Welcome back to Sunday reading. The most interesting thing I’ve read this week is actually about macroeconomics, rather than urban issues. As it deals with trends in Asia, a region that we’re now economically intertwined with, it’s still worth thinking about. James Kynge and Jonathan Wheatley, “Emerging Asia: The ill wind of deflation“, Financial Times (possibly subscription-only):
Price shifts are often early harbingers of global change. The first inkling the British had of the 13th century Mongol invasions of Europe, for instance, was a spike in the price of fish at the east coast port of Harwich. Baltic fishing fleets had stopped sailing after their crews were redirected to fight the invaders, thus cutting the supply of fish to one of England’s biggest markets.
The current economic convulsions emanating from the east are very different, but they do signal changes that imperil global fortunes. Deflation, a prolonged decline in the price of products, is flowing like a draught of cold air from Asia’s powerhouse economies and casting a chill over Japan and Europe, while also endangering US efforts to sustain a recovery…
Evidence of a deepening deflationary spiral in Asia — sparked by manufacturing overcapacity, an evaporation of trade demand and anaemic productivity — is a major cause for concern. That anxiety is amplified because of the structural nature of the problem. That it is taking place just as the EU and Japan are slipping back into deflation while the US is struggling with weak corporate earnings, makes Asia’s falling prices a pivotal issue…
Key to Asia’s problem is the particular type of deflation that it is afflicted by. The issue is not with consumer prices; these are still buoyant in most of the region’s shops. Instead, it lies with producer prices — the amount that factories, mines, farms and other producers can charge for the commodities or manufactured products and components that they sell.
The producer price index is at its lowest average point for six years in the 10 largest economies in Asia (excluding Japan), according to Morgan Stanley. Only Indonesia among the 10 is experiencing any producer price inflation, while South Korea, Taiwan and Singapore have been in a deflationary funk for around three years.
China has notched up 42 straight months of falling producer prices, making it the only large economy other than Japan in the 1990s to show such a persistent deflationary trend, according to Chetan Ahya, chief Asia economist at Morgan Stanley.
The silver lining for New Zealand is that we largely export consumer products – i.e. agricultural goods – rather than coal and iron ore, like Australia. But any unwinding of growth in Asia will eventually put the damper on our own economic prospects. Watch this space.
Now back to the usual programming: parking! Eric Jaffe, “An unusual objection to less parking: It will make our city too nice“, CityLab:
Last week the college town of Champaign, Illinois, joined an increasing number of cities that have relaxed parking requirements on new residential development. The idea in Champaign, as elsewhere, is that removing these “parking minimums” will encourage affordable housing and discourage car-reliance. Developers who don’t have to build costly parking lots or garages can lower rents, and tenants who don’t have access to a free space will be more likely switch to mass transit or other alternatives.
Opponents of such moves usually say they worry that drivers who don’t have spots in their building will just compete for street spaces and increase traffic. It’s an understandable objection (if often misguided, since most cities have way more parking than they need, and proper pricing can keep the George Costanzas of the world from cruising for street spots). But it wasn’t the one Champaign planners got.
Instead, the University of Illinois at Urbana-Champaign “respectfully opposed” the measure on the grounds that sites around town would suddenly become more attractive to private developers. Such sites—current parking lots the clearest example—would never pencil out into profitable building projects under the old rules, but became instantly viable without parking requirements. That bothered the university, which hoped to buy the sites on the cheap as the campus expanded.
In other words, the university is opposing a policy change on the basis that it will benefit society by enabling more development. That’s certainly an … unconventional analysis.
Here’s a nice commentary on parks and green spaces from Andrew Alexander Price. I quite like his categorisation of green space in cities – if it has a name, it’s probably useful, but if it doesn’t, it’s probably just “useless filler” buffering an unpleasant built environment:
There is a critical difference between parks (usable recreational space) and greenspace (useless filler.) Greenspace is useless in that it is non-place, while parks are places. You can easily tell the difference – people are occupying parks and putting them to use, and a park usually has a name. Even if the park is tiny, someone loves it enough to give it a name (often even containing the word “Park”) like “Duane Park.”
Now, three things related to cities and politics. From the right, the Economist’s Bagehot reports on the UK Conservative Party’s annual conference: “George Osborne’s plan to let boomtowns boom and failing towns fail“:
…what struck me most was not the battle to succeed David Cameron, but Mr Osborne’s policy announcements in two areas: infrastructure and devolution. Both were in-part reheated versions of previously unveiled policies. The government, the chancellor explained, would relax planning restrictions on brownfield sites, let housing associations borrow to build, speed up progress on infrastructure and let councils keep business rates (a business tax). But he also went farther: announcing that Andrew Adonis, one of New Labour’s most dynamic ministers, would head a new commission overseeing improvements to roads, railways and the like; that local government pension funds would be consolidated into larger beasts capable of underwriting investments in infrastructure; and that the government’s housing budget would be directed “towards new homes for sale” (more details to come, I am told). Most notably he said that the Treasury would no longer set a single, uniform business rate and that cities with mayors would have the freedom to hypothecate rates rises for infrastructure improvements.
These annoucements came in different parts of the speech but they belonged together; as a whole, they comprise a theory of how Britain is changing and what the state should do about it. This is revealed by a glance at the counter-arguments. Those who want planning rules to stay tight and infrastructure developments to proceed slowly claim that Britain should do more to use its existing stock of housing and infrastructure. Young people are forced out of the London housing market? Let them move to Hull. Trains between Manchester and Liverpool overcrowded? Cornwall is quiet at this time of year. Meanwhile the argument against liberalising business rates rests on (not invalid) concerns about equality. Letting councils capture local private-sector growth is a boon for thriving places like Leeds, Milton Keynes and Cambridge; much less so for struggling, post-industrial towns where businesses are closing and the young and entrepreneurial are leaving: Wolverhampton, Blackpool, Great Yarmouth.
What Mr Osborne is saying, then, is: allow the failing places to fail, but help people move to the boomtowns. Mothball Wolverhampton, Blackpool and Great Yarmouth and make it easier for Leeds, Milton Keynes and Cambridge (not to mention London and Manchester) to build bypasses, new railway stations, housing estates, tramlinks and cycle lanes. Why? Britain’s strength lies in city-based clusters of service industries, many employing university graduates; such places, in other words, possess the alchemical mix that allows them to capture the advantages of globalisation.
And from the left, the NZ Greens’ finance and transport spokesperson Julie Anne Genter discusses the difficulties of implementing a “Bright Line Test” to tax gains from short-term housing speculation:
The Bright Line Test will not be a proper CGT. It only applies to investment properties bought and sold within two years, although the official advice from Treasury originally recommended five years and certainly the majority of OECD countries with similar holding period tests are at least five years.
The two year period is too easy to game because it is too short. Smart speculators will simply hold on to the title until just after the two year date has passed. Five years would be an improvement, but why have a threshold at all? If someone is making a profit from purchasing and selling property, why shouldn’t they pay tax on that income – just like all the teachers, nurses, engineers, and retail workers who pay tax on their income? It’s bizarre that people should argue they would be unfairly disadvantaged by having to pay tax on income earned from property. The tax is nowhere near 100%, so by definition, those taxed will still be making money on the sale of their properties.
Another problem with the bill as drafted is that it only applies to “residential” land. The legislation has to go to some lengths to try and define exactly what is and isn’t residential land. The principles of sound law-making and tax policy include simplicity, coherence and comprehensiveness. Making exemptions for non-residential land introduces added complexity and an effective loophole, which could have unintended consequences. The intention test for speculation applies to all land, so why should the Bright Line Test that buttresses that rule only apply to residential? If there is not a problem with farmland or commercial land speculation, then there is no cost to including it in the Bright Line test.
The saga of this Bright Line Test legislation shows the difficulty of making good policy in a political environment. A number of individuals perceive themselves to better off without a capital gains tax, because it means more tax-free income for them. That doesn’t mean the policy isn’t better overall for the economy and society.
While Genter’s article is largely focused on demand-side policies to cool off the housing market, she also briefly discusses the supply-side impact of planning policies. Interestingly, she seems to be hitting some of the same points as Finance Minister Bill English did in his recent speech on housing affordability. It’s worth reading in full, not least because English is taking a more nuanced and detailed view on the topic than I’ve heard from him in the past.
Along the way, he makes the economic case for cities:
Cities are one of the extraordinary inventions of the human race.
Studies have shown that cities are an engine room of growth. Incomes in cities are higher than elsewhere. That is one explanation for high rates of urbanisation.
Research indicates that when planning rules prevent workers shifting to higher-productivity locations, then there is a cost in terms of foregone GDP.
It’s only relatively recently that economists and politicians have understood the scale of those effects.
So when we’re talking about something as apparently dry as the Auckland Unitary Plan, we’re talking about a set of rules that will have a major impact on the city, on current and future residents – but also on the wider economy.
Calls out some specific regulations that have driven up prices:
Some progress has been made. A study examining minimum car parking requirements in Auckland showed the costs of that planning rule exceeded benefits by a factor of at least six.
That’s a rule that should never have been made. It has probably cost the economy millions of dollars.
Fortunately, now that we’re digging in to these issues, that rule has been mostly scrapped – and credit is due to Auckland Council for doing so.
And highlights the difficulty and complexity of writing a comprehensive urban plan:
Planners and councils have a very difficult job in planning our urban areas.
Cities are incredibly complex systems. They are the product of millions of individual choices.
The idea that a small group of people could understand what choices we’re making is asking too much of them.
Not because they are in any way incapable. But because the task is overwhelming.
The Auckland Unitary Plan is 3,000 pages long.
It’s trying to regulate everything from the size of bedrooms to biodiversity in the Waitakere Ranges. No one person could possibly understand all the trade-offs in that plan.
Which means many of its effects will be certainly be unintended.
Planners can’t know everything – so of course they can’t be perfect in making trade-offs on our behalf.
Successful planning requires an understanding of its own limitations.
Lastly, Wonkblog’s Emily Badger reviews a recent effort to codify “the 27 patterns that make up the world’s cities and suburbs“:
Stephen Wheeler, a professor in the Department of Human Ecology at the University of California at Davis, has spent many hours parsing Google Satellite images, inspecting from above the suburbs just outside Boston, or the maze of streets at the center of Cairo, or the complex that is the Kremlin in Moscow. And there are, he has determined, 27 basic patterns in how we’ve built the world around us.
Of course, there’s the traditional urban grid, that pattern of compact blocks and right angles you’d recognize in central Philadelphia or the heart of Paris. Then there are the rectangular blocks of Manhattan, the superblocks of public housing projects, the curlicues of subdivisions, and the lonely lines of country roads. There is “rural sprawl,” distinct from country roads. And there are the particular shapes that mark, on a map, how we parcel land for factories or malls or cemeteries (“land of dead,” Wheeler calls this last typology.)
Here’s a pattern that is echoed by the world’s airports and the land around them:
Your typical office park:
And a factory:
This one Wheeler calls “loops and lollipops”:
What’s interesting about these 27 categories that Wheeler has defined, covering the full range of development patterns in two dozen metropolitan regions he has studied worldwide, is that most of them are new. Relatively speaking.”We have had an explosion of different types of built landscapes in the last century,” says Wheeler, who is working on a book about these patterns.
If you read on, you can see his maps of spatial variations in cities’ street networks.