I found myself in a really interesting debate on Frog Blog yesterday, on a topic that I know a fair bit about – and debating it with probably the one person in New Zealand who I would most want to have the debate with: Owen McShane. The original post was by Russell Norman, co-leader of the Greens, about the unsustainability of our debt levels – something that is clearly starting to bite and will continue to do so throughout the next year or so.
But anyway, Mr McShane – who is well known for being one of NZ’s best climate change deniers and also for his constant campaigns to denounce Auckland’s metropolitan urban limits, dragged the argument towards blaming those urban limits (and the whole idea of Smart Growth) for bumping up house prices and thereby allowing debt to get out of hand. His original comment:
About three years ago I worked with a bank economist to figure out how much in foreign exchange the Councils were costing us by inflating the value of land in New Zealand. We calculated the inflated portion of house prices for New Zealand as a whole using the Demographia affordability index. (we had already shown that one could “manufacture” a section outside Christchurch for $30,000 at reasonable profit but that section then was selling for $135,000.
Anyhow it turned out the total overseas debt equate almost exactly to the inflated portion of the value of the real estate market. I then found we needed the export receipts from the wine, fishing, horticulture, and film industry (and I think forestry) to pay that interest. So had we not inflated our real estate market those industries would have been real earners rather than paying interest on overseas borrowings.
I predicted these outcomes in my report to the Reserve bank of 1995. So when you look for who to blame – look at the planning schools.
Now first of all, I want to say that I’m not in total disagreement with what he’s saying here. Clearly, house prices going nuts throughout the last few years has been a massive factor is allowing debt to get out of hand. And I’m also in partial agreement that the stifling of land supply has been a factor in making house prices increase so much.
However, I absolutely do not agree that removing urban limits and allowing sprawl to happen is the cure for this problem. While someone living in an urban fringe house may indeed be able to purchase that house at a cheaper price if the urban limits were relaxed, it has been shown again and again that people living on the edge of cities end up having to spend a massive amount more of their time and income on transportation than those living in the inner-city. Furthermore, the cost to local authorities of providing these additional roads, water connections, sewerage systems and so forth ends up being horrifically unaffordable. In recent years councils have tried to get the developers to pay more of their fair share in providing these services, and you would not believe the fuss that has been kicked up.
So I suggest to Mr McShane an alternative way to improve housing affordability without adding to sprawl:
Surely allowing higher density developments would effectively increase land supply (ie. I can build 2 or 3 units on my 600 sq m site, rather that just one McMansion) in the same way, but without all the environmental effects of sprawl?
At 35% site coverage and 8m height limit you can get 400 sq m of floor space on my property. That’s 3 reasonably sized units, and hey you’ve improved affordability without creating a false economy of sprawl where people spend any money they save on rent/mortgage on getting to work each day.
He comes back with some reasonable points, but for some reason believes that someone living on the edge of the city would actually have the shortest commutes. I can’t quite see how that makes sense, as even if a lot of their trips were from suburb to suburb, that other suburb seems to end up on the opposite side of town as often as not.
That was the theory but the theory is disproven by real world experience.
Actually there are some efficiency gains in inner cities on expensive land from moving to single family homes to Town Houses (which is why I invented the word Town House as part of my work to free up housing markets and improve choice in the mid sixties) but forcing whole urban populations to live behind Urban Limits simply generates the cascade of increased costs experienced by Dave S and anyone else unfortunate enough to find themselves in a Smart Growth market.
In NZ especially going above two storeys adds dramatically to building costs because of our high earthquake and wind loads and of course the large amount of space allocated to public space such as stairs and lifts and parking etc.
Why do you think people on the urban periphery take longer to get to work each day? In the real world they have the shortest and least congested trips because they normally drive from suburb to suburb rather than to downtown.
I clarify for him:
I’m not suggesting going above two levels, although obviously in the inner-city that makes perfect sense.
What I’m suggesting is re-looking at how density is controlled in places like Auckland City. If you take the current Residential 6a zone and apply is to a 600 m2 section (I use that size as I live on such a section at the moment), then you are encouraged to build a 400 m2 (200 m2 x 2 levels) monstrosity in order to maximise the value of your land. If you keep the maximum building coverage and building height the same, but stop controlling units-per-site you immediately allow potentially three times the number of units to be built on that same piece of land.
Clearly that would help housing affordability, and in a REAL way as you would have sufficient densities to make public transport viable, to make walking to the local shops viable, and with mixed-use developments you would also make it much easier for people to live closer to where they work and so forth.
The model you propose sees reducing land prices as the end point, rather than as the means to improving affordability as a whole. Plenty of research has shown that people living on the urban fringe spend masses more of their lives and masses more of their money on transportation than those living in inner-cities. Surely that’s unsustainable?
While I agree with you that planning regulations have driven up land prices, as Dr Kerry James Grundy states in the latest Planning Quarterly, that’s a pretty small-fry reason when compared with speculative investment. I think the main adverse effect of planning regulations on house prices is this obsession with units-per-site, which forces the under-development of inner-city sites that should most definitely intensify.
The idea of getting away from units-per-site is one that makes a lot of sense to me, and one that I have thought about quite a lot in recent times. When Auckland City Council gets around to notifying their Second Generation District Plan (which I think is meant to happen in about April 2010) I intend to submit on it (unless I’m working for them at the time, in which case hopefully I can make a difference from the inside) along these lines. As far as I know, Wellington City Council does not impose a density limit on development in its inner-city suburbs – but instead just looks at what the actual effects are (ie. height and building coverage). That same approach should absolutely be applied to Auckland City. The current rules, when applied to the property I live in (not that I own it, it’s just a good reference point) will only ever allow one house on that site. By law I actually couldn’t even internally split the house into two units, even though I reckon it’s definitely big enough for that to be realistic. Most large houses throughout Auckland City that have a granny flat underneath or indeed are split into two smaller units would not comply with the current rules.
But anyway, bringing this back to housing affordability and how my suggestions would reduce the necessity for sprawl, I think it’s pretty obvious that providing for much greater flexibility in the development of a site would allow a developer to still make money while at the same time provide a much greater number of affordable units within the Auckland isthmus. In fact, it has actually already happened in the past, although I often try to avoid bringing up exactly how it has worked. Throughout Auckland City there are a surprising number of ‘sausage flats’ – you know the ones: units built as a long slab perpendicular to the road. Not exactly a great design model from an architectural point of view, but I think it’s pretty difficult to comprehend how unaffordable Auckland City would be without sausage flats. I’m not suggesting a return to the days of sausage flats being built everywhere, but I don’t actually think that would happen. These days councils are much more aware of ideas such as urban design, and I’m pretty damn sure the rules could be written in such a way to ensure the greater number of units are built in an architecturally pleasing manner.
His response is quite interesting actually. He makes a couple of good points, but throws in a heck of a lot of rubbish too:
IT’s the scarcity that drives the speculation. Grundy has it hopelessly back to front. But he is no economist.
Have you tried designing the layout of the six units on your site?
Have you included car parking and manoevering, and some room for some planting etc. And what about kerb parking and so on. High densities increase traffic congestion rather than decrease. Trips per household decrease slightly but the added households generate far more trips.
Residential density does not make public transport viable – employment density does. That is why Manhattan has a high use of public transport.
The whole purpose of a large city is to enlarge the employment catchment. There is no city in the world where people walk to work unless they work in a takeaway, a TAB, a dairy, or a brothel.
The”plenty of research” you refer to is hopelessly wrong in that people optimise location on total costs and families in particular have multiple destinations. this is why people on the peri urban areas consumption of fossil fuel is much lower than people in inner city areas. It relates to household income.
And if the MUL was relaxed and land prices fell then developers could afford to build low cost housing like they did in Auckland pre Smart Growth. It’s high land prices which make McMansions necessary.
I am afraid you have been reading Smart Growth propaganda rather than real research by urban economists.
Yes I can see how the scarcity of land forces developers on the urban fringe to build McMansions. If they’ve had to buy the section for $300,000 alone, and are only allowed to build one unit on it, of course they’re going to build the biggest house possible so they can sell it for $700,000. I can see how employment density is a big factor in making public transport viable: after all that’s why trips to CBDs around the world generally have a far higher public transport share than trips to employment centres sprinkled around the rest of the city.
However, there’s also a whole heap of rubbish he’s saying. Firstly, I’m not suggested 6 units for my site (although, a very nice 6 unit development on a site very similar to mine is located just down the road from us). Parking, planting and so forth can be accommodated fine, as I’m not actually suggesting increasing the building footprint. I would certainly not require each unit to have 2 parking spaces , as 1 each would be fine, and would not obsessively encourage car use like existing rules do. I can’t comprehend how he just writes off the effect of residential densities on making public transport viable. Pedestrian-sheds (number of people within walking distance of a service) are the foundation of developing a public transport system – as obviously running a metro at 3 minute frequencies is utter stupidity through areas of single-unit sprawl, but works brilliantly in the high-density cities of Europe. I do accept though, that often it’s the quality of the public transport service that will lead to an improved share of trips, rather than simply the residential density. His assertion that hardly anyone in any city around the world walks to work is simply hilarious – I guess he’s never been to a mixed-use high-density European city.
And finally, most hilariously, he tries to state that fossil fuel usage of someone living on the edge of a city (or whatever peri-urban actually means) is likely to use less fossil fuels than someone living in the inner-city. Surely this is a joke, as a person on the edge of the sort of city Mr McShane seems to be promoting would never have the opportunity to walk, cycle or catch public transport anywhere. By constrast, someone living towards the centre of a higher-density, mixed-use city with good provision of public transport might rarely have the need to use their car.
I have to say I’m a bit disappointed in him really. He makes a few decent points, but some of the things he comes up with appear simply laughable. As I said above, I do accept that relaxing the MUL would probably have a positive effect on land prices – however that would come at an enormous cost. Unfettered sprawl is what has got Auckland into the huge problems that it faces now, with horrible traffic congestion, crazy automobile dependency, bland and boring suburbs and increasing environmental pressures on our surrounding farmland. I agree that to make housing more affordable in the future – even though that problem is kind of solving itself now as the real estate bubble has burst – the supply of sites needs to be increased. However, I think that supply can be increased within the current urban boundaries by getting away from our obsession with ‘units per site’ controls. By allowing more development within the city, we’ll be able to avoid all the negative effects of sprawl, we’ll be able to increase our urban densities and make public transport, walking and cycling more realistic travel options – all while achieving the same affordability benefits as sprawling would.
Surely it’s a no-brainer.
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