This is a guest post from Geoff Cooper, Director of Economics at PwC, on work he’s done looking at viewshafts.
The Journal of New Zealand Economic Papers recently published ‘City With A Billion Dollar View’ by Geoff Cooper (Princeton University, but now at PwC) and Kabira Namit (World Bank). Geoff lays out the policy, the analysis and the case for changing Viewshaft E10.
A slice of the city
If you are like many Aucklanders, you’ve probably never heard of viewshafts or cared to think how they influence the city you live in. An obscure planning policy, hidden in thousands of pages of planning rules. Sounds dull.
But have you ever wondered why half the city centre is the same height? Why the western side of the CBD isn’t as dynamic as the bustling Britomart or High street? Or why living in Wynyard quarter is so expensive?
Viewshaft E10 is a good answer to all of these questions. It has sliced the top off the western side of the city, to give southbound motorists waiting to pay a bridge toll in the 1970’s and 80’s a look at Mount Eden. The booths have long gone, but the view remains, with a price tag of $1.4bn.
Viewshafts in Auckland
Aucklanders love looking at volcanic cones and the Unitary Plan protects 80 such views across the Auckland landscape, covering about a third of all private land on the isthmus. The policies themselves are three dimensional in space and prohibit development over a certain height (Figure 1).
Our paper attempts to unpack the impact of these policies and present a methodology for their evaluation. To do this, we focus on one viewshaft, known as E10, which protects views of Mount Eden for southbound motorists approaching the bridge around the Onewa onramp (Figure 2). E10 was purportedly located behind the old Auckland Harbour Bridge toll booths, when motorists were forced to slow down and take in the scenery (Figure 3).
The Impact of E10
The analytical approach is a simple one. We use an econometric technique called a regression discontinuity – but it’s basically just a comparison of land values on either side of the eastern edge of E10. By controlling for other things that affect land value
(on either side of the discontinuity line), the approach allows us to attribute the remaining difference in land values to the policy.
Figure 4 is the key finding. This chart plots the land value of properties in the CBD against distance from the eastern boundary of E10. Properties under the viewshaft are on the left of the red line. A property on Queen Street is on the right. The impact of the viewshaft is striking. Land values drop by 40% next to E10.
The full numerical results are in Table 1. Model one is a simple comparison between the treatment (properties under the viewshaft) and the control (properties outside the viewshaft). Model two includes controls (with improvements in precision). The distances (100m, 300m and 800m) correspond to the amount of land included on either side of the eastern boundary of E10.
What do we notice? The effect of the policy (designated TREATMENT) lowers land values across all specifications and is significant at the 1% level. Model two provides a remarkably consistent effect of the policy, ranging from -$2,371 to -$2,939 per square meter.
Calculating the cost is now straightforward. We multiply the effect of the policy with the amount of private land under the viewshaft (641,000 square meters): $1.552 billion.
Calculating E10 Benefits
So far the analysis has been about costs. But we protect views because it is worth something to our residents. We identify two types of benefit: sight line benefits and volcanic view benefits. Sight line benefits accrue to properties on the border of E10 because these properties enjoy protected views into the viewshaft (Figure 5). You can see sight line benefits in the data. Figure 4 shows a slight ‘out of the ordinary’ increase in land values on the E10 border (in the control). To be sure, these are not the intended beneficiaries of the policy, but they benefit all the same. Using a similar technique to that described, we value these at $186m.
Volcanic view benefits are more tricky. E10 benefits motorists, so land values cannot be used. Instead we look to other viewshafts in Auckland. If we can find an effect on land values elsewhere (where the targeted beneficiaries are not motorists), we can use them to estimate benefits for E10. Under various specifications and a range of models, testing the entire viewshaft regime, we fail to find any impact on land values for those that the policy is targeting. This is a striking contrast to the costs – which are loud and obvious.
Despite these efforts, the benefits analysis is inconclusive. Volcanic viewshaft benefits could be so small and distributed, that they are undetectable in land markets. Therefore, until better information is available (such as willingness to pay data), we live in a world where debate and speculation about viewshaft benefits will continue.
To assist with decision making then, we change tact, asking, ‘what amount of benefits would we need to see, such that E10 would be a good policy?’ For this we turn to transport data.
The average flow of traffic into the CBD across the Auckland Harbour Bridge in 2014 (the year of our data) was 82,147 vehicles per day. Assuming 1.5 percent growth in traffic volumes, the theoretical benefit to offset the cost is $982 per year per for each vehicle crossing the Auckland Harbour Bridge in the southern direction (using a 6% discount rate and 30 year appraisal period). This is equivalent to 3.2 percent of the average land value in the northern area of the city.
It is worth reiterating that this is only the cost for the 800m view motorists have around the Orewa onramp. A second policy (Viewshaft E16) protects a very similar view from the Harbour Bridge, which should be thought of separately.
$1.4bn is just the beginning
- The cost of E10 (and viewshaft policy more generally) on the city centre is almost certainly much greater than $1.4bn. We use a number of conservative assumptions in the analysis:We include only costs to the city centre. Approximately 52% of the land under E10 falls outside of the city centre boundaries; these costs are not included.
- We do not include positive externalities of intensification, such as agglomeration and other wider economic benefits, which are regularly included in infrastructure evaluations. These benefits can be substantial. For instance, in the City Rail Link business case, agglomeration benefits were roughly 37% of conventional benefits.
- We only include private land – but public land could also benefit.
- We use 2014 land values. Since the cost of the policy is driven by demand to locate in the city centre and growth has accelerated in recent years, the cost has likely increased since 2014.
- We estimate only the cost of E10. The city centre is further constrained by E16 and the Museum viewshaft. In total, around half of all private land is constrained by viewshaft policy in the city centre.
So are motorists prepare to pay $982 per year?
The short answer is we don’t know. But we can give some context to the number. The average, after-tax household income in Auckland is $66,000. After we deduct mortgage payments on the median house price ($855,000) and transport costs, a disposable income might be around $10,000. This is useful to benchmark the cost, which is around 10% of annual disposable income. A not insignificant number.
For those that remain unconvinced, we take the analysis one step further. Let’s say you believe that motorists are willing to pay more than $982 per year. Is there a way that we can protect the view for motorists and reduce the costs? Yes.
The current design of E10 requires motorists to look over their left shoulder to see Mount Eden. Motorists are driving perpendicular to the viewshaft – a remarkably inefficient design for the city. To demonstrate why, we rotate the viewshaft 4.5 degrees to the left, so that E10 intersects with a southern turn in the motorway (Figure 6). Motorists now drive ‘into’ the viewshaft, so its width over the CBD is reduced. This maintains the view for a similar amount of time, avoids Onewa Rd onramp (which obstructs E10) and is probably safer for motorists (they can look ahead at the view rather than to one side). The benefit to southbound motorists is largely unchanged and the city saves 43% of the cost.
Viewshaft E10 has become a significant roadblock to Auckland’s own ambition. The city has options. It’s time to start looking at them.