Will Auckland Council amalgamation be good for housing supply in the long run?

In the short term, amalgamation will probably have a positive effect, because it enabled a comprehensive rewrite of the city’s urban planning rulebook to increase the amount of homes that are allowed to be built in Auckland.

This worked in part because a council that must write a single urban plan for the entire city has to make hard choices about where new homes should be allowed, rather than assuming that it can just say no and push off growth to its neighbours.

The hope is that Auckland Council will continue to act in the interests of the region as a whole, rather than responding to parochial demands to limit housing. But that’s not only possible outcome. In the long run, though, it’s possible that amalgamation could hurt rather than help.

An alternative theory is that Auckland Council could end up as a regulatory ‘monopolist’: freed from the constraint of having to compete with neighbours for new businesses and new properties to tax, it could end up restricting development in the long run.

But we don’t have to speculate about this: We can look at what’s happened in other countries and cities with different local government setups to understand what trade-offs we might face.

California presents an interesting test case, as it’s large, with lots of local governments. It’s also famously restrictive on housing development. As Kim-Mai Cutler pointed out,since the 1980s California has been running a structural deficit in new housing, as planning restrictions have cut the legs out from underneath higher-density (“multifamily”) development:

That chart is the consequence of thousands of local government decisions to turn down or discourage new housing development. Here’s a recent example reported in the Los Angeles Times:

Just beyond San Francisco’s city limits lies 640 acres of land that could help solve some of California’s biggest problems.

A developer wants to build 4,400 new homes there — one of the largest projects recently proposed in one of the country’s most unaffordable regions. The development would overlook a railway that drops riders into the heart of San Francisco in 15 minutes, reducing the need for cars and cutting the greenhouse gas emissions that come from them.

State and regional leaders have endorsed the project. But its fate rests with Brisbane, a city of 4,700 people that annexed the property 55 years ago. And no one, not even the developer, thinks Brisbane’s residents will approve all 4,400 homes.

“Unfortunately, we believe that their ceiling is going to be below that,” said Jonathan Scharfman, the general manager for the developer, Universal Paragon Corp.

The residents of Brisbane – who are right in the middle of one of the most economically dynamic urban areas in the world – think of themselves as small-town residents. And as a result they’re unwilling to say yes to a project that would significantly benefit the urban area that they’re a part of:

“We’re a small town,” City Councilman W. Clarke Conway said at a meeting on the project last fall, “and we’re a small town by choice.”

As it turns out, Brisbane isn’t an outlier: Virtually all local governments in California have similar incentives to say ‘no’ to development, in spite of the fact that they tend to be small and surrounded by other local governments.

Several recent empirical studies of the causes and consequences of land use regulation in California demonstrate that when local governments compete, they generally compete to develop tighter restrictions on home buildings.

The first study, by economist Kip Jackson, uses a detailed dataset on the date that planning restrictions were introduced to identify what happens after they are put in place. From his summary:

California cities’ use of land-use regulation (including various zoning rules, residential density restrictions, and limitations on growth) increased precipitously from the mid-1980s to the early 1990s (see figure below). In a state known for making extensive use of voter initiatives, this increasing level of regulation was the result of rising anti-growth sentiment following periods of rapid population growth. Unsurprisingly, the most highly regulated communities back then—in the southern coastal region and in the San Francisco Bay area—still top the list today. 

Figure 1 – Residential permitting rate and additional regulations adopted over time, California

Jackson fig 1

Source: Land-use regulation data from survey responses of local land-use authorities in 402 California cities. Permit and housing stock data from the California Housing Foundation’s Construction Industry Review Board and US Census Bureau, respectively.

Comparing the rate of construction in cities that implement more land-use regulations to the rate in cities that implement less of it, I find that each additional regulation reduces a city’s housing supply by about 0.2 percent per year. The average California city used in my analysis has a population of roughly 55,140 with 21,740 homes. For such a city, adding a new land-use regulation reduces the housing stock by about 40 units per year. Reductions in a city’s housing stock are the result of significant declines in the rate of new-home building. The number of new homes built each year is reduced by an average of 4 percent per restriction. These reductions in new construction (and the overall housing stock) come through fewer single- and multifamily housing units, but the effect on the latter is much stronger, with an average of 6 percent fewer permits issued per regulation.

Importantly, Jackson finds that new planning restrictions ‘spill over’ to neighbouring areas. This contradicts the theory that lots of small councils will face incentives to compete to attract development:

In addition to the direct effects of regulation on a city’s housing supply just described, local regulatory regimes also affect housing market outcomes in neighboring communities through regulatory spillover. In California, city and unincorporated county governments are given a significant amount of autonomy in how they manage land-use, which leads to regulatory competition among nearby cities. Rather than the kind of tax-rate “race to the bottom” that often occurs when localities compete for businesses or residents, this form of competition leads to increasing levels of regulation as residents and city officials attempt to stifle growth in their communities. Although land-use regulation is generally implemented at the city (or county) level, growth is a regional phenomenon. So, like a tube of toothpaste, when regulatory pressure is put on development in one city, it typically spills over into less-regulated neighboring cities. Thus, in order to avoid taking on all of the region’s new development, cities tend to adopt similar regulatory patterns as their neighbors, both in terms of the level of regulatory stringency and the actual policies adopted.

A second study, by urban planning professors Michael Lens and Paavo Monkkonen, takes a look at the impact of planning regulations on income-based segregation within cities. They find that certain types of planning regulations – particularly restrictions on higher-density development – result in more segregated urban areas. And, again, they find that more localised planning systems exacerbate these effects. From a summary in The Atlantic:

Importantly, the study shows that greater involvement at the state level can help temper some of the most damaging effects of exclusionary zoning. The authors write:

Greater pressure from multiple local-interest groups regarding residential development exacerbates the tendency to segregate by income. At the same time, income segregation is ameliorated by a higher level of involvement from state institutions. Taken together, these findings suggest that land use decisions cannot be concentrated in the hands of local actors.

In short, the evidence from the US suggests that smaller, more fragmented local governments are not good for home building or levelling out socio-economic disparities in the housing market. This doesn’t mean that the Auckland Council amalgamation will lead to a perfect outcome, but it seems like it can help us avoid some important pitfalls.

What do you think about the right size for local government?

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53 comments

  1. Well I’m agnostic about the Auckland Council Amalgamation and have some sympathy with those who feel our council is cumbersome and bureaucratic and very CBD centred. However it seems like a no brainer to agree with the author that it needs a single organisation to handle the big issues of large scale housing and levelling out socio-economic disparities. We may decide it hasn’t done a very good job but at least we know who to blame.

    I have never understood why the unitary plan took 5 years. The Treaty of Versailles took 7 months and the Congress of Vienna took 8 months and both remapped Europe. As an example I owned a 870sm property in North Shore and the old North Shore section size was 450sm; the unitary plan moved it to 400sm so the section could be sub-divided and a new house built. Everyone knew the likely result would be 400sm but nothing could be done until the plan was signed off five years later. I would have put all the different old planning teams in a room and produced new rules in days not years; had each set of rules approved by council within weeks. The completed comprehensive plan may have taken 5 years but activity could have started immediately.

    We had seen much the same trouble in the UK – whenever you merge authorities intending to get performance and savings you get an extended period of confusion, inactivity and empire building with the alpha males beating their chests and becoming head of department and immediately needing new offices and extra staff to signal their importance.

    Conclusion: it should have been done better but it is just beginning to settle down so don’t disturb it.

    1. What took so long wasn’t the planners, they had their plan together at the start of the five years.

      It was five years of consultation, five years of the likes of Auckland 2040 moaning in court to stop three storey houses, five years of people trying to tell their neighbour a what the can’t do with their own property. Five years of Foodstuffs trying to force all their competitors to oversupply parking so they don’t have to manage their own supply.

      Don’t blame the planners, blame the people who have no concept of planning!

      1. I’ll admit to having no concept of planning but I have noticed planning failures the world over. Obviously there would be difficult decisions to make where a balance between conflicting interest groups is negotiated but many of the decisions were not controversial and could have been ratified well before the entire plan was completed. [I thought the supermarket parking had been going on for 20 years – ref Pak’n’Save Wairau taking 20 years for approval but it opened well before the unitary plan was finished.]

        1. Auckland Council was never amalgamated for cost savings, that is a myth. And the Unitary Plan covers much more than just land-use zoning.

        2. Pak’n Save Wairau was fought against by competitors who appealed every decision Council made. It needed a law change before it got through.

      2. Bullshit. Blame the planners who lobbied for a ‘fast track’ process and got what they asked for. The standard system would have created a a district plan that people would have needed to ‘have regard to’ the day it was notified. A series of council hearings would have taken a year and gotten rid of 95% of the issues. Of the rest half would have been negotiated out and the last 2-3% would have gone to the Environment Court. We live in a society where people are asked what they think and where we have a right to have input. The problem was the Council turned it into a one step process of one very big difficult step. Everyone treated their submission as if it was an appeal. The process took as long as it did because of Auckland Council.

      3. Don’t consult the public then. Elections are public consultation, everything else is a waste of time and a source of bias. (Consultation as originally intended to gather expert information is OK, just not “do you like this or not” style consultation).

        1. Great one recently was in the summary of feedback that listed a community group as a “key interest group” they would “work with”. “Working with” turned out to mean “advising when the design is finalised”.

          I want to see change, and public input has seemed like an avenue for that. but I don’t want it at the expense of a fair process. At present the consultation process often adds no educational element in either direction, creates division in the community, and is exhausting. People advocating for a better Auckland feel they need to submit all the time, and in fact they do, as numbers count. Proper commitment by politicians and accountability allowing for a 3-yearly review of success would allow many people to just get on with living their lives.

    2. “it is just beginning to settle down so don’t disturb it” – Couldn’t agree more!

      I thought it was obvious that there’d be a few years of pain then some good improvement, but I was surprised how damn long it took to get here. If anything could be learned, I think that it would be for the council to lawyer up when proposing “big” changes and accept that they’re going to spend money in court. High St continues to be a sticking point, where the aversion to spending money on lawyers has resulted in no improvement in public amenity.

      I despair when I see people outside of Auckland refer to the amalgamation as an example of a grand folly to be avoided at all costs, Wellington region and Hawkes Bay being good examples.

      The setup of the council is sub-optimal for sure, however any changes now need to be very carefully thought out. I would love to see more control of the “council _controlled_ organisations” though.

      1. A commercial organisation would look at the Auckland amalgamation and review the successes and failures before doing another amalgamation. If I lived in Wellington or Hawkes Bay I would certainly be using Auckland as a reason for not going ahead.
        It has resulted in less practical democracy and that isn’t out-balanced by other outcomes however good (say Public Transport, Libraries, large scale planning, squeezing more money from the government, etc).

        1. The benefits you list are pretty huge…of great benefit to Auckland, and would never have happened with separate councils.

          Can you expand on ‘less practical democracy’ argument?

        2. RE: Less practical democracy is open to interpretation, so I’ll take it from my viewpoint – Lack of accountability and controllability of the CCOs.

          As for “local representation”, no matter what you do there people will be unhappy. It’s nigh on impossible to find the correct balance between sufficient ability for locals to influence policy and locals falling into the trap of selfishness or NIMBYism.

          With regard to the HB amalgamation – I’m a bit fuzzy on the details, however it appeared that Napier was concerned that the Hastings mayor, also the regional mayor would have too much power. IOW – Napier vs Hastings as has been the case for over a hundred years. Add into the mix that HB people are very parochial and have an illogical hatred of Auckland (speaking as a former HB person)…

          1. re Hawkes Bay or Wellington almalgamations – meh, they can look at Auckland and see if they think it works for them or not. What was abundantly clear is that it was the correct decision for Auckland IMHO, even if perhaps it needs to be structured better (e.g. CCOs?)

            the less practical democracy argument I was keen to hear an opinion on – as you say by using the term ‘local representation’ or ‘practical democracy’ I get visions of people being pissed off with a lack of ‘democracy’ when actually they mean ‘I didnt like a decision that was made’, which are two different things. As far as I can tell thre’s nothing stopping you contacting your local councillor with an issue, just like you could before..

          2. You have expressed the idea better than I did.

            Except for ‘illogical’ though it could be argued that all hatred is illogical.

            Germany has a concept of everything being decided democratically at the lowest level possible. Given modern communications a return to participatory democracy rather than representative democracy is conceivable. On the other hand direct appeal to the populace can result in a Trump – it is pleasing to note he would be impossible in NZ because no political party would elect such a loose cannon as leader.
            Low level democracy does result in more trust and civic pride as per Switzerland.

          3. Speaking as someone who lives in both Hawkes Bay AND Wellington, i think the reasons that the proposed amalgamations failed are a little different. Wellington was proposed to be amalgamated with the Wairarapa, which does not make sense, either to them or to us. It’s miles away, on the other side of a gnarly mountain range, and there is a strong feeling that they need to be in charge of their own destiny. Wellington would make sense to merge with Porirua and the Hutts, as they are all effectively just commuter suburbs of Wellington – in much the same way that most of Auckland is a suburb to the central AKL CBD.

            Hawkes Bay is a whole different kettle of fish. The present system is all screwed up, for sure, but basically – there are two cities of almost equal size but one of them (Hastings) has also swallowed up the surrounding countryside. It would make more sense for their to be one Urban council, and one Rural, as Napier and Hastings have more in common with each other than they like to think. Sadly, the Hastings Council is now bleeding suburbs out into the rich farmland, which should be firmly avoided – farmland should stay as farmland. It’s not called the Fruitbowl of New Zealand for nothing! But proposing that Napier now got swallowed by the Mayor of Hastings went down like a cup of cold sick. Yule is now standing for Parliament, to try and force onto the people what he could not achieve by voluntary means.

            I don’t think that people of HB actually hate Aucklanders, especially as so many ex-Auckland people now live in HB. But the attitude of some in Auckland still gets up noses – i.e. Metro magazine, which for the last 30 years has always labelled people it does not know as “a visitor from Hawkes Bay” in its society pages. Funny for the first decade perhaps, but the joke grew tired a long time ago… Hence the more popular name “Dorklanders”…

    1. Yes me too, even though I could always see that the transport and land issues were so interrelated that a large body, like the original ARC, was necessary too. I suppose a central body gets the whole gamut of pressures and has to balance them better than a local body going after the local vote. Hmmm

  2. why does the potential for increased efficiency seem to get lost in such council mergers? where have all the monies from less mayoral salaries gone? I assume the mayor of Auckland is paid less than the sum totals of the North Shore, Manakau, Waitakere and Auckland mayors got paid let alone the mayoral assistants, secerataries, PAs, receptionists etc.

    1. I remember seeing a tweet from Richard Hills a while back which did actually mention quite large savings in a particular area of council, so maybe it has worked, at least in part. Theyre just not being very good about broadcasting it effectively.

      In saying that, I’m sure plenty of people wouldnt believe it anyway!

      There’s also probably an argument to be made in the future that the additional housing allowed by the UP has had many positive benefits to Aucklands economy which wouldnt have been possible had the same council structure stayed as it was. I’d hazard a guess that these benefits would far outweigh any unrealised efficiencies from the almalgamated structure. But thats just a guess.

      1. I expected no savings although there certainly were opportunities and maybe the best example may be the merging of the IT departments – I realised they had lost the plot when I read an advert that boasted about the ‘largest IT dept in the country’ – would you be attracted to a dance boasting the most choreographers, a painting by the biggest gaggle of painters or a book written by a team of authors?

        1. 🙂 Yes, although I’ve been using some of the GIS layers and AT traffic info recently, and I’m absolutely stoked with what’s available – loads of info. Very cool for suburb-wide permaculture plans. And the GIS department is responsive. Quick for easy things, not too long for harder queries.

          The queries I have are around the consultation fees for the amalgamation – how could we have avoided that blowout? And the role of ATEED will always sit as a question mark in my mind. They probably do some great work. But they are funded from rates, and essentially exist to assist business through the workings of Council. Given that Council – in the broadest sense – is there to ensure residents don’t get steamrolled by big business, I don’t get the rationale for ATEED. Either Council’s processes are straightforward for all (residents and business), in which case ATEED is not required. Or it’s not, in which case rates should be used to ensure it becomes straightforward for all, not just for business.

          1. North Shore had a good GIS viewer long before the amalgamation and it has only just been superseded – over 5 years for an enhancement – they developed TradeMe in months not years with a small team.

        2. Bob, as an employee of a healthcare shared services organisation that has been the largest IT shop in NZ in recent years. The creation of shared services for IT create huge economies of scale allowing less staff to do more.

          However, like healthcare where my organisation caters for 50,000 users using 1600 apps on hundreds of sites, local government IT is immensely diverse and complex. The effort involved in rationalizing the legacy IT of the old council structure into a more streamlined IT with the new structure alone will take a large workforce years to get through, at which point the IT shop will shrink and/or the range of services offered will expand.

          Roll on the day when IT enables fast resource consents, or Smart City Big Data provides local decision makers with better analytics to inform their decisions.

          1. Retired after an enjoyable and very diverse life in IT. The failure rate for IT projects would not be accepted in any other profession (except town planning?). I hope your Healthcare doctors have a lower failure rate than your IT department.

            Of course it is not just dumb programmers making logic errors – the real problem is the interface between IT and the real world; in particular it is hard to persuade a department where salaries are so generous that they are just a parasite on a parasite on the real people doing real work – there are council staff who build and maintain and they have a large layer of managers sitting in offices and those managers use various services such as law and accountancy and in Auckland marketing PR and then those services use IT – so the IT department is a long way from the reality..

            I am willing to admit Auckland council has produced some reasonable IT – the new GIS viewer, the library software (could be better) and the last time I looked ATEED had a wonderous website but I stopped appreciating it when I got to the page showing how they spent money.

            Merging seven IT departments should be trivial – sit all the mangers in a room; by lot chose a leader, then system by system ask the question “who has the best”; agree and make it the Auckland standard. That ought to take an afternoon. Then sack five out of seven IT staff – making sure you get rid of the correct five is the tricky bit since the best IT staff have frequently developed a protective highly prickly personality. Commit to not introducing a single amendment or starting a new project until all the old systems are working.

          2. Bob the Government sector has a rule against that sort of thing. You are supposed to spend months reviewing all the options then conclude none are any good, then after more months you claim you need to have a big new system designed and coded from scratch for an estimated price of $0.5 gazillion and three years work. Then 5 years and $2.3 gazillion later you quietly try and pretend that your system that has never actually worked was all the fault of someone else.

    2. The mayoral salaries will be a tiny proportion of a councils operating budget. The biggest chunk is transport and the same number of roads need maintenance as they did before the merger.

  3. These studies seem to show NIMBYism at a local authority level which is quite interesting and counterintuitive. Is there a balance where size and power outweigh that kind of behaviour?

    1. There is – Auckland Council. The people of St Heliers complained vociferously about intensification but ultimately it is allowed for in the UP anyway. If there were a St Heliers borough council it’s pretty safe to say no intensification would have been allowed for.

  4. 140 apartments soon to be built by the RSA in Pt Chevalier – I imagine (but could be wrong) that this is thanks to the UP, at least in terms of not having to have carparks to match. There’s a certain beauty to the idea of the older folk at the RSA providing apartments to help house young people.

    Word’s barely out in the suburb, so will there be an outcry? Will the centralised decision-making reduce the outcry? I’d imagine so. No point trying to lobby local politicians when the plan’s set.

  5. I can’t see the mechanism by which smaller councils would approve more housing (competition for rates revenues I guess). But it seems like their incentives to approve more are in practice overridden but the concerns to NIMBYs and smaller councils can always say – let the next door contiguous city provide the supply. Larger councils have a greater ability to appropriately weigh the concerns of the collective (not enough places to live) against the concerns of NIMBYs (neighbourhood change) to get better overall outcomes.

    1. It depends a bit on context. Smaller councils on the fringe of urban areas such as Selwyn and Waimakariri will happily approve new developments as it can significantly grow their rates revenue. Also districts with valuable coastal areas such as Kaipara will often encourage this to be developed for the same reasons.

      1. I agree re context. More Councils might have an effect of encouraging some types of peripheral development and discouraging intensification -as many people above have given good examples of.

  6. There is a need for a comprehensive analysis of AC performance vs. ancestor Councils.

    Fullspectrum

    Are they processing BCs faster?
    Are they getting to noise complaints faster?
    Have commute times (adjusted for population) improved?

  7. I would have thought it would be in the Council’s interest to build more housing to gain more ratepayers and more income from consumers (watercare, aucland airport, etc). This also consolidates political power to gain more influence with central government. Driving people to the regions, or splitting councils apart seems to do the opposite of these things.

    1. I imagine the problem is that this small council is being subsidised by the bigger councils and the government (especially in terms of transport and proximity to employment). I’m sure if 4000 people paid the real cost of having a small town (either in money or opportunity cost), they would think otherwise.

      1. I have been surprised by how much ratepayers pay living in small towns and they don’t get any of the facilities Aucklanders get: HOP cards, public transport, ethnic festivals, big art galleries, ATEED, etc.

    2. Wouldn’t it depend on the marginal cost of adding the next consumer.

      If you get close to the tipping point because you’ve only planned to grow to a certain size, the infrastructure investment required would be difficult to get approved, so while there is an incentive to grow, there isn’t an incentive to grow too quickly.

  8. The issue is that multiple Councils do compete to give people what they want. In California people don’t want development so the Councils compete to give people that. In Auckland people traditionally wanted more houses at the edge so the Councils competed to deliver that. Now we have the worst of all possibilities, a monopoly Council that does what it wants and a whole bunch of monopoly CCO’s that dont even have to do what the Council wants. The biggest mistake was they got the Watercare dude to set it up so he set it all up like Watercare.

    1. Depends what you mean by ‘what the people want’. I would say a lot of people want affordable central housing, but they probably aren’t the people the council care about…

    1. Not a good comparison, Anthony. The building consent boom time during 2002-2004 was during a period when in addition to the council, whose staff were nose to the grindstone trying to pump out consents within 10 working days, there were also independent building certifier companies approving and signing consents. Remember those? Apparently competition was meant to be a good thing. Then came 2005 and leaky buildings…

  9. More competition will tend to go toward ‘good’ outcome.

    The good outcome for local is anti growth, as it suppress supply and increase the local home value.

    What needs to be change is the rule of good outcome.

    This can be achieved by creating growth incentives to home owners and council, by rewriting tax system and land value capture mechanism.

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