An article in today’s NZ Herald notes that new councillor Dick Quax, who replaced Jami-Lee Ross as the representative for the Howick Ward, argued against the council’s generally agreed position of preferring a ‘compact city’ in his maiden speech. I’ve discussed the metropolitan urban limits (MUL) in many previous posts, including reference to a pretty detailed study undertaken for the ARC that showed an expansionary model of urban development generally delivered the worst outcomes for the highest cost. However, Cr Quax raises an interesting issue related to the MUL that does need further consideration:

Mr Quax, on the Citizens & Ratepayers ticket, told the council last week that the city faced huge challenges over the next 30 years when the population would increase by about 650,000.

That meant about 300,000 new houses had to be built.

“However, there is a projected shortfall of 90,000 homes. More land and supporting infrastructure will be needed if the goal to unleash Auckland is to be realised.”

He said too many Aucklanders had no stake in the region or their community, were shut out of the housing market and would be renters for the rest of their lives.

He goes on to talk about other issues that he thinks will result from urban intensification – like pressure on infrastructure, crime, pollution and so forth. Generally I think those other issues don’t have much merit: the ARC study showed quite clearly that the cheapest option infrastructure wise is to focus on intensification, more compact cities are typically more sustainable and therefore less polluting, while the crime issue is probably neither here nor there (highest crime levels are generally not in the densest parts of the city).

I think the issue of housing affordability is more valid though. The MUL clearly limits the supply of land for urban development, so naturally that’s likely to increase the price of urban land. A more in-depth study by Motu Research into the issue seems to generally confirm this, in particular noting the big difference in price of land just in and just out of the MUL. Generally I think that applying the MUL in Auckland has probably contributed – to an extent – to the reduction in housing affordability.

However, I still get annoyed by people such as Dick Quax thinking that getting rid of the MUL is both the only way to improve housing affordability significantly, and that it’s supposedly the magic bullet for achieving this. There are a number of reasons why I think this, which leads to why I reckon getting rid of the MUL (and not replacing it with some sort of sprawl tax) will have costs that aren’t worth the benefits.

For a start, I think there’s a need to separate out land costs and housing costs. While it’s obvious that and urban limit would increase the price of land inside the limit (because of the constrained supply), that doesn’t necessarily need to carry through to higher housing costs – one could simply allow higher densities to make more efficient use of the land. I used to live on a 600 square metre section in Sandringham that had a pretty standard zoning for Auckland City, allowing one unit per 375 square metres as its maximum density level. The main other controls on development intensity were a two storey (eight metres) height limit and a 35% site coverage limit. This means that theoretically one could build a house with 400 square metres of floor area (freaking massive), but not ever more than one unit, because two units requires a site area of at least 750 square metres. If you were designing residential development controls to undermine housing affordability, you’d struggle to do better than the controls we currently have.

So a tweaking of the general development controls on residential land within urban Auckland could make it possible for more housing units to be built on our urban land – thereby improving affordability as land costs would reduce as a percentage of a house’s total cost. There’s a reason why central parts of large cities in Europe and older North American and Australian cities tend to be full of apartments, terraced houses and townhouses: they make the best economic use of the land. Many of our current planning rules prevent this, and I would argue contribute more to housing unaffordability than the MUL does.

Secondly, I must say that it just doesn’t seem to me as though we’ve tried very hard with our planning regulations to promote housing affordability (in fact, as I noted above they generally do the opposite). In many overseas cities there are floorspace or development bonuses set aside for developments that incorporate a level of affordable housing. There might be specific planning rules that allow “granny-flats” to be built on sites not really large enough for two full houses (some councils in Auckland have this). Development contributions could be raised or lowered depending upon the level to which affordable housing was provided as part of the development. The key point to make is that there are some obvious planning tools out there that could be used to provide affordable housing – we just haven’t used them yet.

Finally, even if allowing much more sprawl did improve housing affordability, I do wonder whether much of the improvement would actually be a false economy. What people save on housing costs they may need to spend on transport costs – travelling far greater distances than they would in more central areas. The affordability of new housing on the periphery is also likely to depend upon the extent to which the real costs of developing that land are subsidised by the rest of the city. Over the past decade it’s clear that many parts of Manukau City have had to go without in order to stump up the money necessary to construct Flat Bush, while the money that the Ministry of Education has spent on all the new schools out there is simply mind-boggling. If these costs were actually put into the cost of greenfield properties, I doubt they would be particularly affordable.

So really, when people like Dick Quax (or Owen McShane) reckon that removing the Metropolitan Urban Limit and allowing Auckland to sprawl will solve the housing affordability issue, I think they’re grossly over-simplifying the issue. That’s not to say that we shouldn’t be concerned about the impact of our planning system on house prices: it’s pretty clear that the policies of the last decade, which have chopped development off at the sides and made intensification difficult, have contributed to affordability problems. But let’s be smart in how we approach this issue, to ensure that efforts to make housing more affordable don’t come at the cost of increased transport costs or require massive sprawl subsidies from the rest of the city.

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    1. Very unfortunate Dick Quax’s stance……I know that his place of birth – The Netherlands offers outstanding examples of great communities accommodated within compact villages, towns, cities, all served by a brilliant public transport network, and with an amazing network of cycleways too! Perhaps he needs to take a trip back to reconnect with his whanau………

    2. Auckland has many characteristics that make it very different from the Houstons and so on that we are compared to in this regard. The constrained nature of Aucklands topography means it can only grow in a small number of directions.
      This means it is easy for private developers to land-bank. They then can develop new housing at a slow rate thus constraining supply.
      Also the geography creates many more complex issues in terms of stormwater.
      the sprawl advocates often overlook is that a major negative of having weak zoning is that the urban growth path fills up with 1 acre lifestyle blocks, which is a hopeless waste of land in the medium term, as then people (and services) have to travel much further to get anywhere. This has happened somewhat in Alfriston, Opaheke, Karaka south of Auckland, and Redvale, Dairy Flat North of Auckland.

      My major issue with sprawl is the hopeless (car-dependent) land use and urban design outcomes it creates, and it is almost impossible to retrofit when oil is more expensive. I don’t mind gradual urban expansion, and I think that is what is occurring at the moment.
      Of course the real issue at the moment is financing for these developments as most of the developers and finance companies went broke, so nothing is happening. Meanwhile all the builders and contractors leave to Australia, which will really constrain our building ability in future years.

    3. Does any one know of any studies done in Auckland on how much a new area is subsidized by the Council/Government with regard to infrastructure including services such as schools and police stations? I’m firmly in agreement that if the MUL was to be lifted or increased then the full costs should be carried by the developers that will then pass those costs onto the buyers. The new properties rates should also allow for the increased costs of running PT to further sprawl.

      1. “Does any one know of any studies done in Auckland on how much a new area is subsidized by the Council/Government with regard to infrastructure including services such as schools and police stations?”

        How do you define “subsidized” in this case? Police stations and schools are usually built on roughly a per capita basis, with adjustments due to demographics and particular local need (such as areas of high crime). We generally don’t allocate taxes that individuals pay to specific government services. However I think you could look at all tax revenue gathered and cost of government services in a particular area and compare the two. My gut feeling is if you did that, the urban fringe areas would be showing an excess of tax revenue, while the subidised areas would be suburbs like Mangere.

        1. Schools are built to service x number of pupils, based on the surrounding housing. High-density housing will lead to schools designed for large numbers of pupils, and conversely low-density housing will lead to schools designed for fewer pupils. But the most basic principle is the distance to the nearest school, especially in urban areas. So although they’re not catering to particularly many students, schools in Flat Bush and Albany still have similar-sized catchment areas to schools in the middle of Auckland urban area. That’s horribly inefficient in terms of land cost, infrastructure cost, management overhead (the marginal cost per student in staff costs of a Rangitoto College is much less than that of an Albany Senior High or a Bairds Mainfreight Primary), etc.

          Police stations are somewhat based on geographical distance, though more so for community constables than “proper” police stations given that most patrolling is done from cars.
          Fire stations, however, are very much based on geography. The further a fire appliance must travel, the greater the need to build a new fire station in order to maintain mandated response times. Fire stations are expensive. The operating cost of a single-appliance full-time station is on the order of a million dollars per year – that’s one truck, four fire fighters per watch, four watches.

        2. The capital cost of acquiring land for the various schools built in Flat Bush is huge. That cost simply wouldn’t have been necessary if those students had been accommodated within existing schools across Auckland.

      2. Penfold,

        This is actually what should happen, and yet we know it won’t as they would require developers to take account for the true cost of their actions. They’ll just go squealing to the media or politicians.

    4. Unfortunatly, banks don’t care about associated costs; but they should. It would be better if stated home prices were forced to include the average, real costs associated with purchasing in a specific area. In addition to simply the sticker price of the structure itself, the average costs of local infrastructure upgrades, transportation costs (petrol, extra vehicle maintenance, average commuting times), costs related to the decile of the local school, etc. These extra costs would need to be taken with a grain of salt, but would represent averages and likely within the expected, real costs of purchasing a home. Knowing how much it will cost TO LIVE in a place would certainly level the playing field with regards to denser development. The current MUL arguements completely ignore the massice, associated costs of living in the furthest-flung suburbs.

    5. I think there is one thing that is often overlooked in the debate about land prices that proponents of removing the MUL always ignore. That is the reality that many people want to live relatively close to town, that is why land on the city fringe is the price it is. Opening up land on the outskirts of the urban area isn’t going stop do much to people wanting to live in suburbs like Grey Lynn, Mt Eden, Epsom, Ellerslie etc.

      I think that this is made worse by people in younger generations (of which I am part) wanting the perfect home in the perfect location when they in their 20’s. They are also the ones who the media focus on and they seem to have no concept of starting out in a cheaper house and working their way up.

    6. another good point Matt, many suburbs in Auckland are highly desirable due to amentities, status, views,coastal access etc.
      I don’t think the same issues apply in American Cities built on flat plains that McShane et al seem to keep bringing up.
      There is no way the positives above can be recreated in Flat Bush, Dairy Flat and Westage for example. New housing areas are always very sterile.
      Building quality apartments in light industrial areas and town centres is the way to go.

      The way Quax talks is like the Council wants to build 20 storey towers in Howick, this off course is ridiculous. The plan would be more for about 3 storeys, and at the moment there are carparking buildings bigger than this near the town centre, so apartments would add to the vitality of the town. Same thing in Mt Albert.

    7. Even with restrictive planning, growth is still occurring on the fringes, and so is intensification. As an example, the roll of Waitakere Primary school has doubled in the last five years, and yet no new subdivisions have occurred in the area. The reason is that vacant land has been built on, as pemitted by the current zoning. This has also resulted in more people using rail, as can be testified by passenger counts and the overflowing carparks at Waitakere, Swanson, and Ranui stations.

      McShane is right in that many people desire to live in the country or on the coast, but it is a fact that there is a very high property churn in these areas, when the reality of country or beach living doesn’t match the dream. A lifestyle block is hard work, the country or beach aren’t convenient to get to, it’s a hike to the supermarket or to get a latte.

      I’d have no objection to a 15-20 story apartment tower in New Lynn or Mt Albert, as long as it was attractively designed and surreounded by a green space. One 15-storey tower with 60 apartments (90m2), with a footprint of 450m2 on a 4500m2 site, versus 60 3-storey apartments squeezed cheek-by-jowl on to the same site.

      1. The mental thing about McShane’s stated view is its inherent contradiction. All the things he states is great about country living are destroyed by the roll out of suburbia over it. It proves he is just a front for vested interests. It is a desperate scrabble for principle to support short term gain and to be contested at every opportunity.

        Quax is the same, using his maiden speech to root for those poor land-bankers and place destroyers is telling. He’s keen to show that he’s working for them isn’t he. Send him back to Amsterdam to see a real city in action. Twat-x.

    8. Y’know, there’s a lot of land within the current MUL that would become available for development if we simply abolished MPRs and allowed developers to decide on their own how many car parks per site to provide.

    9. The ironic thing is you can already get cheap housing out on the fringe, if you want to live in Manurewa or Albany Heights. The price of this fringe land has almost no influence on the price of housing in Mt Eden or Takapuna, which are desirable and expensive for their own qualities. They are totally different sub markets, creating a glut of cheap outer fringe land will only affect the cheap outer fringe land market. If the cheap housing on the exiting fringe doesn’t make everthing affordable region wide I don’t see why more cheap fringe housing would.
      The answer is cheaper housing in the places people want to live, the same places with good services and infrastructure. Sure the land might cost more in Mt Albert than Dairy Flat, but who cares if the number of dwellings per acre is factors higher.

      1. You’d expect that if the market would pay more, they’d increase the price. Cheap semi-rural housing seems to be so because a large price inducement is needed to attract people to buy.

    10. Yes, we need to rework the zoning code to allow more density in the first couple ring of suburbs to start. In my hood we could easily double the amount of people. Its basically a ghost town. I live 5km from the cbd and there is not even a proper pub to walk to… nor cafe, bike shop, etc.

      1. I agree. I live right on the edge of the inner city, Kingsland to be precise. I have many options for pubs, restaurants and also bike shops etc. The one thing you don’t want to do is go too far the other way. I grew up in Devonport. Unfortunately now there are few shops that serve locals, e.g. no bike shop, no petrol station. However there are more cafes than you can shake a latte at. Not to mention the lack of good pubs. They have the Patriot, Dida’s and Wicked Wanda’s but with the Masonic soon to go. You’re pretty limited in where you can go out at night for an adult beverage.

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