The other week Australian planning expert Greg Vann came to Auckland to talk about his experience developing the South-East Queensland urban growth strategy, ShapingSEQ. A lot of what he had to say was transferrable to Auckland. While Queensland faces different environmental challenges that often result in different decisions about built form, Brisbane and Auckland are both mid-sized New World cities experiencing rapid growth.
(Unfortunately, Greg’s Auckland Conversations talk isn’t online yet.)
Among other things, Greg argued that urban planning had to provide affordable living, not simply affordable housing. Essentially, consider transport costs (including the cost of car ownership) as well as housing costs when assessing affordability.
This is a topic I’ve looked at in the past using Census data on household incomes, rents, commuting choices, and car ownership from Auckland, Wellington, and Christchurch. The data suggests that there is a ‘spatial equilibrium’ between housing costs and commuting costs: While rents tend to decline with increasing distance from the city centre, commuting and car ownership costs rise in almost exact proportion to offset them.
However, there’s a further wrinkle to this: Lower-income households tend to locate further out. This results in a situation where (on average) Aucklanders pay a similar proportion of their household income throughout most of the city:
But where overall housing plus transport costs tend to take up a higher share of household incomes in outer suburban areas than on the isthmus:
Talking about similar patterns in Brisbane, Greg Vann made a really good point that I had never considered before: This pattern of population distribution can have significant effects on long-run wealth distribution.
Cities that encourage low-income households to save money on housing by spending more money on transport (car ownership, commuting costs) encourage them to invest in depreciating assets rather than appreciating ones. Over time, the resale value of cars goes down – eventually to zero – while homes tend to hold their value or even increase in value over the long run.
Consequently, well-off people who live in areas that are rich in public transport and cycling options will tend to save money on car ownership and invest more on housing ownership, while low-income people who tend to live in places without transport choice will do the opposite. Over time, this can contribute to rising wealth inequality.
Here’s a chart based on the data from my 2014 paper. Housing costs, as proxied by median rents, are higher in the inner suburbs (0-10km from the city centre). Households in these areas spend around $1000 more per annum paying the rent than households 20-30km from the city centre.
However, this is offset by higher transport costs in the outer suburban areas: Households 20-30km from the city centre spend around $700 more on car ownership per annum, because they have to own more cars, and around $1300 more on commuting costs per annum.
That extra $2000 a year is money that disappears from household savings and investment. People in the inner suburbs may be paying more for housing, but when they do so they buy an asset.
What can (or should) we do about this?
From my perspective, there are three basic answers.
First, we need to give everybody opportunities to live in locations where they can save money on transport and car ownership and invest it in housing instead. Basically, that means allowing people to build more homes in most suburbs in the city, and especially in neighbourhoods with better public transport, walking, and cycling options. (Other policies may also play a role, such as development of new social housing in accessible areas.)
In a lot of neighbourhoods, this will mean enabling options for ‘invisible density’, like low-rise blocks of apartments, terraced housing, or backyard granny flats. In other contexts, it might mean making the jump to mid-rise apartment buildings. But the point is: if this kind of thing isn’t happening, low-income households and young people will be at the back of a long queue for a limited supply of housing with good transport choices.
Second, we need to significantly expand the reach and speed of the city’s public transport network, as well as complementary options like safe cycling facilities. Giving people in more parts of the city these choices will enable them to spend less on depreciating assets like cars and save and invest instead. As Anthony Downs observed in his tome on congestion, Still Stuck in Traffic, this may be one of the more significant effects of public transport investment:
…public policies should help low-income households spend more on ownership of housing by providing more transit opportunities. (p132)
Getting there isn’t necessarily easy, though, as Auckland is trying to do a lot of things at once in the transport investment space. The Auckland Transport Alignment Project sets out a potentially transformative rapid transit network plan, including committed projects like the City Rail Link, Northern Busway extension to Albany and AMETI busway and near-future priorities like the Northwestern Busway and mass transit (eg light rail) to the isthmus and airport. But we can only build so many of these at a time!
That brings me on to the third point: Transport and land use planning needs to be better integrated. For example, when rapid transit upgrades go ahead, it would also be useful to rezone those areas to allow more housing to get built. This will mean that more people get the opportunity to benefit from increased accessibility and the option to save money by giving up their second (or third) car. Pretty simple concept, really.
What do you think about the impacts of urban form and household location on wealth distribution?