By Geoff Cooper*
In recent times there has been a surge in research completed on the economic implications of Auckland’s spatial form.
A common theme of this research has been Auckland’s land use policy and the appropriate regulatory framework required to give residents greater choice in where they live and work, while managing the unintended consequences of these decisions.
The policies required to achieve such solutions are straight forward.
They include removing the barriers to development, particularly in high demand areas but also on the periphery of the city; but if the policies are simple, the path to implementing such policy is far more complex.
The most notable obstacle is the divergence in interests between current and future residents.
This is not unique to Auckland. Local governments around the world face this challenge, where residents first to an area make it difficult for others to move in.
This comes about because of the perceived costs of additional people moving to an area.
It is a challenge that requires far more thought by policy makers.
A wider range of tools is clearly needed, including mechanisms by which existing residents can share in the benefits of population growth either through the provision of greater amenity and levels of services, financial compensation or both.
It has become clear that if the value created by a growing population is not widely shared, then well directed urban policy will always be difficult, to the detriment of Auckland’s competitiveness and economic potential.
Cities are the new centrepiece – but they are not without costs
Cities have become a centrepiece of the global economy. For the first time in history, over 50% of the world’s population is living in cities, generating more than 80% of global economic output1.
Cities have become more important because knowledge has become more important.
Cities specialise in proximity, reducing the distance between people and in so doing, reducing the costs of moving ideas, people and goods throughout the economy.
This is what makes cities more attractive, generating higher wages and more opportunities. It helps explain why Auckland is growing rapidly.
Density also creates costs however. Congestion, environmental degradation and high house prices are common ills of density.
Such costs require careful management through a range of tools including prudent and well-targeted regulation, investment in infrastructure, a broader array of demand management tools and market based mechanisms that reflect development costs.
The competitiveness and growth of Auckland will be defined in large part, through its ability to implement such tools and manage these costs of density.
Urban policies to enable growth
Where you live and work matters.
The role of urban policy is to ensure that people have choices over where they live and work, without compromising other urban priorities such as public space, heritage and the environment.
Urban economists broadly agree that people should be able to determine themselves, where they choose to live and work, except where other social costs are incurred by such decisions.
If the first part of this sentence suggests a simple land use planning rulebook, the second is reason to pause and reconsider.
Greenfield development may be cheaper for an individual household but more costly for Auckland generally, since it often requires expensive infrastructure funded in part, through rates and commonly generates greater congestion costs.
In actuality, land use choices are riddled with externalities or unintended consequences, both positive and negative – meaning that the choices we make about where to live and work can have a wide range of impacts on others.
An individual worried about how a neighbour’s renovations will affect their view; the retiree concerned about the new liquor store in town; the homeowner desperate to sell with a neighbour who hasn’t mowed their lawn in months.
Each of these scenarios involves unintended consequences and costs (real or perceived) to seemingly innocent bystanders.
Effects of this nature must be taken seriously by policy makers, planners and economists alike.
All of this makes urban planning complex. It is not just a masterplan, rather it is a considered and cohesive plan that tries to balance the needs of everyone, home owners and renters, young and old, to ensure a good living standard for residents across social, cultural, economic and environmental aspects.
It is wrong to boil urban planning down to up or out. It is both. It also much more.
The proposed Auckland Unitary Plan is several volumes detailing thousands of different policies applying across Auckland. The level of consultation on the plan is unprecedented in the history of local government in this country. It is outside the scope of this article to describe even a fraction of the issues in question here.
Instead, we focus on just three issues that are notable for their consistent absence in the wider debate on Auckland’s land use planning and housing affordability; the political economy of urban policy, Auckland Council’s proposed urban limit policy and the policies behind a compact city.
The political economy of choice
‘Auckland Unleashed’ (the precursor document to the Auckland Plan), showed a significant amount of initial support for a compact city model. This resulted in an Auckland Plan and subsequently, a proposed Unitary Plan, laying out a model for urban development allowing for considerably more intensification in tandem with opportunities for dispersed urban development.
Since this time, there has been a concerted push back against this vision with corresponding policy changes.
Height limits have been reduced, density constraints tightened.
Attractive suburbs (as measured through prices) have been made more difficult to build in.
Homeowners in these areas stand to benefit with such constraints pushing house prices up further, but for the estimated one million new residents expected to arrive over the next 30 years or for those people from lower socioeconomic groups looking to locate closer to the city centre, the news is not so good.
Two important conclusions have emerged from the planning process.
The first is that planners are wrongly vilified as the architects’ of high house prices in Auckland. This view is not supported by the evidence and its continued insistence is unhelpful to the debate.
Second, the political economy of urban policy plays a defining role in its final state.
While significant gains for housing choice were made in the proposed Unitary Plan, much of this was lost as the plan progressed. The difference between the proposed and notified plans was the incorporation of community consultation.
This is not to say that community consultation should be blamed, omitted or lessened in any way; it is the linchpin of local government and something to be protected.
Community consultation has only served to emphasise the real costs of intensification that are enacted on existing residents.
Asking residents to accept these costs for nothing in return has, unsurprisingly, yielded only incremental progress.
There is no reason to think a repeat will deliver something different.
If Auckland is to enable a quantum change in housing choice as envisaged in the Auckland Plan, new models of planning must be considered.
Auction schemes may form part of the solution, where community costs are priced through market mechanisms and facilitated negotiations rather than regulation.
For instance, one would expect significant latent demand for housing in high demand areas in much the same way that we see this occurring through land banking on the periphery of the city. Such profits could be shared by developers and communities (perhaps facilitated through local boards) to ensure the returns to growth are shared by current and future residents.
Moving on from urban limit debates
A lack of land supply is widely cited as a contributing factor in Auckland’s rampant house price growth. Simple economics would support this view, as does the proposed Unitary Plan.
Auckland Council’s proposed urban limit policy is to ensure an average of seven years infrastructure-ready, forward land supply.
While there is a defined boundary in place (the “rural urban boundary”), there will always be 20 years’ forward supply of development capacity meaning that the RUB will not constitute a binding constraint on supply.
Once implemented then, approximately 20% more urban zoned land will be available outside the current urban limit.
This is an enormous amount of land, enough for 61,000-76,000 new dwellings or roughly equivalent in size to Hamilton.
Embedded in this policy is a subtle but important deviation in the driver of Auckland’s urban limit policy. Where previously it was used to actively create a ‘compact city’, the rural urban boundary is now designed to facilitate the efficient provision of infrastructure required for greenfield housing development.
Any calls for further land release on the periphery of Auckland should be done in the context of this proposed policy. Doing so should largely put an end to this debate, helping to refocus attention on more important issues.
Rising to the challenge of housing affordability
There is widespread misunderstanding as to the tools wielded by local government in New Zealand to achieve a compact city.
Auckland Council is a regulatory authority; it is not a construction firm and has shown no appetite for forcing people to live in high density living.
Further, there has been no discussion about large scale subsidies for high density living and no consideration given to introducing minimum height restrictions anywhere in Auckland.
The toolbox for intensification largely consists of releasing those regulations that have prevented people from living in higher density areas.
It has become clear that far too little attention is given to assessing the economic benefits of such policy directives – and far too much on urban limit policy.
Given that land prices are highest on the isthmus – signalling high demand – and generally decline with distance from the city centre, this is puzzling.
A recent working paper by Melanie Luen, an economist at Auckland Council has shed light on this issue, showing evidence of a considerable ‘regulatory tax’ on housing development in the current urban limit. This implies that regulations are restricting supply so developers are unable to respond to rising prices, with house prices remaining at elevated levels as a result.
These findings are all the more important as a new round of apartment and terraced development attempts to get traction (see Figure 1).
Let Aucklanders decide urban form through housing choices
The intent of the proposed Unitary Plan is, in many ways, about letting Aucklanders decide how and where they want to live through markets, while managing the costs of these choices.
It is clear however, that this ‘intent’ is heavily mediated by the political economy.
The future development of urban policy must progress on this understanding in tandem with more rigorous cost benefit analysis of land use policy.
Doing so would help reveal the true benefits of realising greater intensification, which we would expect to be significant.
In this context, the renewed focus on Auckland’s urban issues is welcomed.
The recent work by NZIER, MRCagney, Demographia and others, examining the trade-offs of urban policy are important and constitutes a much needed addition to what is an ever-evolving field of study in Auckland.
Table 1: Recent empirical work on Auckland’s urban form
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1. The Economist, ‘Benchmarking the future competitiveness of cities’, 2013
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Geoff Cooper is the chief economist for Auckland Council. This article was first published in the Auckland Council July Economic Quarterly.
48 Comments
With all due respect, what a load of whaffle.
"It has become clear that far too little attention is given to assessing the economic benefits of such policy directives – and far too much on urban limit policy.
Given that land prices are highest on the isthmus – signalling high demand – and generally decline with distance from the city centre, this is puzzling."
Greenfields and infrastructure.
How about you tell us why you people in the council have allowed infrastructure to cost so much.
[ angry rant edited. Please keep to the subject. and keep it civil. Ed ]
Ok sorry, I just cant see what the guys point is, it got me angry as i hear beaurcrats talk this whaffle the whole time and its theirs and his salaries i pay.
I mean read his statements from just one section of his article and my take on it and someone please let me know if im missing something here:
"Let Aucklanders decide urban form through housing choices"
Well where does this lofty statement come from, the unitary plan is telling us our choices are limited, Aucklanders arent deciding, city council planners are.
"The intent of the proposed Unitary Plan is, in many ways, about letting Aucklanders decide how and where they want to live through markets, while managing the costs of these choices."
Last i saw there is no managing choice of those costs. its just the council saying if you go and live outer it will cost us more, even though our mortgages will be less, so since it will cost us more you cant do that. The auckland plan is not about any market deciding activity at all, its about suffocating the choice of people being able to live on sections to the east of howick or north of Albany. Theres no way its letting aucklanders decide through markets... Its incredibly concerning this chief executive thinks its giving us choices,
"It is clear however, that this ‘intent’ is heavily mediated by the political economy."
What?
"The future development of urban policy must progress on this understanding in tandem with more rigorous cost benefit analysis of land use policy."
More rigorous analysis- you dont even mention the productivity report which says land must be released now.
Whereever we live we have costs.
If you live on the outer suburbs the council charges an absolute fortune for new amenities, so much so they actually profit off it and subsidise existing properties waste management and roads from it. Not too mention the new rates they take as well for libraries (which i note they may start closing down) pools etc
What other costs do you mean?
....it doesn't take to long for those in the 'new' outer suburbs to want the same amenities that exist in more central suburbs - swimming pools, schools, librarys, bus/train services, improved roading, upgrades to water & sewerage and so on. So why intial incremental growth may seem to have little affect - all of a sudden council gets these infrastructural/facility demands. Subsidy - nope, I believe it is more of a reflection of how much things actually cost these days. The days of access to cheap and abundant resources are long gone...
But these new sections already pay a massive development fee and also rates which means of course they deserve all those amenities out there. just as there are libraries and pools in most parts of Auckland.
You say a reflection of how much these things cost.The price Auckland council charges for one subdivided section is astronomical. $42,000
Yes $42,000, no more roading, nothing, watercare is more.
Rememebr this new house section now pays rates.
You really think thats a reflection of true cost or a rort?
well if there is a rort where is all this rorted cash going? In the private sector it would be to super porfits - with a council exaclty where? Pretty easy to make broad statements like excessive wages and so on, but damn dificult to cut and slash to a point where it would make any difference. Seems Auckland is getting to the point where debt cost and infrastructure (both new and maintenance) are at a point where a few savings here and there will make b## all of a difference. Three are now too many must have's and must do's.
I take it you're not in Auckland then? As you certainly "cowboy'd" that answer (and not in a good way). What industries, and what value are they adding. 100k is a lot of value-add $. And that makes for some pretty expensive Big Macs (comparative pricing model).
Lot of retail assistant folk up that way.
Lot of clerical.
Lot of cleaners.
Lot of hospo's too.
Plenty of warehouse (logistics) folks.
Plenty of teaching staff.
Even a few more cabbies and bus drivers than the rest of the country.
Not many engineers for the pop though.
Less lawyers too (by pop), they tend to be in Wgtn.
Scientists? a few, but often elsewhere in the country.
so what industry, what -jobs- and tasks are they doing, wiseguy...
as for "the society"... hmmm. socialist scum. perhaps that's what you mean, that they make their 100k by stealing it from others who don't get a choice on whether to use their services...
MikeyB, you are 100% onto it. I get tired of playing whack-a-mole with all the apologists and their crap excuses for the racket. I wish someone would fund a class action in court, trouble is the people being harmed are not being politically represented, they are not organised, not informed, and it is hard to get any mass "pay-in" from them to get their own interests properly represented. On the other side of the fight, there are vested interests reaping millions on EACH SITE they own, up to tens of millions in some cases.
And the anti sprawl people have the crookedness to say THEY are on the side of pure motives and the "pro sprawl" people are in the pocket of vested interests? They need a Goebbells award for their success in establishing this myth in the public's mind.
I think the truth is that it is containing urban growth and imposing a de facto oligarchical setup on citizens, that destroys a city economically and fiscally, not the sprawl and inter-jurisdictional competition that marks the affordable regions of the USA. Bring on the MUD systems and the planned master communities anywhere and everywhere anyone wants to build them.
Detroit is not a cautionary lesson against that model, it is an illustration of how things work when you have inter-jurisdictional competition. If you let your city be run by corrupt oligarchs, it will go bankrupt. That is the way things SHOULD be, not the alternative where all ordinary citizens remain helpless captives to a racket.
Hit another nail on the head there Phil. Much of the shading dealing is hard to track down as it's quite oblique rorting - I can't go to court and fight a case, if the damages don't effect me directly.
So my hands are tied, my local MP is about as "company man" as you can get - last time I wrote to him complaining of OIO not seeking "special value to NZ" from foreign investors, he called me a racist. So the chance of him actually crossing the house on anything critical...yeah Right.
this works for most people, because if they're not personally effected they don't want to know so as long as only a few are financial destroyed at a time then the fox in the hen house is thought to "be wthe ways things are" - keep quiet and maybe it won't notice you...
Auckland Top 25 Suburbs (on Average Value 1st July 2014)
1 Herne Bay - $1,852,100
2 St Marys Bay - $1,595,650
3 Remuera - $1,418,400
4 Stanley Point - $1,365,700
5 Epsom - $1,324,700
6 Campbells Bay - $1,279,350
7 Ponsonby - $1,273,150
8 Westmere - $1,266,450
9 Orakei - $1,240,950
10 Mission Bay - $1,219,900
11 Devonport - $1,186,900
12 Kohimarama - $1,178,550
13 St Heliers - $1,160,500
14 Omaha - $1,157,300
15 Takapuna - $1,155,600
16 Parnell - $1,136,450
17 Glendowie - $1,131,900
18 Castor Bay - $1,127,500
19 Mellons Bay - $1,091,000
20 Narrow Neck - $1,069,950
21 Dannemora - $1,015,200
22 Greenlane - $1,015,100
23 Mt Eden - $1,006,150
24 Pt Chev - $1,000,450
25 Milford - $980,800
Just how ridiculous this is, becomes painfully evident when you do a bit of research on RE sites online (what is the internet FOR anyway?) and find equivalent properties for half the price, in New York, Tokyo, the French Riviera, etc etc. Of course in truly affordable cities the same sort of properties are around 1/5 of the price.
But even the excuse that Dorkland is a truly global city, or that it has world leading amenities, etc etc is bulldust. More so than Tokyo, New York and the French Riviera? Kiwis must be some of the dimmest people in the world to have failed to "get" this. Mind you, the shameful obfuscation on the issue by the MSM is massively responsible for Kiwi ignorance. FIRE sector undue influence much?
Of course the other cities as unaffordable as Dorkland - London and Vancouver - are that way because of planning intransigence too, not because they are better than New York or Tokyo or the French Riviera.
... Phil , when London is the only major city in Europe with an average house price greater than that of Dorkland , then you know we have a serious disconnect occurring ...
We are in ga-ga land , and - alike the coyote in the Hanna-Barbera cartoons - you can only defy gravity for so long ...
Where does one even begin to address the attitude and created problems within this article.
After reading this article I take it that the Dorkland City Council fails to recognise the Universal Declaration of Human Rights.
How do the Council Planners ensure their policies do not arbitrarily interfere with privacy, family, home or correspondence, or to attacks upon the honour and reputation of others?
Anyone going through the RMA process will have every area openly discussed at a hearing. How often do opposers attack the honour and reputation of the applicants? The word affect can mean anything one wants it too. But perhaps the word affect should only refer to direct impacts upon another's land. Things like run-off, soil contaminants etc.
Article 12 No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.
How does the Dorkland Council ensure that an individuals right to freedom of movement and residence within the borders when they place restrictions on freedom of movement and residence? As soon as you are telling someone they can't build on a particular plot of land then you are not meeting the requirements of Article 13 below.
Article 13 (1) Everyone has the right to freedom of movement and residence within the borders of each state.
How does Dorkland Council ensure their compliance with an individual/group right to own property and then be able to use that property for the purposes they owners intended?
Article 17 (1) Everyone has the right to own property alone as well as in association with others. (2) No one shall be arbitrarily deprived of his property.
As the Council is in control of planning and that plan has failed in allowing land to be released....how has the Council ensured that everyone has the right to a standard of living adequate for the health and well-being of the individual and of his family?? Please note this article below includes HOUSING!!!
Article 25 (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
Given the high number of limitations that the Council and its planners impose then obviously they give absolutely no consideration to these Articles either.
Article 29.- (1) Everyone has duties to the community in which alone the free and full development of his personality is possible.
- (2) In the exercise of his rights and freedoms, everyone shall be subject only to such limitations as are determined by law solely for the purpose of securing due recognition and respect for the rights and freedoms of others and of meeting the just requirements of morality, public order and the general welfare in a democratic society.
- (3) These rights and freedoms may in no case be exercised contrary to the purposes and principles of the United Nations.
- Nothing in this Declaration may be interpreted as implying for any State, group or person any right to engage in any activity or to perform any act aimed at the destruction of any of the rights and freedoms set forth herein.
"planners are wrongly vilified as the architects’ of high house prices in Auckland. This view is not supported by the evidence and its continued insistence is unhelpful to the debate."
Har de har.
Councils' utter ignorance of the time value of money gurarantees that the time elapsed in a planning process:
- won't be counted by any Council minion
- Won't be factored in to the Economic Impact of planning in general
- will certainly be accounted by the applicant (ask Kimy about a time series of $ and Interest...)
- would be a Fail in other Gubmint areas: e.g. IRD will have its hand out for UoM interest, if it were Their Taxes being delayed. How come this doesn't apply to Consents?
I'll believe that a Council Economist is worth the salary, when I text-search any of their utterances and discover phrases like 'Planners/Plans have a wide economic impact' or 'Interest on capital committed' or 'time value of Money' or 'planning externalities' or 'unexpected' or 'unintended outcome'.
Until then, I'm afraid, my core belief remains at its default setting: that Councils are Economically Clueless.
You beat me to it, Waymad.
The Council Planners haven't had anything LIKE the criticism they deserve. If someone would fund a class action against them I would be glad to be the citizen to bring it.
I think their whole department should be cleaned out, they should be on the street. In Singapore they might even have been jailed for their behaviour. For example, their original spatial plan was audited by Jasmax Consultants, the audit was called a Fine Grained Analysis; which contained detailed explanations of how to properly analyse the potential for intensification, including the need to exclude parks, playing fields etc.
What did the planners do in their NEXT report, allegedly a fine-tuning to answer the criticisms? Failed to exclude parks, playing fields, etc in their estimates of capacity for intensification by suburb. SACK the idiots, this is what would happen to most ordinary Joe and Jane members of the public in their own real life jobs if they did anything this stupid and pig-headed. And the planners are experimenting with hundreds of thousands of citizens lives, making their duty of care immeasurably greater than that associated with Joe and Jane citizen's jobs.
Unfortunately it is not just the Auckland planners, it is planners and associated bureaucracies all over the western world, with the honourable exception of some in parts of the USA. These bureaucracies and the 'Planning Schools" that supply them with graduates have been hijacked by ideologues who made an end run around the professionals that used to handle urban planning; that is engineers, economists and architects. Objectivity used to be the norm among these professions as they handled urban planning.
Sadly this end run has even ended up poisoning the kind of professionals who used to know better, including the economists and the architects. I must say I know engineers though, who are fuming in frustration at the idiocy and systemic sabotage of the planners.
I nearly burst some blood vessels when I read this this morning:
http://www.nzherald.co.nz/bernard-orsman/news/article.cfm?a_id=67&objectid=11292887
“……Auckland Chamber of Commerce chief executive Michael Barnett says Brown has done what politicians have done to Auckland for years - offered low rates increases but not stuck to a spending plan that aligns with this.
He says if Auckland really wants to build a city that people want to live in there must be investment to attract people, investment and tourists.
Where the Auckland Council has gone wrong, he says, is not aggressively reviewing what it does with an eye on doing things better with less.
He asks: Does the council need 900 staff in planning and 600 in policy?...... "
NINE HUNDRED PLANNING STAFF and they STILL couldn't think to net out parks, school playing fields etc when calculating capacity for population intensification by suburb?
NINE HUNDRED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I repeat my call for sackings and cleanout of the department - all the more so for the sheer numbers of useless seat-warmers in the place.
I would bet that back when Auckland was growing faster than it is today, especially spatially, all this "planning" was handled by a couple of dozen people at most. I mean in the 1950's and 60's and into the early 70's when all those suburbs we now take for granted were getting built in the first place for the baby boomers. Affordably, too.
This Cooper guy has it all morally back to front, which is really the underlying problem with all the people who support the racket.
"People" should "pay for the costs they impose on others". "People" should "pay for the costs of growth". "People" should pay for the costs of infrastructure "that is provided for THEIR needs".
What was wrong with the old system where NOBODY paid, other than in the common pot via rates?
Everybody was in the same boat, were they not? They grew up, got a house, paid rates, enjoyed amenities, incurred a share, in their turn, of the costs "imposed on them" by those who came after them.
At BEST, the modern day changes that Geoff Cooper has been suckered into defending, could be a zero-sum game. But they are FAR from a zero-sum game at all. They are an intergenerational gouge morally on a par with child abuse.
To remedy this, we could sock every owner of property at the point Development Contributions were introduced, a levy of around $50,000 to cover the DC's they DIDN'T pay, unlike the cost their children are going to be lumbered with. OR we could grant every buyer of property after the DC policy was introduced, a rates holiday of the value of the DC's THEY HAVE been levied.
It is irrelevant whether the recent and future buyers of first homes actually bought a new home that had been built on greenfields. The price they paid for a property anywhere in the city, embodies a windfall value increase derived from the inflation of the price of new properties on which DC's have been levied. And it gets much worse than this. The value of the DC's is only a fraction of the price inflation that has occurred thanks to running a racket in greenfields land in the first place:
http://www.nzherald.co.nz/anne-gibson/news/article.cfm?a_id=39&objectid…
Land bought in 1995 for $890,000 - owner will sell for $112m
It is utter crap to argue as the apologists for a UGB do, that this site would have sold for this much anyway without a UGB being present. Even one with "20 years supply of land for growth" inside it. This is an observable reality in urban land markets with UGB's versus those without them. If your theory does not fit the reality, it is time to get a conscience about your theory and the objectivity of the "profession" you are a party to.
Got to remember that much of the big development structure was paid for by debt, that borrowed cash paid very low wages that allowed the highly employment rate workforce to purchase low cost undeveloped land and a lack of bureaucratic ability meant overheads were very minimal.
Now that infrarstructure is in maintenance mode. We are still paying off the debts, and getting debts for the upgrades to fix the shortcuts and "too expensive" alternative choices. There are less people employed to do the basic work and few large projects because we haven't deleveraged enough to do the earlier projecys, let alone support the on going maintenance cost.
Because of all the capital invested and increased scarcity, prices have shot up for all land. So "every Big Mac" (ie comparative pricing") now costs a fortune to make. But we're getting less value for our improvements from DC, than the original cheap investment in DC. But because we're piling on more more bureaucrats and paying them more, the DC cost is going up exponentially.
At some price infrastructure has to be paid for. If we take out 10x 3bd cottages, and put in 3x 5 story highrises, it's going to need more water, comms, effluent services. The _only_ reasonable place to put that cost, is on the people who choose to live there. The best way to do that is build it into the building costs at time of construction, and through sale to the rentier
I can agree with a lot of what you say there. Actually, the Council IS charging DC's for intensification projects, just as they are for greenfields development. This is in spite of the rhetoric from advocates of the compact city, to the effect that there is "spare" infrastructure in mature areas that "should be better utilised".
The simple reason that they want to force developers into doing intensification rather than greenfields, is that they can shake down developers to pay for new infrastructure when the old infrastructure was overdue for replacement anyway. This is what the last several decades of rates was meant to cover. The Council gets to double-dip on intensification DC's, in a way they can't on greenfields DC's.
I have already explained why it is more moral to recoup costs over the long run via rates, than lump them upfront. If you want to make compensating transfers to all first home buyers, from existing property sellers, then you would remedy the inter-generational social injustice inherent in switching from "cost recouping in rates" to "lump sums upfront". But there would STILL be disadvantages relative to the old way of doing it. Infrastructure providers, whether Councils or MUD corporates as in the US, can raise the money at lower cost than private individuals can get mortgages. The levies do filter into the price of ALL property, not just capitalise into the price of property in which levies have been lumped upfront into the cost. An ongoing tax against a site, not only avoids the price increase, but systemically lowers site values. This releases capital for more productive uses than sinking it into zero-sum land price increases.
This stuff was common knowledge several decades ago; the reversal of the traditional practice is a triumph of the rent-seekers in urban land, and a collective loss of common-sense. If Councils have lost control of their costs, ratepayers need to punish them in time, not allow the can to be kicked down the road so that an even bigger crisis will be hit in another decade or two. And inter-jurisdictional competition underpinned by MUD type systems, as in much of the USA, results in the corrupt local administrations hitting the skids as they should, as their residents and businesses bail out to surrounding municipalities and further.
I disagree with some of the rates grab theory.
If some developers put in a large intensification, or a new suburb is tacked onto my town or city, why should _my_ rates go up? I have enough problems with my own bills without paying for the others, especially if their desires include things which I disagree with (eg domestic gas reticulation)
An ongoing tax is exactly that. excessive ongoing tax. First rule of business, whenever possible reduce ongoing consumptions. This isn't just a slogan, is _very_ important feature of operation - without following that mantra you'll find that leakage and complexity just keep continually creeping up on you, constantly pushing prices up and value down. In the end you be forced into chasing higher productivity just to offset your commitments, and that should set off alarm bells!! Because with ongoing costs, the more you push the productivity increase the higher your costs will go!! - as is really obvious and I shouldn't need to point it out, "higher productivity" in this case is more ratepayers; immigration and migration, to try and pay for services that should have paid themselves into solid assets position (ie be barely above minimal operational cost)
thus it is clear, that if a group of people want services to an area they want, and that overloads existing (or non-existant) structures, then clearly it is the incoming people that are responsible for that choice. Likewise, if extra capacity has been paid for over time by existing users, it is only reasonable that incoming people pay their share of that capacity when they want to use the facillities.
what is unreasonable is to tax people who take no part in the decision making or enjoyment of new services, to have those choices or services provided to others.
We could set it up that the incoming people pay over time for their services, but that rapidly becomes a nightmare with some people on an old rate in one part of town, and others on a different rate with a newer part of town, or with different services/access. Such things are best left to only large degrees of variation (rural vs suburban, or differnt rides) rather than a per developer adjustment. Anyway such services of "capital over time" are what banking services are for. Better to cover the lump sum up front...perhaps with a more minimalistic philosophy the services costs would be more realistic.
Yes I agree in principle but you then must be assuming that the baseline from which you start is not part of this, and this only applies to 'others' What services are you enjoying now that have been paid already by others and you are not contributing your full share?
The reality is most of the extra costs that new developments incur are paid for by the developer first and the new owners next and there is no extra burden on existing ratepayers, or at least no more than those existing ratepayers caused on those that came before them.
The biggest issue with supply of new services in councils that operate like NZ councils do, is that they cannot match the supply of those services with the demand. They are either over supplying or under supplying demand. This is what causes the unneccessary considerable extra costs.
In places that can match the supply with demand in almost real time, ie the supply and demand curves lie almost on top of each other, costs are very low, this actually gives the developer extra money (money that in NZ goes into non-value added costs like land banking) to put in real value-added amenities that benefit all residents, both old and new.
Cowboy, what you are saying is right regarding the existence of a problem, but you are advocating the wrong solution.
Most "newcomers" are simply people whose only "sin" is "being born". It is immoral to make them the subjects of "the biggest inter-generational wealth transfer in history" as Prof. Robert Bruegmann described it.
You don't show from any of your comments that you have a clue about how this works.
The solutions to the problem you describe, are to be found in 1) Land taxes, which automatically align revenue pay-in with benefit captured 2) User-pays pricing for infrastructure instead of "postage stamp" pricing and socialised costs 3) Inter-jurisdictional competition underpinned by freedom of entry to the "market" for local residents, of NEWLY INCORPORATED municipalities.
Any ONE of these three things would go a long way to solving the problem.
The "popularity" of upfront lumpsum charges on new building is due to ignorance and worse, unscrupulousness regarding the resulting social injustice.
You are creating more problems than you are solving with your solution.
I have lots of clues. You are the one pushing a prejudice barrow, and I don't want to be the one paying for your incorrect philosophy.
ongoing taxes/charges should be used to meet the cost of ongoing operations. A major development principle is to reduce resource consumption. Therefore, if this is done correctly, future costs will reduce.
(1) Land is a right not a "benefit captured"
(2) user pays is good, but only for services rendered, which refers to a fair portion of the capital expense and pro-rata contribution of the on going operational cost. the capital expense is charged to the greenfield development, and then re-evaluated through singular capital charges when brownfield development occurs. When a individual moves out of the area and resells, they recover their capital contribution, and the incoming person purchases that capital contribution as part of the sale price.
the operational cost of services, is thereby proportioned to those receiving the benefit of them.
This woudl also encourage breaking out hidden fees and services that councils like to sneak in that many in the area dont' want. Which given the number of people near or under the living wage, would mean that rates need not be pushed up and not penalise those on low income, or those who didn't want the services in the first place.
This is rubbish:
"......Greenfield development may be cheaper for an individual household but more costly for Auckland generally, since it often requires expensive infrastructure funded in part, through rates and commonly generates greater congestion costs......"
The correlation between urban density and congestion, is the opposite way round to this assumption - the lower density cities are less congested and the higher density ones are more congested. The only data sets that don't show this, don't show anything (i.e. no observable correlation). There is no data set that shows what Geoff Cooper and the Auckland planners claim. This is not rocket science anyway, and one wonders how the heck such an unenlightened assumption as that higher density reduces rather than increases congestion, ever got any traction at all.
On infrastructure costs correlation with density, there is no observable correlation in any set of data analysis, other than that VERY low density cities tend to have higher infrastructure costs than merely "low" density ones. It might be possible to save costs by intensification IF intensification had been planned right from before anything had been built in the first place, but this is never the case, is it? If you have to buy sites with multi-storey buildings on them, and demolish those buildings, just to put in a bigger sewer, is that likely to be cheaper than just letting growth happen on greenfields instead? Especially if you have inflated the costs of the sites you have to buy in the first place, with your UGB and upzoning policies.
Take the costs of property being acquired to build the Rail Link. Stupid, stupid, STUPID!!!! Or corrupt.....!
Without the growth containment policy having been imposed and inflated the land prices already, the cost of acquiring this property would have been FAR LOWER. Auckland ratepayers should SUE over this. The land should be compulsorily acquired anyway, and no planning and zoning policies that inflated the prices legally negotiable by the owners should have been enacted prior to the acquisitions. The potential for corruption is so high and the public watchdogs so non-existent, that if there is not actual corruption happening already, we are begging and praying for it to happen in the future.
If you read a book heavy on historical analysis like Phillip J. Anderson, "The Secret History of Real Estate and Banking", you will see that corruption in the nexus between land dealing and politics and infrastructure provision, is a repeated historical norm from way back.
Governments have traditionally acquired land for infrastructure, compulsorily. The fact that they have decided to 1) force the price of land up with regulations and then 2) negotiate for "market prices" with land owners, the cost to fall on ratepayers, is something beginning with "C" and it is time the ratepayers woke up to it.
The same C-word applies to the owners of centrally located land that economic rent is concentrated in by planning and transport investments. The Commuter Rail system subsidies should be paid by special assessments on the owners of property surrounding the stops, with the steepest targeting being at the focus of the radial routes. This is actually fair and just, while charging levies at the fringe is not - but which one is the Council actually doing?
Well there is the matter of insider trading and that's the reason used by many governments to make sure officials didn't own property or favour friends/receive red envelopes. These days such trading of favours is so common place that the C-word tends to be just for those who fall out of favour. Another word for a bribe in some countries is a gift that was too small...
"......profits could be shared by developers and communities (perhaps facilitated through local boards) to ensure the returns to growth are shared by current and future residents....."
On the one hand, Geoff Cooper is arguing that newcomers "impose costs", then he is telling us there are profits to be shared around as the result of growth......!
Real income increases, that result from agglomeration economies, are a legitimate and naturally occurring benefit to the citizens of a growing city. "Super profits" that are a result of planning and regulations that have distorted the market, and captured by some at the expense of others, are not. If they are there to be captured and distributed, they shouldn't BE there; capture and distribution would be just legitimising a racket by turning it into an added layer of distortions to market function. It would be like addressing the profits made by Bootleggers under Prohibition, by taking and distributing those profits to the do-gooding Baptists. Of course neither the Baptists nor the Bootleggers want an end to Prohibition, which is the real problem.
It is sickening that one social agency after another calls for "more public funding" to "solve the housing crisis", but they don't want to know about the "free market in land" solution. It has been pointed out in the UK, that the consequence of providing subsidised housing for the "least fortunate" in a market suffering from inflated economic rent, merely transfers the impact of the rationing system to the "next least fortunate", who don't qualify for the assistance. The de facto tax rate on people who pay their own way instead of "qualifying for social housing" is well over 100%.
‘Embedded in this policy is a subtle but important deviation in the driver of Auckland’s urban limit policy. Where previously it was used to actively create a ‘compact city’, the rural urban boundary is now designed to facilitate the efficient provision of infrastructure required for greenfield housing development.’
‘Any calls for further land release on the periphery of Auckland should be done in the context of this proposed policy. Doing so should largely put an end to this debate, helping to refocus attention on more important issues.’
So what Cooper is saying here is we will continue to do exactly what we were doing before but will change the name of what we were calling this ie Compact City (now that has been exposed as the rort that it is) and call it something more palatable and use the word ‘efficient’ (which it is not) to justify what we are doing.
Having been involved in the development of MUD's in Texas, I can tell you if you wanted to be super efficient in provision of infrastructure in Greenfields development, you would do away with the MUL and RUB.
While there is a defined boundary in place (the “rural urban boundary”), there will always be 20 years’ forward supply of development capacity meaning that the RUB will not constitute a binding constraint on supply.
Once implemented then, approximately 20% more urban zoned land will be available outside the current urban limit.
With statements like this from the Auckland City Chief Economist, is is easy to see why Auckland is in the S*#t and will continue to be so.
The very fact that the land is identified by council and that they are only providing infrastructure for 7 years ahead (yeah right) makes it easy for land bankers to identify which land to buy ahead. This cause’s rent seeking behaviour with the land suddenly being worth 20 times plus more than it would have been without a RUB.
Also the infrastructure supplied by council is always from the last end connection which means only the land immediately adjacent it can be developed. This effectively limits the land released to a far smaller area than what they theoretically say is available.
Developers do not need for council to be involved in the provision of infrastructure as much as council want to be involved. Developers can develop most of the infrastructure far better, quicker and cheaper without council’s involvement.
Further, many of the traditional land owners eg farmers, within the areas identified by council as available for development now, do not want to develop now or in the near future. Effectively not making this land available for development, in spite of what Cooper says.
And their standard is expensive housing.
The right developers will build to a better standard, quicker and cheaper than council ever will.
Developers are generally penalised for turning up with the right solution first time up as councils see that as the baseline from which they leverage any planning gain. On top of this developers dumb their infrastructure down to keep within market price constraints because the cost of land via land bankers and council fees and levies has made the section price so expensive before they have started to build.
But you make a good point in that if council were not there, the present lot of developers would not develop like they do in other places that have affordable housing like, Texas.
It would be like an overally oppressive parent (council) suddendly giving their teenage kid (the developers) the keys to the car.
But if we want more affordable housing both up and out, then it starts at the top, with council.
".......if council were not there, the present lot of developers would not develop like they do in other places that have affordable housing like, Texas....."
It might take a while before the good operators cleaned up the bubble cowboys and the gougers, but it would be worth it. The fact that there are some old hands around who know their stuff and are lobbying for reform, not perpetuation of the racket, is a good sign.
It is always the first argument of the gouger, that "the public must be protected from low standards". All that protection ends up costing the public dearly. It is little different to paying the Mafia for "protection" - the Mafia probably actually does it CHEAPER (and more effectively :-) )
When the government runs the racket, there is more scope for corruption than when the Mafia runs it. You are less likely to be caught when the government runs it, and it won't result in a kneecapping or concrete swimming shoes.
The big difference is organised crime is an affirmative force. It says who you are going to pay, how much you will contribute, and when you will receive it.
With proper government it is a negative or restricting force. It says what level you can't go under, but you may choose a btter option; the minimal level of quality and what the minimum standards will need to be covered.
That's how you can tell when government is overstepping its proper jurisdiction, because they move from that minimalist restriction mode towards the organised crime model.
It is much cheaper and faster for the Mafia -because- the Mafia retain control and ownership of the process throughout. There is no need for oversight or for forensic records, as justice is delivered and arrange for their pruposes. Again that's the sings the government has corrupted itself, when it becomes the law maker, yet insists it has no liability for it was just following the law, and that laws are passed to approve inappropriate actions that have already occurred. ( a recent issue was various pwerful people in the US granting themselves immunity over some international crimes... you don't have use for immunity if you aren't _guilty_!)
It's just a stardard lazy NZ corruption. Bunch of sheep that think the government (lcoal and central) is their mother.
The standardisation is things like, water 500mm or more down, pipe to last 50 years, diameter between X and Y, measured externally.
Gas to be marked with tape and have GPS coordinates supplied with plan, a locator cable to be put in trench.
The councils go overboard and start throwing in their wish list because it only costs the developer. That's why I keep saying government related to _direct_ issues affecting the work.
(an example of this was an ex-boss of mine when he built his house, the council demanded to know where he was purchasing the supplies, what brand, what price, before they'd accept his plans. _Who_ and _how much_ (and brand) aren't relevant _directly_ to housing planning.
And it gets worse. Just read a developer covenant where the developer stipulates than all houses in the subdivision must only be single level. Then most of the convenants expire after 5 years, except that one?
Councils and developers are getting out of touch with what their ratepayer/customers want.
that kind of thing is a bit suspect in this day and age (of the RMA). I understand the building of a unusual 3 level dwelling like the one behind one of my properties can be a bit of a privacy/eyesore issue - but there is the issue of just how much say such a post-sale clause should be able to violate the natural laws of ownership and freedoms associated with that (respecting the RMA conditions of not adversely effecting others)
I would wager that in markets where there are minimal restrictions on converting land uses, and systemically affordable land as a result, the very much more responsive supply of housing will have a BETTER mix of housing types, than our rationing system that leads to developers aiming only at the top end of the market.
If you quota used car imports, you end up with Lexuses and EVOs and Godzillas the only things being imported, don't you?
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