. I believe he has the courage, but winning over his government as it is now comprised might be beyond him.

Boundaries and rationing of ex-fringe land supply ALWAYS is the point at which cities lost housing affordability. Other factors do not correlate. ALL the cities that sustain a median multiple below 4, have a "land price curve" that starts in "true rural land values" and slopes up gradually from there. Every city with a boundary or a proxy for one, has a "discontinuity" in that price curve that results in any land actually getting developed, having a "raw land" cost component of AT LEAST a factor of 10 to 30 times as high as otherwise. MOTU have identified this in the case of NZ cities and no credible analysts have been arguing to the contrary since the Productivity Commission accepted this reality several years ago.

The resulting median multiple is always 6 and higher, and cyclical volatility is always higher. After several decades of persistence with such a policy, it is common for land prices to continue inflating to the point where the FACTOR exceeds 100. The reason that the land price factor can be 100+ and the median multiple "only" 6 to 10 (as in UK cities), is that "site values are elastic to allowed density of development" (under these market conditions). The price per unit of housing never falls through density; the price of land inflates. If Kirdan Lees is saying that the inflation in land prices in Auckland is insignificant, he is flat wrong. It is not the dilapidated old structure of a railway cottage in a central suburb that has inflated in "value" to over $1 million from $100,000 a decade and a bit ago, it is ALL in the land.

You are quite right to be concerned about factors that "drive a wedge between production costs and prices", but this is ALL ABOUT the distortions to land price signals. Dale Smith is quite right; everything else you address (construction costs, labour remuneration, building materials, excessively high minimum standards, fees and levies, etc) will merely result in the price of sites rising to take out the slack. The way the market works under these distorted conditions, is "backwards from the maximum that consumers can be gouged for". Dale as a developer, understands this from actual practice. In fact the worst thing is that site owners are incentivised by the inflationary trends in land prices, including BECAUSE of upzoning every time it occurs, to "hold" their investments in anticipation of future gains. In other words, redevelopment and intensification tend to be slowed down.

There is excellent research by Issi Romem that shows Houston and other systemically-affordable US cities with a flat urban land price curve, to have the MOST "redevelopment" and intensification, simply because developers can respond to the real demand for higher-density housing, at relatively flat costs of sites, and the resulting apartments and higher density housing are so affordable that of course their potential is maximised. However, Romem points out that under these relatively free-market conditions, the housing supply split is roughly 70% separate family homes and 30% higher density. Cities like Portland and San Francisco and Vancouver that attempt to force higher-density housing as a more significant proportion of supply, end up only distorting the market so severely that the housing supply shortfall is something like 90%. We are doing the same thing in Auckland.

There have been exceptions, such as in Spain; where the apartments were being speculated in off-the-plan by international investors as they were being built in a kind of frenzy of development, but the prices remained sky-high until the entire market crashed, and the economy is still suffering a decade later.

This raises the angle that "but they allowed sprawl, didn't they"? Similar argument to what you are saying, "there is plenty of land inside the Auckland growth boundary". This assumption fails to reckon on "the rate at which land owners sell it anyway" without the inducement of speculative pressures. In the affordable markets without a boundary, the rural land that is being "sold anyway, as farms" within effective driving distance of the city, is sufficient for growth. The resulting development patterns are "splattered" rather than incremental carpet pushing-out of the fringe, but splatter with later infill is significantly more efficient. (This is the subject for another essay). When there is a quota on land supply that results in itoo few developable sites being "sold anyway, as farms", to allow for developer demand, the whole market flips to being driven by developers pleading with unintentional sellers, who then get the general idea that they have powers of monopolistic price extraction. Hence the "always 10 to 30 times" factor in the inflation of the price of that land.

It is also unnecessary for grand central infrastructure budgets to be providing ahead for growth; 100 years ago cities were all high-density squalor, and the systemic affordability and housing quality we now take for granted, began to become a reality as soon as the Model T Ford became ubiquitous. There are always already networks of rural roads that are sufficient for the initial urban newcomers. There are numerous good solutions for "local" infrastructure and off-grid existence today, so this is even less of an excuse than it ever was. "Planning" SHOULD merely focus on preserving "rights of way" for future trunk infrastructure. It is the pinnacle of incompetence that the "Planners" today do NOTHING of this, and do everything of micro-prescription of how development is to occur in such a way as to avoid "trunk infrastructure" apart from grossly expensive acquisition of property in existing locations and confiscation of already-scarce road space in pursuit of obsolete modes based on rails, bicycles and foot.

Lastly, it is flat wrong to argue that sprawl is inefficient per se. This is based on a totally wrong assumption that all travel destinations are in a single central location and sprawl always results in more and more aggregate travel distance and longer and longer infrastructure "runs". There are plenty of urban areas that are now the size of a small country but most average "commute times" by urban area continue to fall between 20 minutes and 28 minutes. EVERY example of monster outlier-high average commute times are in high density cities with a small footprint per capita and assumably shorter distances to get everywhere! (Eg Hong Kong at 50 minutes). Obviously something else is going on, and this "something else" is "CO-LOCATION". We get a big fat clue about what is going on, in that as median multiples go from 7 to 8 to 9 and higher, anecdotes start to abound about people commuting 100 kms from rural towns where they can afford a home. This was common knowledge about Californian urban areas in the 2000's and it is becoming common about Auckland now. This is ironically NOT "the results of sprawl" but the results of attempting to contain it.

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by  k_s  |  15th Apr 18, 3:46pm 1523763997

Good reply. Albeit very long. I'll try to reply as best I can.

I just ask one thing - why do bloggers such as yourself always have to mention Houston (or other sunbelt cities) to justify your responses?
It seems a bit silly to me. You make the example of cities with extremely low exogenous elasticities of supply and compare them to Auckland which has a relatively very high exogenous elasticity of supply.
Houston and those cities function well with little endogenous limitation due to the fact that their exogenous supply is huge. Houston is also both incredibly industrially diverse and naturally conducive to a hub and spoke type of suburban living. Sprawl is thus not (as) bad in this circumstance.

Now, look at the map of Auckland and think how much area is exogenously unavailable - i.e. impossible for develpopment; water, slopped, forest, etc.

Now I do agree that land supply needs to be increased. But I also take the pragmatic approach in that Auckland is no Houston. Auckland has very centralised locations of industry. Auckland is burdened by building restrictions. Auckland needs a plan. Auckland isn't some beautifully flat vista where you can add ring roads ad infinitum.

It is not at all wrong to argue that sprawl is inefficient in the case of Auckland. Maybe Houston for the reason I pointed out above, but not Auckland. Auckland has three main employment areas and they are located along SH1. The purpose of a city is to reduce economic distance between inhabitants in order to stimulate wealth. Sprawling areas away from this centralisation of industry does nothing but imply an increase in that distance.

Anecdotes about people commuting 100kms per day are purely that. I would be very surprised if that was the working class individual. It's more likely to be the relatively wealthier citizen - why? Because travel is very expensive - the exact reason to not incentivise sprawl as a substitute accommodation arrangement for the working poor. Once you position all your lower end workers far away from the industrial hubs their ability to generate wealth is decreasing with the marginal cost of transport.

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by  Brendon  |  15th Apr 18, 4:10pm 1523765454

Kade I am a commentator turned guest poster and I would interested in your thoughts about my article about how to improve urban performance in NZ. https://www.interest.co.nz/opinion/93194/brendon-harre-sees-many-reform…

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by  k_s  |  15th Apr 18, 4:22pm 1523766165

It's a great article.
Does a lot better job of developing the arguments/concepts than this one - I was limited by both length and the need for diversity! The result is that ironically we go down the rabbit hole in the comments section.

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by  Brendon  |  15th Apr 18, 4:30pm 1523766628

Yes I know what you mean by comment sections having a life of their own, with a tendency to go off on tangents. But I still like getting comments -often there are gems of info and feedback which I hadn't considered.

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by  Brendon  |  15th Apr 18, 5:46pm 1523771170

You can also read my paper on my blog site -NZ needs an Urbanisation Project
https://medium.com/land-buildings-identity-and-values/unravelling-the-s…

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by  Dale Smith  |  15th Apr 18, 6:38pm 1523774326

Hi K-S, do you want to run the comparison you made between Houston and Auckland with say Houston and Melbourne or Canberra?

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by  k_s  |  15th Apr 18, 7:08pm 1523776118

Sure.
Canberra is an interesting case as it is was a planned city to start with and also is hugely limited by geographic features - hills, water.
So, I don't know what you want me to argue here? It is, again, the polar opposite to Houston.

Melbourne - Again, look at the map. How is the geographic terrain of Melbourne at all similar to Houston?
Melbourne is bordered by sea and hills. They exogenously limit the amount of developable land. Endogenous restrictions then spring up due to the fact that people think they know best how to zone or plan accordingly.

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by  Brendon  |  15th Apr 18, 7:17pm 1523776661

Kade I am not sure that Melbourne's outward growth is restricted by *hills*.
https://en.wikipedia.org/wiki/Geography_of_Melbourne

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by  k_s  |  15th Apr 18, 7:27pm 1523777278

True. "Hills" may not be correct.
Ranges and native forest might be a better description.

The main takeaway - Melbourne can't expand in ring roads from the centre, like Houston.
It must navigate these natural features.

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by  Phil Hayward  |  17th Apr 18, 10:24pm 1523960663

Do you know for certain that Houston does not need expensive engineering, merely of a different kind to hillier cities?

Here is the secret. There is little "cause of expense" in engineering infrastructure that is so dire that it is justification to impose several thousand dollars per year excess housing costs on all future generations. If a mere fraction of this unjust cost imposition was spent on allegedly "expensive" infrastructure for growth, everyone would be a long way ahead. It is ironic that back before machinery was anywhere near as good as it is today, our ancestors got on and did tunnels, bridges, viaducts, major pipelines, drained wetlands, cleared vegetation, etc. The resultant affordability of housing left us well ahead regarding "costs".

This is only one example among many, of the modern generation being incapable of thinking through how much better the way our ancestors did things was.

It is necessary to include in this assessment, the cost difference between "expanding capacity" in existing built areas where no rights of way exist, and greenfields expansion. The existing built areas were seldom planned for population density increases and this rationally necessitates the greenfields option instead. Our infrastructure spend that allegedly is such a burden in the case of greenfields, seems to suddenly be subject to different rules when acquisition of property, demolition of structures, on-the-ground efficiency constraints etc make infrastructure catch-ups in existing built areas easily ten times more expensive per lane-km of highway or added pipe capacity. We "just need to do these projects". No we didn't. We should have spent the money to get a LOT MORE capacity, on greenfields.

I recommend "Discovering the Efficiency of Urban Sprawl" by Alex Anas (2011).

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by  Dale Smith  |  15th Apr 18, 7:41pm 1523778095

You need to go to Houston to see that it has its own limits, from your perspective, but that did not stop them..

Granted open water is a limiting factor, but hills are only limiting in restrictive zoning jurisdictions. If you are into hills and water then Austin would be a great example.

In a less restrictive jurisdiction, which NZ was until the early 90's, If you were to run a hypothetical subdivision development model on any land, and negatives to development (hills) are deducted/weighted from the hypothetical sales price, which used to be set a more affordable medium multiple. After these deductions, whatever was left over was the value of the land. If this land value was at least equal to its value as rural land, then it might be for sale for this purpose.

But with land restrictions, then this land has a scarcity that multiples its price over 10 fold, costs are then added plus margins to give a price that is double what it needs to be,

With restrictions the price becomes a cost plus approach with the price being whatever the customer will bear.

What Houston and Austin have that Auckland, Melbourne, Canberra etc don't have is low restrictive zoning and Municipal Utility District (MUDs), and they also have affordable housing.

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by  k_s  |  15th Apr 18, 8:08pm 1523779709

Granted open water is a limiting factor, but hills are only limiting in restrictive zoning jurisdictions.
It's actually pretty recognised that terrain exceeding a certain slope is deemed difficult to develop. Hence we exclude it when we calculate total available developable land within a given area. The 'hills' are exogenous, not endogenous (zoned out of reach).

I don't disagree with your example. It's a good one. We often get too tangled up in theory so it's good to get an industry perspective.

I will caution you that correlation is not causation. Also, we are presented with unique circumstances in Auckland that aren't as simply solved as in other places.

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by  Phil Hayward  |  15th Apr 18, 11:25pm 1523791500

Actually when it comes to "excluding non-developable land" from "capacity" calculations, I understood that Auckland Council had been pinged by audits not once, but twice in the process of devising and revising the Plan, for absurd failures to do this. It was Patrick Fonteyn of Studio D4 that pinged them both times. Have you seen the reports I am referring to? Besides failing to exclude non-developable land, they had failed to exclude ANY sites that should be assumed NOT to be developed, such as school playing fields, churches, community halls, etc

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by  k_s  |  16th Apr 18, 7:54am 1523822045

That's a really good point - I haven't seen the reports but I had noticed the exact thing on the maps and thought it pretty weird that schools and the like were zoned incorrectly.
These are endogenous restrictions, however.

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by  Phil Hayward  |  17th Apr 18, 10:10pm 1523959808

I am not sure how you are meaning to use the term "endogenous". An unstable slope and a school playing field should both be regarded as just as much of a "given" re exclusion from potential redevelopment. In fact even the unstable slope might be able to be overcome with clever engineering.

The big problem is not so much the bits of land inside a growth boundary that can't be developed anyway, it is the effect of the distortions on all the developable land; both in their price trends and the motivations of site owners.

But it is even worse than "not allowing for school playing fields to remain undeveloped". Planners everywhere are making colossal blunders about the need to sacrifice MORE space as population is added within a given urban footprint. MORE school playing fields will be needed, and a lot more space for non-housing purposes if the added population are not to be completely deprived of amenity and normality of life.

Ian Gordon (2007) calculates that because of all the land needing to be allocated to non-housing use, doubling the population density within actual housing locations only saves 7% more land. Housing is only a "significant minority" proportion of land in use in a city.

This is just one of dozens of realities that "compact city planning" experts seem to know nothing about. Isn't it wrong that it is a surprise to planners here, that the UN Habitat Program found Auckland city to have an outlier-low proportion of its surface area allocated to streets? It is down there with Moscow and former Communist cities, and unplanned 3rd world cities. Yet to hear Kiwis talk, "everybody knows" we have "overinvested in road space". Data on highways is hard to come by, but using proxy data from the private sector, and Google Earth, I believe it is evident that Auckland has less than half of the highway space of most 1st world cities of similar population.

Isn't it ironic that there are legions of bureaucrats worldwide working on "planning" including frameworks to be adopted globally, yet no-one has bothered to assemble a good data set of basic variables for all cities so we can analyse correlations properly? The UN Habitat Program report on street space was a welcome new direction.

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by  k_s  |  18th Apr 18, 9:02am 1523998956

I am not sure how you are meaning to use the term "endogenous". An unstable slope and a school playing field should both be regarded as just as much of a "given" re exclusion from potential redevelopment. In fact even the unstable slope might be able to be overcome with clever engineering.

School playing zones...
No, they aren't. And this is the fault in your understanding.
Schools, roads, zoning decisions are all the product of some given economic/demographic factor at a given time. Thus when we are testing causality in econometrics it's difficult. Why? Because it's not aparaent what is causing what when they are both a function of one another (in some regard).

This is Saiz's argument for an exogenous developable land measure.
It's actually Saiz's whole argument as to why we cannot rely on the assumption (that you are guilty of making) that causality flows from zoning restrictions to unaffordability - we cannot untangle the endogeneity.

As you mention below, Saiz's paper is not without it's flaws.
It is however a very important paper for the likes of you because it highlights why it is definitely not consensus among urban economists whether regulations are the reason for unaffordability.

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by  PocketAces  |  15th Apr 18, 4:47pm 1523767634

So long as our excellent growing soils are protected, it would be (is, as its happening) stupid to the highest degree to concrete over them. There is no argument you can make that can convince me otherwise.

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by  k_s  |  15th Apr 18, 5:01pm 1523768502

A point also not lost in Brendon's article - Urbanism is the answer to reducing carbon footprint and protecting the environment.
Not sprawl.

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by  Phil Hayward  |  15th Apr 18, 11:36pm 1523792162

So Silicon Valley should still be vineyards earning that valuable grape and wine export income for the US economy.

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by  Phil Hayward  |  15th Apr 18, 2:17pm 1523758622

Additional to what I just said: besides the monster commutes from rural towns to unaffordable cities, households and businesses WITHIN an urban area are more strongly sorted, spatially, by "ability to pay", the higher the price of property is. In other words this "ability to pay for location" swamps the "sensible co-location" factor in decision-making; the latter is what enables "still-normal" average commute times in ultra-low density sprawling cities. There is a series of papers on this phenomenon by Peter Gordon and co-authors, starting around 30 years ago, and it is now non-controversial among credible urban experts.

Anticipating the argument "but we can't afford the infrastructure" - this is nonsense. The so-called "economic sustainability" of infrastructure in high density cities frequently ignores the colossal disruption and difficulty of accessing the infrastructure for maintenance and renewal (again, Planners are completely incompetent currently when it comes to allowing for this by way of rights-of-way and so on). The alleged fiscal unsustainability of long-term infrastructure costs in low density is more likely exceeded by those in badly-planned high-density cities. In fact it is the "planning" that is the main factor in the sustainability, not the "form". Auckland's existing built area and its infrastructure is "well planned"??? Ha ha ha. In fact they are arguing that "we will save money on infrastructure" if we do intensification instead of greenfields, then they are turning round and gouging DC's out of developers who do intensification, just as if they were doing greenfields. This reeks of bad faith and fraud. Councils are in fact in breach of the conditions of the 2002 LGA legislation about DC's on this point most of the time.

The clincher is this: the famous "Costs of Sprawl 2000" study raised alarms about aggregate "added costs" of sprawl in terms of so many billions of dollars over the next 30 years; and Wendell Cox and Ronald Utt politely pointed out in a paper following, that these costs came to $50 per annum per household. The consequences of constraining sprawl, on housing costs, are in the order of several THOUSAND dollars per annum for every future household.

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by  Phil Hayward  |  15th Apr 18, 10:52pm 1523789547

In reply to Kade up above where the thread is getting too skinny.

I agree that it is unnecessary to use "Houston" as "the example". My own exact words were "Houston and other systemically-affordable US cities with a flat urban land price curve", in the context that they have MORE redevelopment and intensification than cities planning for significant intensification and rationing sprawl. Houston is the top-performer in the analysis from Issi Romem that I refer to, so it is logical to mention it by name. But numerous examples could be used, there are dozens in the USA.

In fact in the noted "housing supply elasticity" data that was done a few years ago by the Wharton School guys, Texas cities were all around the middle of the data - the highest elasticities were in Indiana and Kansas. But all the cities with a problem scored "below 1" for elasticity in the method used, while 2 and a bit over seemed to be the middle of the Bell Curve where most US cities sat. The highest (in Indiana and Kansas) scored over 3.

We really have no idea in this part of the world just how "free-market" urban expansion is in most of the USA. Texas is not unique at all. In most of the USA, power exists to "incorporate a de facto municipal body" to raise bond finance and instal infrastructure and pay it back from future property tax revenue.

I don't understand what you are talking about, re "hub and spoke" model in Houston. Dispersion of employment and amenities is the norm in all cities. Cities have long since gone beyond even "polycentricity" which is what I assume you are referring to. Auckland is included. More dispersion would be natural and it is merely a case of "allowing it". Auckland's plans are obstructing this. One of the worst aspects of this is the signals of monopoly powers of price-extraction to the owners of sites at the locations prescribed for employment. This will be worsened if a model is adopted that “all growth is to go in the already-existing 3 main centres”. These centres contain well under 50% of the employment at the moment (but admittedly this is greater “concentration” than US cities).

It is beyond "simplistic" to make urban productivity a matter of "reducing distances between participants" as a reason to force a compact-city straightjacket on the entire urban economy. Left to themselves, urban economies will EVOLVE their own optimum co-location efficiencies; a compact-city planning model and prescribed zoning about where each urban activity is to go, obstructs this evolution, it does not enable it let alone speed it up! This kind of planning is not just redundant, it is riddled with unintended consequences and perverse outcomes.

Clustering is a phenomenon that became most strongly observable precisely during the era where cities were expanding their footprints rapidly. Pre-automobile cities were (and still are in the third world) hell-holes of congestion, inadequate space for efficient operation, and real economic “rents” of a level that strangle many nascent enterprises in their cradles. Density does correlate with productivity, all other things being equal, but it is self-evident that economic development involves increased productivity of an order of magnitude along with reductions in urban density of an order of magnitude. These increases in productivity were not “in spite of” the reductions in density; they run along together. Find and read online, Robert Fishman’s essay “Megalopolis Unbound”. Richard Mudge's "Business Location in the Modern Economy" is more deeply analytical but is hard to find.

The greatest “clustering” efficiencies in the aggregate whole are to be found by way of numerous separate clusters of different types, with different requirements for space and local amenity. These historically have evolved by themselves without any omnipotent crystal-ball gazing from planners. They have evolved where there was spare space or at the very least, affordable space. By insisting on an incremental carpet-like pushing out of an urban fringe with all space built out as you go, and land prices at gouging levels, there is far less chance of clusters evolving. Silicon Valley is the ultimate example. How smart is urban planning that would make it impossible for a Silicon Valley to evolve? This includes arrogant, ignorant planners and politicians “designating X location for our local high-tech zone”, which is ludicrous and not how Silicon Valley came into being at all.

Planners also make cargo-cult assumptions about unique local economies like New York’s and assume that “form” will result in “the same function” when in fact only a lucky few cities have evolved high-value service-sector density. New York evolved its famous global-finance sector in Manhattan at the same time as it was sprawling for dozens of miles in several directions onto low-cost rural land; I would argue that it would have been rendered less competitive and not grown so fast if it had been growth-contained like its main established rival London and land rents been higher.

The problem I have with your “exogenous supply of land” argument is that it is the wrong argument to use as an excuse for a growth boundary. If the lack of exogenous land supply is a bad thing, how is restricting it even further somehow the “good thing” answer to the problem? You might argue that this is because Auckland needs to take the course of developing to maximum potential “within its natural contraints” but this founders completely on the problem of land-owner powers of rent-extraction. If it is really essential to develop this way, then very tough exercising of compulsory acquisitions of land are necessary, along with targeted land taxes to encourage redevelopment versus “holding”, and targeted rates to fund the public transport subsidies so that the cost falls on the property-owner beneficiaries, who are overwhelmingly those based at the focus of the radial and spine-based services. It is incoherent in this day and age of condemnation of inequality and wealth transfers, to be empowering and transferring wealth to the owners of the most valuable property in the economy already.

But in reality, Auckland and every other city with “natural constraints” had decades of systemic housing affordability that changed only when planners introduced quota schemes to the supply of greenfields land. Natural constraints are exaggerated as a cause of unaffordability. The “plains cities” have problems with rivers, swamps, unstable land, flooding, greater seasonal variation, insufficient “fall” on pipes, the need to build in all grade-separation (versus natural geological features enabling it) etc. In the case of Auckland, furthermore, during past decades its growth potential immediately ex-fringe was limited to expansion within a narrow isthmus – it has now expanded beyond this isthmus and there is greatly increased potential “directions in which to sprawl”, and now we are throwing up our hands claiming we have “run out of land”? New York (urban area) wasn't told by central planners that "we have run out of land" because Manhattan was all built on; it just carried on inland through New Jersey, out along Long Island (which has plenty of land left still) and north and south as far as PA and CT. The similarities to Auckland are noteworthy.

One way to look at “ex-fringe supply of land”, is to look only immediately beyond the existing fringe. Another way, is to look at the land available for 360 degrees around the outside of new “edge cities” established at a distance from the existing fringe. The reason that an extremely geographically-constrained city like Wellington managed to have housing affordability for decades, is that Porirua was growing in several directions including back towards Wellington; and the Hutt Valley was pushing into the hills and valleys on both sides. The effective “land supply” under these conditions is several times as great as “what is adjacent to the existing fringe” of what we regard as “the city”.

Auckland is obviously crying out for major “edge cities” and efficient splatter development (do you want my essay on why splatter is more efficient than incremental carpet expansion, or have you connected the dots using what I have said already)?

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by  k_s  |  16th Apr 18, 8:04am 1523822687

Sorry, I don't have any time to reply fully.
Just with this point, however...
In fact in the noted "housing supply elasticity" data that was done a few years ago by the Wharton School guys, Texas cities were all around the middle of the data - the highest elasticities were in Indiana and Kansas. But all the cities with a problem scored "below 1" for elasticity in the method used, while 2 and a bit over seemed to be the middle of the Bell Curve where most US cities sat. The highest (in Indiana and Kansas) scored over 3.

Look at Saiz (2010) - this will give you an idea of the naturally/geographically limiting availability of land.
The Wharton School stuff is very useful. However planning is always an endogenous factor.

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by  Phil Hayward  |  17th Apr 18, 9:44pm 1523958261

Saiz' analysis of"geographic limitations" was very badly done. It used the same radius for land under analysis, for all sample cities, regardless of their initial size or their growth rates. See:

https://econjwatch.org/file_download/472/CoxJanuary2011.pdf

I stand by what I am saying. There is not one example of an urban area that had a problem stemming from "geographic limitations" until the point that regulations against sprawl, or proxies for them, were adopted. Every city that Saiz claims to be suffering from "geographic limitations" had decades of a median-multiple-3 norm, including the coastal California cities. This is the elephant in the room, and "geographic limitations" are a convenient red herring. It is just too convenient for planners everywhere that a problem began with their interference in the land market, to turn round and claim, "oh, it's the geographic limitations".

If your statement that planning is "an endogenous factor" takes account of the increased likelihood of certain types of city adopting land-rationing policies, I agree with you. Almost all cities have land-rationing policies now, but cities with "geographic limitations" probably ALL have land-rationing policies. However, there is not a 100% overlap between cities with "minimal geographic limitations" and "absence of restrictions". It is probably true that all the cities without regulatory restrictions, tend to have minimal geographic limitations BUT there are plenty of cities with minimal geographic restrictions, AND a deliberate land-rationing policy, AND a housing-affordability problem. Nearly every city in the UK, for example.

It reeks of a hidden agenda, that every discussion of "housing affordability" that comes up, brings out a brigade of "experts" who insist that "we mustn't repeal growth boundary policies" AND "they wouldn't restore housing affordability anyway". Why the vehement opposition, everywhere in the world, to GIVING IT A TRY? It seems to me highly likely that all these "experts" worst fear is SUCCESS of abolition in restoring housing affordability and eliminating extractive price markups in land.

I have yet to meet an expert who claims to care about housing affordability, and who says that growth boundaries are not responsible, who objectively accepts that the experiment would be worth doing. This is highly ironic because the experiment in growth boundaries has been plunged into everywhere over the objections of those who said it would result in a land price and housing affordability problem; these critics have been proved right every time, and yet no quid quo pro regarding "try repeal and see" is allowed THEM.

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by  k_s  |  18th Apr 18, 8:54am 1523998454

Hmmm.
Saiz was the first - there have been a few since him that have developed the method away from a 50km radius.
Regardless though, the approach is a great exogenous tool for land restrictiveness. It has it's limitations, yes. But as a tool to econometricians, it is far better than a land use restrictiveness survey dataset.

Perhaps you could link us some of your work, to see how it stacks up?
I'm just always dubious of people who discredit the work of the elite and then back it up with a "hidden agenda" argument.

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by  shuffling  |  16th Apr 18, 2:25pm 1523845540

Interesting. On land cost/price, any thoughts from the Hobsonville Point development - how was the land 'priced' and who is making what return on capital?

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