This is the first part in an open-ended series on the economics and politics of zoning reform. The Unitary Plan decision means that Auckland’s urban planning framework is set for the short to medium term – albeit with inevitable appeals and changes. But the issues we’ve been grappling with over the past few years – i.e. how, where, and why to adjust the rulebook – will keep coming back. A growing city must also be a continually changing city, and zoning decisions can either help or hinder that.

A good starting point for thinking about the economics and politics of zoning reform is to ask: What are the costs and benefits of allowing more housing to be developed? And how are these costs and benefits distributed?

I investigated these questions in a conference paper at this year’s New Zealand Association of Economists. Without getting into the numbers, we can identify three main effects:

First, the benefits of new housing primarily accrue to people who are newly entering the housing market. For instance, young people trying to buy or rent a home benefit from there being more homes, as it means they can get better housing or cheaper housing. Equivalently, restrictions on new housing development mainly impose costs on people who don’t already own homes. When the supply of housing is restricted, then they face a choice between paying more for housing that meets their needs, living in substandard or crowded housing, or leaving the city entirely.

Second, the costs – adverse effects – of new development are location- and context-dependent. The distributional impacts – who is affected? – can also vary quite a lot. For instance, a new subdivision on the city fringe probably wouldn’t shade anyone’s home or block its view, but it might worsen water quality or biodiversity. And, given the dysfunctional way we build new suburbs, it will definitely increase traffic congestion.

By contrast, redevelopment and infill within the city will tend to have fewer environmental impacts – it’s already a city! – but there are more neighbours who may be affected by the various nuisances associated with development, like having new buildings casting shade on adjacent properties or more people parking on “their” street. People don’t like change very much… but they can easily adjust to different “status quo” scenarios.

For instance, consider Ponsonby. It would all be horribly illegal under today’s zoning codes. Lot sizes too small, buildings too close to each other and taking up too much of the lot, no parking, etc, etc. If you tried to get houses like these consented today, especially in an existing suburb, you’d be refused in about three seconds flat. But because they’ve been there for decades, people see them as something that should be protected – present-day zoning code be damned!

Ponsonby Russell St

Third, enabling housing development can allow cities to grow larger and in a more economically efficient pattern – leading to enhanced agglomeration economies. The benefits of increased productivity and greater consumer choice accrue broadly to most people in the city, or potentially even to the entire country. (Taxes paid in Auckland pay for retirements in Tauranga!)

Conversely, evidence from overseas cities suggests that restricting housing supply can result in large economic costs as a result of the misallocation of workers throughout space. For instance:

  • In the US, Chang-Tai Hsieh and Enrico Moretti found that high housing costs have discouraged people from getting jobs in high-productivity cities – in particular New York, San Francisco, and San Jose. If those cities had allowed more homes to be built over the past three decades – which would have entailed more intensive development – the US economy would now be 9.7% larger than it actually is, with commensurate gains in income.
  • In the Netherlands, Wouter Vermeulen and Jos van Ommeren found that housing supply, not productivity or availability of jobs, has driven cities’ growth. Rather than moving to locations with abundant high-income jobs, people move to places with more homes – again, with a cost to overall economic outcomes.

As Matt Yglesias observed, agglomeration economies benefit workers with different skills… provided that they can afford to locate in high-productivity cities:

…just as factories served as economic anchors for regions, today’s big industries produce broader local prosperity.

Here are some examples from the San Francisco area:

The problem is that for most residents of these places, the higher cost of living erodes the benefits of higher pay.

So how does all this add up? There are two answers. The first is that the benefits of urban development tend to outweigh the costs… provided that it isn’t happening in a totally dysfunctional way, like paving over the habits of endangered birds or building astonishingly unredeemable eyesores. In other words, the benefits for people who are getting housed, plus increased agglomeration economies, outweigh the costs from negative social or environmental impacts. So from the perspective of long-run social wellbeing, zoning that enables more development seems like a good idea.

The second answer is that the distributional impacts tend to determine the politics of zoning. As economist William Fischel observed, local governments tend to be dominated by “homevoters” who are mainly worried about risks to their property values and quality of life. In this context, the fact that enabling urban development mostly has benefits for new entrants to the housing market – i.e. young people and people moving into the city from elsewhere – is pretty important.

National and local voter turnout chart

As economists like to say, the incentives facing local government voters aren’t well aligned with long-run social wellbeing. To current voters, zoning reform isn’t necessarily an appealing proposition. It appears to create uncertainty for their neighbourhood and property values, while principally benefitting other people.

This is a very understandable view for individuals to hold, but it’s not awesome for society as a whole. If cities and economies don’t change, they wither and die, creating vast human misery in the process. In order to prevent that from happening – i.e. to keep people from crowding into unsanitary accommodation or going homeless – we need to be willing to reform our zoning policies.

In the subsequent posts in this series, I’m going to take a look at what that might look like. In the first instance, I want to focus on the institutional arrangements that enable reform, considering issues like:

  • The trade-off between localised and centralised decision-making
  • The good and bad in New Zealand’s legislative framework
  • The role of analysis and evidence in planning decisions
  • The role of social norms in encouraging (or discouraging) people to plan for future generations.

As always, leave your views in the comments.

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51 comments

  1. > The role of social norms in encouraging (or discouraging) people to plan for future generations.

    What’s particularly interesting is that one of the main principles of the RMA is supposed to be intergenerational equity – managing resources for the “reasonably forseeable needs of future generations”. But it doesn’t seem to have had much impact.

    1. I agree that this is a key problem. The problem is so pervasive that it probably warrants a national policy statement on how the needs of future generations should be evaluated. Because right now they seem to get shafted.

  2. An excellent post Peter. I want to address one of your sentences, as it’s crucial:
    “The first is that the benefits of urban development tend to outweigh the costs… provided that it isn’t happening in a totally dysfunctional way, like paving over the habits of endangered birds or building astonishingly unredeemable eyesores. In other words, the benefits for people who are getting housed, plus increased agglomeration economies, outweigh the costs from negative social or environmental impacts. So from the perspective of long-run social wellbeing, zoning that enables more development seems like a good idea”

    Absolutely, however the key issue is the distribution of benefits and costs, which leads me to my view that what we need is a mechanism to compensate those who lose utility from the net utility gains from the new development.

    I am convinced that overall a 3 storey apartment going up next door will improve the net level of utility – however, it will very clearly have negative effects on me, reducing my utility.

    So, what we need is a simple mechanism whereby developers take a cut from the net utility gain to compensate those who lose it. Now, the counter-argument to that is that there isn’t enough net utility to compensate, but if that were really the case then the development would be a bad decision anyway!

    Summed up
    -> Open up zoning
    -> Next door neighbour decides to build a 3-storey apartment that shades my balcony etc.
    -> He calculates a net utility gain of 500 utils
    -> I calculate my net utility loss as 150 utils
    -> He compensates me the cash value of 150 utils
    -> Everybody happy. Maybe I use those utils to build another storey on my house to get out of shading effects!

      1. “I am convinced that overall a 3 storey apartment going up next door will improve the net level of utility – however, it will very clearly have negative effects on me, reducing my utility.”

        So I think my utility would increase if an apartment building went up next door,you think it would decrease. How do we decide on a fair framework to assess that objectively?

      2. A util is a unit of measure equal to one of whatever Early Commuter personally thinks is important to himself, and zero of whatever he doesn’t.

    1. Isn’t there a temporal/intergenerational dimension to be considered as well? I mean, when your house was built, it probably had some negative external effects. But it’s unlikely that they were fully priced in at the time, meaning that you effectively got a subsidy. Now you’re asking future entrants to either (a) forego that subsidy or (b) forego housing in their preferred location.

      Another way to look at the situation is that compensation can happen on a societal level – i.e. B builds a home near A, deriving benefits but imposing some costs on A, but with the expectation that C will then build a home near them in the future. A “pay it forward” model, in other words.

      1. I’m not sophisticated enough to do four-dimensional economics Peter. Also, as a leftist I quite like the idea of “whatever benefits the many”; however my sense of social/natural justice is that I believe any harm incurred should be compensated at the time.

        I’m not asking anybody to forego housing. I am saying that the loss should be compensated otherwise the net result overall for society is negative (100 extra utils for 10 people less 120 fewer utils for me is actually a net loss of 20 utils). So, people can build wherever they want, whatever they want, as long as they compensate those who lose. It’s pretty basic.

        There are means to calculate the util gain/loss – that’s what economists do, right?

        1. “Pay it forward” is an inherently solidaristic idea. It relies upon the notion that there is a coherent community of interest – albeit not a closed community – in which benefits and costs will be balanced over time. As a leftist I prefer that approach to a tight-fisted accounting for gains and losses and insistence that all parties pay exactly what they owe.

          “There are means to calculate the util gain/loss – that’s what economists do, right?”

          Yes, but if you want to do it with exactitude in every particular case the costs associated with gathering the information will exceed the value of the monetary compensation, probably by a substantial margin.

          1. Yes, but what’s different about your argument and saying “NZ will be well served by investing in value-added dairy products” and building a value-add dairy production facility next door to me.

            Yes, future generations of NZers benefit
            Hell, current generations of NZers benefit because the overall utility gain to NZ probably far outweighs the loss to me as the owner-occupier of the affected land

            So, there’s a massive social benefit. It’s still not fair to say “suck it up” because my losses are outweighed. I should be compensated.

          2. Someone else allowed you to get housed, potentially at some cost to themselves, e.g. by taxing themselves to pay for drainage and roads to your house. Are you going to retrospectively compensate them, or does your proposed system only apply to new entrants? If so, it sounds suspiciously like pulling up the ladder (unless young people pay to use it).

          3. Let’s boil it down to basics.
            The principle is “When an action causes a loss of utility to a person, that person should be compensated.”

            It’s not pulling the rug up. There’s still a net gain. However, we are using some of that profit to compensate the loser!

          4. Again, you’re looking at gains and losses in an a-historical, atemporal way, without considering the path that we followed to get here.

            People who have owned homes for more than about a decade in Auckland are likely to have benefitted from:
            * Zoning restrictions that were either looser (e.g. fewer requirements for environmental mitigation) or less binding, which meant that prices were lower when they purchased
            * Infrastructure charges that covered a smaller share of the overall cost to serve new dwellings (e.g. Watercare’s only recently moved to a full cost recovery model for water supply) which again kept prices down
            * If they purchased prior to the 1980s, very generous state-subsidised mortgages and inducements for home ownership, which made buying houses cheaper.

            The beneficiaries of these policies didn’t pay for the benefits they received – instead, others gave them a helping hand up. Why are you so resistant to the idea that people should pay it forward?

          5. Maybe I am stupid here Peter

            I currently enjoy X utils. How I got there is not relevant to the discussion. If your action reduces X, why shouldn’t you compensate me?

            If I take your land under the PWA I compensate you, even though the net gain of the new public works is probably higher than the value of the land. Why shouldn’t we just say people should be willing to have their land appropriated as the net gain for society is positive?

          6. “If I take your land under the PWA I compensate you, even though the net gain of the new public works is probably higher than the value of the land. Why shouldn’t we just say people should be willing to have their land appropriated as the net gain for society is positive?”

            Because taking someone’s property is definitely a loss to that person. Shading someone’s house isn’t necessarily a loss to them. It’s super easy to objectively calculate the value of someone’s property and impossible to objectively calculate their utility.

          7. @Early Commuter this may superficially sound like some kind of fairness, but all it does is throw up obstacles to positive change. Are you to be the sole arbiter of which differential gains need to be rebalanced via compensation?

            If someone invents a safe, affordable flying car then by your reasoning, everyone who relies on land based vehicles stands to lose a lot of asset value and deserves to be compensated. This could potentially delay adoption for lifetimes. In this scenario, society as a whole would lose while car manufacturers and their ecosystem would be the only real beneficiaries.

          8. Sailor:
            “Because taking someone’s property is definitely a loss to that person. Shading someone’s house isn’t necessarily a loss to them. It’s super easy to objectively calculate the value of someone’s property and impossible to objectively calculate their utility”

            Then how do benefit:cost calculations work? They survey people on preferences. Which is utility calculation

        2. “There are means to calculate the util gain/loss – that’s what economists do, right?” Not really no. The problem is the unit of measure isn’t standard. Alfred Marshall assumed that every pound was equal. (There is debate as to whether he meant that every pound was indeed equal or if he was merely assuming it to show what conclusion that would lead to as a start to the more general case that every pound wasn’t equal.) He was a really interesting dude who once claimed there was no point in educating women, but once he met some smart women changed his view totally. His lectures to women sets out a strong case for education that anyone could be proud of. https://books.google.co.nz/books?id=bEwgSMbuU5oC&printsec=frontcover&dq=alfred+marshall&hl=en&sa=X&ved=0ahUKEwiC47Kay9POAhWQNpQKHUwPAoo4ChDoAQhIMAk#v=onepage&q=alfred%20marshall&f=false

          The problem is that utility is taught up front to economic students but it is a really difficult concept to use later in analysis. Maximising a profit function is easy mathematics by comparison. (Kind of how physics students are taught error measurement in week 1 year 1 and then ignore it after that!). It didn’t help that Marshall wrote in english so was familiar to most but Leon Walras wrote in French so his ideas were not as well read.
          A fundamental problem occurs as soon as you have winners and losers if the two groups have a different level of wealth. In transport it causes bias to B/C calculations as often the winners of a new road or rail line are wealthy and the losers are the poor people who are affected by it. In planning the same problem occurs when wealthy people can increase their amenity or wealth at the cost of poor people missing out on a home. Measuring that with $ as your unit is never going to be correct.

          1. Yeah, but utils don’t have a marginal function, unlike dollars/pounds/pesos

            going from 100 to 101 utils is a 1% improvement in quality of life. going from $100 to $101 income may not lead to a 1% improvement in quality of life.

            What might change is the $ value assigned to a util compensation. however that might have the perverse effect of overcompensating the wealthy as the cost to move from 100 to 110 utils (and thus the compensation from dropping from 110 to 100) is likely higher than the cost to move from 50 to 60 utils due to marginal effects

    2. Early Commuter that only effects you if it is build on your northerly side, if it were to be build on your southerly side it will have very little effect on you. As these higher density houses start appearing they will become the norm and have no negative effects on neighbouring properties.

        1. I think you understand that it was the location of the property that were being talked about, they don’t build houses on roads yet.

    3. No. Today you deprive your neighbor of the full utility of his land through zoning restrictions. And now you’re suggesting to exchange giving your neighbor the right to properly utilize her land for some fee.

      Freeing up zoning gives you just as much right to fully utilize your land as your neighbor. If you and your neighbors think the best way to utilize the land is NOT to have a three story condo, then you get together and buy your neighbor’s land so you can collectively keep it low rise. Thus you all pay the true cost of the low rise neighborhood, and we very quickly find out how much you truly value it.

      1. So if my neighbour builds a tannery on his property, he doesn’t need to compensate me?
        Because we’re only talking about the quantum of utility loss here. A tannery and shading are the same flavour, just different sizes

      2. And you’re committing a logical fallacy here. People aren’t stopped from fully utilising their land, what they are stopped from doing is utilising their land in a way that affects other properties through (for example) blocking photons (shading) or releasing pheromones/other odorous cmpounds. If what occurred on your land didn’t affect anybody else’s, there’d be no reason for zoning. Central flaw in libertarian politics

        1. You’re making the assumption that people have the right to photons that pass over my property first. My view is pretty clear on this, you don’t own or have any property rights to views, sunlight, sea breezes or anything else that aren’t part of your property.

          I think you’ve committed a logical fallacy. Yours supposed right to the photons over my property and on to yours is only contingent on me not having rights to those same photons over my property. You can’t have a right to sunlight that is predicated on your neighbour not having a right to sunlight! If you want a lot of sunlight on your house then buy yourself a big piece of land to have plenty of room for sunlight to strike your property from above your property. Don’t build a house 10m away from someone elses property then demand they never try and take advantage of the light that shines over their land and on to yours!

          Its the same with views, arguing that my neighbour can’t block my view is simply saying I have rights to the view but they don’t. Hardly a good rule that can be applied consistently! I much prefer the simple conclusion that nobody has rights to sunlight, view etc. If you can take advantage of it then good for you, but don’t expect that you own that advantage in any way, or can prevent others from using it to their advantage.

          1. So you would have no problem if I built a large concave mirror and focused sunlight on you? I can’t own the sunlight therefore it’s not me causing the harm, right? It would also have the double benefit of getting rid of the house shading my property in a hurry

            You can’t shine a light at a neighbour’s property so we already have common law about photons.

            Cause harm, compensate. Not sophisticated 4 dimensional economics, but understandable.

          2. Correct, you can’t own sunlight and you certainly can’t laser it at my house in a willful act of commission. Nice straw man though.

            “Cause harm, compensate”… are you actually listening to yourself? You are equating harm with “anything I might potentially want or enjoy, even if it impinges on what you want or enjoy”. By your logic emancipated slaves should compensate their former captors.

          3. So you have the right to block photons, I don’t have the right to focus them? Both are physical acts that alter their “natural” pattern. Explain why one is allowed

          4. Also, you’re confusing temporality. I have CURRENT utility. Your act creates FUTURE utility. Theft is exactly that – the taking of current utility. Nobody is talking about you harming my future utility (if it were solely future vs. future, you’d have a point). We’re talking about you taking away something I currently enjoy

          5. Correct, the photons are not yours, you don’t own them and you have no intrinsic right to take, use, modify or redirect them. Therefore you can’t aim them at me, and you can’t complain if they don’t always land on you the way you like. Quite frankly tough shit if you’re currently luxuriating in light from my property, you have no ownership or right to it and if my building a house stops your free ride then so be it. If I have an apple tree that drops fresh fruit onto your lawn, you don’t get compensation if I build a fence that stops them rolling away from the tree.

            It’s not theft because you don’t own it. Theft is the taking or depriving of use of personal property. Sunlight is not your personal property.

            The only theft is you claiming I don’t have the right to build a house that catches the sun on my property because you have an overriding right to build a house that catches the sun from my property! That is denying my my property.

            Or we can do it your way if you like. You’re stealing my sun by using it yourself while preventing me from using it. And please, I have no time for “but I was here first” arguments. You are taking away all my utils, so and you need to compensate me if you want to keep stealing my utils.

          6. “But I was here first” makes perfect sense. My ownership creates a present right to utils. Your building a house deprives me of an existing right. If we built simultaneously, fine.

            Going back to photons, let’s use another analogy. Photons from source A pass over my property B and then your property C. I build a focusing lens – so you get exactly as many photons as you would ordinarily get (I am not reducing their number, nor increasing it). What I am doing is organising those photons. Is this legitimate? I have no right to the photons, you have no right to the photons, my actions are not altering the number of photons. You get just as much sunlight as before.

            Or another. Oxygen belongs to nobody. Yet it would be illegal for me to build a machine that absorbed all oxygen from the atmosphere, would it not? Or, indeed, just absorbs all the oxygen surrounding your property. Because we would say “although you do not own that oxygen, others do not have a right to deprive you of it” – correct? Or would you say it is entirely legitimate for me to deprive your property of oxygen?

  3. Well you have convinced me Peter, tenants should have a right to vote. But it works best if left to only those who can be bothered. Same with the property owners. I don’t accept we have a problem if everyone who takes an interest gets a vote. Not voting is a democratic right to let everyone else choose. It is one of our freedoms.

  4. Related. Here is an analysis of Manhattan building typologies that shows that the cause of building up is land constraint and consequent higher land values. And of course the legal right and the available technology to do so.

    This contradicts some who repeatedly argue here that more land supply elsewhere, on the edge of the current city, will somehow incentivise a denser form in the existing city area. No it won’t.

    http://www.economist.com/news/books-and-arts/21705303-using-economics-explain-why-buildings-get-big-up-and-up?fsrc=scn/tw/te/pe/ed/theupandup

    1. Patrick i am in a rush so have not read the link. But is it the rise in amenity value which is reflected in higher prices that induces greater intensification not the higher prices themselves. Christchurch CBD is an example, Brownlee deliberately restricted supply by the govt buying 20% of CBD land and land banking it in various projects. Prices did not fall to reflect the loss in amenity due to the effects of earthquake. Result these artificially high prices restricted development opportunities which went elsewhere.

    2. It is hard to see how anyone would think greater supply of land at the edge could lead to greater density in the centre. But there are plenty of people who argue that less supply at the edge will result in greater density in the centre. That must be true to a certain extent if they are substitutes. (But not perfect substitutes and never will be). The problem with that approach is it requires the value of land to rise above what it would have been. There will be a substitution effect and a wealth effect. The wealth effect is a dead weight loss experienced by people having less amenity and by those who are priced out of our city or at least priced out of having a home in our city. It can’t come as a surprise to anyone that US style growth management results in US style homelessness.

      1. Manhattan added most of its upwards floor space when there was no boundaries to fringe growth of the urban area, and in fact the urban area was sprawling at very low density for dozens of miles in several directions. The land price curve was low and flat, and this suppressed the cost of sites in Manhattan itself by way of a knock-on effect. As lower-value businesses could not manage the rents in Manhattan, they moved just across the river to New Jersey, which was cheap. Manufacturers and warehousing moved further out still. The local economy evolved for reasons that were nothing to do with growth-containment planning. If Wall Street had ended up in Boston or Philadephia, New York could have been a bigger Detroit when its garment manufacturing collapsed (Glaeser suggests this in “Triumph of the City”).

        It is plain wrong and destructive to push up the price of land by regulations, thinking that by doing so you will force your local economy to use land as efficiently as they do in Manhattan, and become as productive as them. The economists who are condemning this illogic are very much in the right – Cheshire and colleagues at the LSE, for example.

        In fact the best economists are now starting to notice the exact opposite unintended consequence in real life – site value inflation is a signal to investors to “hold” in anticipation of further gains, not to sell or develop. The LSE economists have been observing it about UK cities, and our own Arthur Grimes and Andrew Aitken in a 2010 paper, did a modeling exercise that showed that this is the reason why the standard models always over-estimate housing supply from planned intensification. They should have become global economics celebrities for this, the point is so important.

        Houston is now doing the most intensification anywhere in the first world. The rents for apartments in the city centre, which has more Fortune 500 company head offices than any other city outside NYC, are drop-dead affordable. This is because of the “option value” effect in urban land, which knocks-on from fringe to city centre. Site values are either “elastic to allowed density” or they are not, depending on the freedom of the fringe. Another vitally important point that some economists should be global celebrities for.

        1. I think Bill Phillips is the only ‘global celebrity’ economist to come out of NZ. The poor dude noticed a correlation between inflation and unemployment but I don’t think he ever claimed you should base policy on it. Because his name is on the curve he cops the blame for high inflation.

    3. Patrick, the author there is far from alone in not knowing anything about the vastly differing behavior of urban land markets depending on whether there is low-cost land being added at the fringe or not. In general, it is correct that rising land values at a city centre due to the way its economy is evolving, are the incentive to add floor space and provide smaller housing units as an option for more residents to be priced in to a share of the action. However, as Cheshire and colleagues have been observing, it is possible for city-centre land values to be hundreds of times too high relative to the economy’s fundamentals, due entirely to land-rationing planning, and land values being derived by an “extractive economic rent” process, with speculation on top. In this case, the rate of actual development will be slower than otherwise unless speculation gets into construction. Generally speculation and investment in “sites” becomes an end in itself, and development takes a back seat, when land values are inflating endlessly with no actual “production and income” basis. I am commenting at The Economist now, on this.

      By the way, I have never said that lower land costs due to freedom of fringe development are an “incentive to adding density at the centre”. They are a powerful enabler when the incentives exist, and their existence is dependent on factors that are outside of urban planners control. Urban planners can only “enable”, they cannot “create”. They can also “obstruct”. Forcing land prices up with rationing, whereby prices represent a bigger and bigger “taking” from income and production, not an outcome of increased income at all, is a powerful obstructor of all kinds of real economic growth. Furthermore, one of the best enablers is an intense street network designation well in advance of a city’s development, as is proved by the UN Habitat Program report, “Streets as Public Spaces and Drivers of Urban Prosperity”.

  5. A little selfishness from a lot of people is more damaging than a lot of selfishness from a few people. It reminds me about the video: the honest truth about dishonestly. The people that oppose density reform are insulated from the consequences of their actions! It doesn’t affect them personally unless they think about children that are unable to buy houses. If they don’t have children, or their children already have housing, then they don’t even have that.

  6. There’s that false linking of homelessness to zoning policy again. The wildest intensification dreams of the pro-UP crowd will not make any noticable difference to housing affordability, especially for people who are homeless.

    1. Allowing more homes to be built is a necessary (although perhaps not sufficient) precondition for getting people housed. Other policies, such as greater investment in social housing and support systems for people seeking to get off the streets, are also important, but they don’t work unless it’s possible to provide more homes.

      1. There is a surplus of homes, and in some places such as Taumarunui houses sit permanently abandoned because the owners can neither sell them, nor rent them out. Plenty of people would love to live in them, but the jobs have all been moved to Auckland where homes are 20 times more expensive. We have an economic policy of relocating jobs from where the homes are, to a fewer number of locations that are already built-out. It’s destructive for the people, but brilliant for businesses. It is a case of screwing over the people for the benefit of business, which also has the by-product of wealth transfer from the people, to businesses, many of which are based offshore, thus we have an ever increasing equality gap. The rich get richer, the poor get poorer.

        The solutions exist, but you generally advocate the opposite, and thus end up promoting the problem more than the solution. How about talking more about getting business back into the provinces where infrastructure and homes already exist? How about talking more about having responsible immigration that more evenly distributes new arrivals further afield?

        1. There really isn’t a surplus of homes. There is a surplus of cheap credit which is going to mean that any house built until the supply/demand side of things is square is going to go up in value.

        2. “The solutions exist…”

          What solutions? What specific policies should we implement? Wage subsidies for employers in small towns? Bans on hiring in Auckland? Hiring a whole bunch of people in unproductive government jobs in rural areas? Please explain.

          “How about talking more about getting business back into the provinces where infrastructure and homes already exist?”

          Because the last time we did this it did more harm than good. And, oh yeah, it didn’t even stop Auckland from growing more rapidly than the rest of New Zealand. I don’t know about you, but I’m happy to let the failed policies of the past *stay* in the past.

        3. The best location to encourage businesses and people to move to is…..Auckland. Plenty of easily developed land around Auckland – just need some great motorways and allow mixed uses instead of just housing – and big office parks and low cost business land.. I think the compact city retrofit ideas are fairly discredited now – they have only shown to price out most people on an “honest wage” and create terrible traffic congestion. Lets move forward with proper modern solutions.

      2. I don’t get Geoff Blackmore’s reasoning, but the point he makes is according to real life observation. Housing supply by going “up” rather than out, by way of prescriptive planning, never results in lower cost per housing unit. The cost of the average housing unit rises even as the average size falls. Atlanta, population density 600 per square km, has a median multiple of around 3, and Hong Kong, population density 26,000 per square km, has a median multiple seldom less than 15.

        If “theory” in its current established form is not explaining this, it is time for economists to get out of their ivory tower and start working out some theory that actually does fit urban land-market observable behaviour, is it not? It is not as if there are ANY examples of cities moving from systemic unaffordability to affordability by building “up” and smaller. In fact here is a letter I had printed in the Herald a couple of weeks ago:

        Ryan Greenaway-McGrevy may be a senior lecturer in economics, but his assumptions are wrong regarding zoning density and land prices.

        He is correct that rezoning for higher density makes land values rise, so that incumbent property owners do not need to “lose” even if “housing” becomes more affordable due to it becoming denser. The Auckland Council planners assume that land values remain static, and that more units built on a site allows the site value to be split up between more units; this is grossly erroneous. There is non-controversial urban economics literature that states “site values are elastic to allowed density”.

        But Greenaway-McGrevy is still wrong to assume that housing becomes more affordable as it becomes denser on average. The data on real-life cities is clear: Hong Kong at one extreme of density, is the most expensive, and all the cheapest cities of all, like Atlanta and Kansas City, are extremely low density. The elasticity of land values to density, is volatile and exponential. Everybody loses except the landowners.

        Policy must not be based on plausible assumptions that are nevertheless provably wrong, with costly consequences. The above is not even “too complex” – it is observable reality.

      3. “It is cargo-cultist to assume that people themselves will be significantly more productive just because they get to live around “productive” elites.”

        Then why is pay for low-wage service jobs much higher in San Fransisco and New York than it is in Atlanta and Houston? Housing costs mean that pay needs to be higher in SF and NY but it wouldn’t be possible to pay those higher wages without the increased productivity.

  7. What jobs were moved from Taumaranui to Auckland, and by whom? I’m not aware of anyone shifting King Country farming and forestry jobs to Auckland, what is it exactly that got moved?

    To be realistic the Taumaranui has declined because it’s traditional jobs declined, not because they moved, and Auckland has grown because it’s sectors of the economy have grown. So really you’re talking about taking jobs that thrive naturally in Auckland and forcing them to relocate to where they aren’t being set up without interference. What jobs do you actually have in mind to encourage out of Auckland?

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