This is part one in a five part series of guest posts on the Christchurch rebuild from reader Brendon Harre. It first appeared on the Making Christchurch blog
A case study of how our government approaches urban development.
The Christchurch post-earthquakes rebuild is peaking and construction activity will plateau for a while before tailing off. So this is a good time to review the Christchurch CBD rebuild model.
Five parts:
- The $1 billion Fletcher/Crown housing development.
- The Crown/Fletcher development within the context of the Christchurch rebuild and national economy.
- Is the Fletcher/Crown development exploitative?
- Is there another explanation?
- Is there another solution?
Part one: The $1 billion Fletcher/Crown housing project
A little over a decade ago in 2002 before I was married, I bought a small two bedroom, single garage townhouse in Kilmore Street in Central Christchurch for $160,000 on a single nurse’s salary. A decade later, after a series of devastating earthquakes in Christchurch, the Crown decided to take control of fourteen hectares of land. Seven hectares of that land, just a few blocks from my old townhouse, is being developed as part of the Eastern Frame development of the CBD rebuild.
So it is with great interest I follow the design/development stage of this process, in which Fletchers has negotiated an exclusive deal with the Crown to develop this large block of prime land. This development will be a mixture of apartments and townhouses. The Eastern Frame is approximately 20% of the inner city core of Christchurch. So the success or otherwise of this development will have a significant impact on New Zealand’s second largest city.
The East Frame is set on a 14 hectare site between Manchester and Madras Streets, and extends from Lichfield Street in the south to immediately north of the Ōtākaro/Avon River. It has easy access to a bus super stop on its west, Latimer Square to its East, the Innovation Precinct and CPIT to its south and the Margaret Mahy Family Playground to its North….
Half of the area will be developed into medium density residential living for approximately 2,200 people….. The other half of the East Frame will form open spaces and streets, including a central park running north to south, with walking and cycling paths, community gardens….
A simple division of the projected monetary size of development and the number housing units it will create, indicates the average price will be in excess of $800,000. A price that is out of reach from those on a nurse’s salary, in stark contrast to my experiences a little over a decade ago.
The Eastern Frame development is the biggest Government housing project in Christchurch. In combination with two other smaller Government housing projects, this provides more than $1 billion of work for Fletchers. The Eastern Frame project is budgeted to be worth $800 million and when completed it will have nearly a thousand residences. The first homes being planned to be ready in 18 months with the project expected to take 8 or 9 years to complete. The deal between the Crown and Fletcher is a profit sharing contract. This includes upfront payments to the Crown and further payments as sales are made. Simply put, as Fletcher completes and sells residences it shares the profits with the Crown.
Brownlee said there would be no loss to the Crown in terms of the sale of land to Fletchers. “Excluding the public realm there’s no loss on the land sold, to the Crown.” He would not give financial details and said the public land could eventually pass over to the care of the city council.
….Cera development director Rob Kerr said Fletcher had delivered the most compelling vision on the staged process. “As Fletchers sell more and more property, they’ll be paying us for the land. Depending exactly on how much they sell and how quickly they sell, that’s how much (land) we’ll sell.”…….
Mike Greer, a member of an opposing group who bid for the project was less impressed with this model of urban development and has spoken out about his concerns.
The unsuccessful bidders are putting on a brave face, but builder Mike Greer is more prepared to speak his mind.
Greer is hugely disappointed his bid with Philip Carter and Ngai Tahu failed to be selected by the Canterbury Earthquake Recovery Authority. He said the consortium had a top team including architects Warren and Mahoney and top Australian architect firm Woods Bagot…..
“They (Fletcher) are obviously doing a very good sell job to the Government, aren’t they. “I’m pretty disappointed a local bid didn’t get it. I think it’s pretty sad for Canterbury.” A local bid would have produced something much better, in his view.
“I guess they (Fletcher) offered more for the land than we did, that would be the biggest carrot for the Government, wouldn’t it.”
Greer said their proposal was “taller”, some eight storey apartment buildings, because they were planning for future population growth as well. It comprised 1200 apartments and townhouses in a price range of $300,000 to $1 million. The main part of their project was aimed at middle New Zealanders.
“We wanted to encourage policemen and nurses and all those kinds of people that work in the city to live in the city.”
“I think we would have created something far better for the people of Canterbury than what they are going to get.” “My biggest concern is they go offshore…to sell these as investment properties.” That would be devastating for the city, in his view.
It cost the consortium $600,000 spent to make the bid. “To be honest the whole process was a bit of a shemozzle, an absolute waste of money. I won’t be doing any bids ever again.”
“Our proposal was probably far too fancy for the Government, it looked after the people of Christchurch too much and didn’t provide a massive economic return for the bidder and the Government. Our bid was focused on building something world class.”
“It’s a funny old world this post earthquake world. There’s more politicking on houses than I ever imagined,” Greer said
In part 2 Brendon looks at the Crown/Fletcher development within the context of the Christchurch rebuild and national economy
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I haven’t seen much lately on the Christchurch city centre rebuild, so thanks for highlighting this, Brendon. Look forward to reading the rest of the series!
Everything being redeveloped in the city centre should have been 5 stories or more. 5 Stories is the standard height that most European cities go for as it is the most economic. Ground floor retail/cafe/restaurants etc then 4 levels of apartments above. Provides a good level of density.
Thank you for this post will look forward to reading the others as they come to hand.
Is there any more on the rail to city PT issues since they were last covered on the blog?
No. Christchurch is a full sized experiment on sprawl and auto-dependency; going all-out on those two great ideas again, cos somehow the powers that be don’t think it’s been given a fair go in the last 60 years.
I can tell you now what’s going to happen: once the exogenous money [rebuild cash from outside the local economy] is all spent on Convention Centres, Stadia, and parking buildings, the inefficiency of doing business on the drive-only dispersed model will slowly become apparent and it will wind down to a flatline…. ie structural low growth. Hey but houses will get cheaper compared to thriving places…
The Labour party has a transport policy for Christchurch.http://campaign.labour.org.nz/rapid_transit_to_unclog_christchurch. I recently checked and this is still Labour party policy.
National avoids talking about their extreme urban dispersal policies. Brownlee in particular has stomped on any suggestion that the rail corridors could be used to help reduce congestion or speed up travel times in the Canterbury region.
I know several perfectly good, safe buildings which have been demolished/will be demolished for this vanity project! Not impressed with the wasteage, Christchurch has so many vacant spaces the last thing we should be doing is tearing down perfectly good buildings!
Why are they going for weird looking, expensive leaky homes designs? Sad. Not a hint of the heritage they have so enthusiastically demolished
+1
I see a conundrum with the direction of evolution of cities. As I put it in a guest post on WhaleOil blog a week ago:
“…It is all very well to admire European cities dense urban cores, and even New York’s; but these predated the automobile by up to several centuries and their density today is significantly lower than it was several decades ago. Land rent curves in most European cities have been flattened out by decades of post-WW2 suburban development, same as in the Anglo New World. The overall urban area densities are dragged upwards by the dense cores which are quite different to ours. It is very difficult to increase core density from, say, 3000 people per square km to 10,000, in comparison to still having 10,000 people per square km some decades after it used to be 30,000 people per square km. Trying to increase core density by arbitrary planning, merely hands value uplift to site owners and “prices out” most of the population from the central location that is the subject of intensification intentions…”
http://www.whaleoil.co.nz/2015/08/guest-post-the-death-of-the-back-yard/
I regard Brendon Harre as one of the few people in New Zealand who can actually understand this.
Brendon Harre may well be a good writer, but I’m never going to go to the terminally toxic whale oil site to read him. So I’m glad he is writing here.
Brendon doesn’t write for WhaleOil, that is my guest posting. WhaleOil is the most-followed blog in NZ, and it raises the cred of the site that it is prepared to carry a posting on a subject that is “too complex” for all other media – or perhaps it is a case of vested interests in property and finance, wanting the facts kept obscure as possible…
lol ‘as I said recently’
An inherent problem that I know Brendon understands, but he does not really go into it here, is that containment of the urban fringe boosts the entire land price curve, so this is just as much part of the “CBD frame” racket as the Frame Plan itself is. If the fringe was not constrained, it would be impossible to set up a gouge in central land, because “just outside the frame” would be so competitively priced.
The discontinuity in the urban land rent curve really occurs at the regulatory fringe, if it does not occur there, you can’t really create one at the boundary of a “frame” around the centre. Site values CAN be “differentially” derived; that is, the start point is true rural land values, and the values are derived from that plus whatever transport costs are saved from location, and whatever gains there are from local agglomeration effects.
That is how the land market is working in cities with a house price median multiple of 3 – in spite of the fact that these cities provide MORE space per person on average – whereas the ones with a median multiple of 6 and more, are gouging “whatever people and businesses can stand to pay” for whatever is the minimal space they can tolerate. 100 years ago the economics profession was very focused on all this, the subject of monopoly rent was not controversial for all that Marx advocated nationalisation of everything as the solution. Henry Ford was one of many laymen who understood, as many economists did at the time, that giving people more mobility and access to superabundant supplies of land for living, would solve the injustice.
There have been and still could be “middle ways” involving more government operation in the property market, compulsory acquisitions, targeted land taxes, proper pricing of road use and infrastructure use; but ironically none of the anti-sprawl advocates ever talk about anything but “solutions” that play straight into the hands of the rentiers in “big property”.
Phil their needs to be competition across the entire urban land rent curve. Putting a discontinuity or restriction at any point on the curve will inflate prices. This applies to public planning rules restricting going up or out. Or private monopolisation of developable land -land banking. Competition at or past the fringe is important but so is competition at the centre, which this series of articles is about.
I appreciate your engagement with these issues, Brendon, but I say the evidence is that no restrictions on density, of themselves, create an affordability problem. They do create an economic-evolutionary problem, in that clusters that work with density are prohibited from evolving. But there are numerous cities in the USA with a median multiple of 3, and an average housing unit land footprint of around 2/3 of an acre. In fact density restrictions force the value of sites, in per square foot terms, down fast enough that the median multiple of 3 is retained even as density gets lower and lower. At the root of all this, is that rural land is so darn cheap relative to urban incomes. As long as it can be bought within driving distance of the fringe, by developers, at $10,000 per acre, almost no density restrictions are going to make the result unaffordable. Even a 4 acre minimum lot size means a mandatory raw land cost of $40,000 – wow, what a killer. Contrast this with the growth boundary causing 1/10 of an acre postage stamp sections to be $200,000+ in raw land value.
Then the differentials from fringe to centre, based on honest transport cost savings, make urban land ridiculously affordable even well in towards the centre of a city like Atlanta. The main part of the “cost of a home” is the structure, and these depreciate. This is why you can find suburban homes on large lots near the centre of some US cities, for under $200,000. The density restrictions do NOT cause affordability problems. However, they do mean that clusters of the Manhattan type are impossible, so the city economy will have to remain based on actual wealth creation, not the gouging of finance fees etc from the rest of the world. Whether this is a bad thing? I would say there is room for some cities of each type, in the global economy. This fetish for “everyone must be Hong Kong to scale” is ridiculous. It is possible for a city like Nashville to be globally iconic for what it is, and low density. Why do we not see NZ cities as having a distinctive identity already that we need to stick with, rather than be subsumed into a global craze for being mini-HK’s, which cannot end prettily for future generations of Kiwis given the housing cost consequences and loss of local environmental quality of life.
Having said that, I absolutely agree with letting Auckland go “up” in the centre, but the evidence is that actual building “up” will severely lag the banking of gains by the lucky land owners there, and actual addition of population there will be painfully slow. “Dense sprawl” everywhere will happen, choking the entire urban area. Another problem I keep pointing out, is that central Auckland does NOT have the street space to support much population density there – refer to the UN Habitat Report “Streets as Public Space and Drivers of Urban Prosperity”. There are several paras on what a disaster Auckland is and always will be because it is too late now to put in a street grid like Manhattan’s or even Toronto’s or Amsterdam’s.
Phil, can you – once and for all – clarify that you want planning restrictions dropped for both the fringe and the center? That is, let the market decide? You only ever seem to talk about the urban limit, not the center. So I’m not clear.
Even with strict controls on density, the demand for inner city suburbs well outstrips the fringe. House and rental prices unanimously support this. So I am not sure how just how relaxing the fringe will do anything except make the center more attractive given demand for activity, shopping, less commute time etc. Much of the most affordable housing in Auckland is on the fringe already.
So up as well as out?
Absolutely, I agree with “up as well as out”. I am just fighting for “affordability” in the whole thing, which “up only” or even “mostly intensification”, does not achieve. At least not with Anglo property rights intact – many times, I have said that to be intellectually credible, anti-sprawl advocacy needs to disassociate itself from the obscene capital gains to site owners that are going on under the status quo, and advocate solutions that do not allow those gains.
I admire the Japanese system where direct government operation in rail-served property locations, or at least strict controls over the private sector if it is involved, deliberately keeps the profits down to “honest operating profits and return on actual physical capital” and creates a competitive tension in the entire urban property market. This is why Japan, with 120 million people with about as much room as NZ, has only had one postwar major property boom and bust (and it has been a long slow melt) while Anglo markets have them every 15-16 years with monotonous regularity.
What the Japanese system does, is incentivises vertical living and working and conducting of business, on rail routes, by making it highly rent-competitive. Our system, in contrast, only ever delivers highly elitist, high-rent CBD’s for the already-best-off people and businesses, with lower-grade workers having to commute massive distances – albeit with a subsidised train fare, but this subsidy is ultimately a benefit to the CBD property sector, not to those workers themselves. They would be far better off if they were “priced in” to the more central locations.
But where sprawl is freely allowed, if there is demand for vertically-added floor space at the centre, it will happen anyway. New York never had a growth boundary while all the skyscrapers were being built. I would argue that if if has a boundary like London did, it would have retained “crowding” rather than the addition of vertical floor space, as the means of having a dense core – and it might never have evolved the way it did, either. It nearly died in the 1970’s as it was. Houston, incidentally, is adding floor space vertically in its CBD now at an impressive rate, and it is CHEAP – it should make Aucklanders “priced out” of their CBD sick.
There is a very good radio interview by Kim Hill of Mark Todd a property developer -Occam Residential which has recently started through its charitable organisation -Occam Foundation to sponsor the Booker prize.
http://www.radionz.co.nz/national/programmes/saturday/audio/201765712/playing-favourites-with-mark-todd
Important themes I took out of the interview were;
Housing typology -the need for a variety of types of housing.
Supporting high density residential typologies but not necessarily exclusively apartments.
Character flats being cheaper to build on a per sqm basis for example.
Supply and demand in Auckland is dysfunctional because new housing supply is above the median house price. So new housing supply is exacerbating not improving affordable housing.
Finally there is a need for a broadening of the public discourse in society. I hope my contribution in these articles helps with that process.
It seems like christchurch’s version of the viaduct basin redevelopment. Government supported exclusivity.