Every weekend we dig into the archives. This post by Peter was originally published in July 2017.

This piece was originally written for Fightback magazine and published online in March.

As an economist specialising in urban issues, I spend most of my time analysing and debating how transport and housing policy can make society wealthier, healthier, and happier. But it’s important to keep equity, exclusion, and politics in view as well: When the average person’s fortunes rise, is everybody better off, or are some people left behind? And if some people feel excluded from society’s good fortune, will they react by building up an alternative, or by tearing down what’s already there?

In this article, I want to step back from purely economic concerns and ask how we can build a city that is more equitable and inclusive, rather than simply more efficient. However, in saying this, I don’t want to give the impression that we must sacrifice economic outcomes to improve equity, or vice versa. On the contrary, many of the housing and transport policies that will benefit us economically will also contribute to a more equitable society.

The problem of scarcity

Urban space is fundamentally limited. A person on a bike cannot occupy the same space as a truck – or, at least, it would be very unwise for them to try it. Two people cannot build houses on the same plot of land – unless they stack their homes and call it an apartment building. Consequently, access to many urban amenities, like coastal views or convenient commutes to a range of jobs, are also limited to those with the right and the means to occupy desirable places.

In a market economy, access to these amenities is usually rationed by price. People with the ability to pay for a nice location get to enjoy living there, and others must go elsewhere. This isn’t to say that non-market allocation systems will necessarily produce a fairer outcome. For instance, in the Soviet Union the best dachas, or holiday homes, were reserved for political and technical elites. However, it does suggest that, to get a more equitable outcome, we need to overcome the scarcity of housing in nice locations and the scarcity of good transport choices throughout the city.

Good urban policy can overcome scarcity. For instance, survey evidence shows that Aucklanders value their natural environment, including beaches, coasts, and public parks. However, a piece of research that I led last year found that home-buyers in Auckland pay substantially more to live near the coast but not to live near regional or local parks.

The difference is that coastal locations are in scarce supply, while parks are not. Because councils chose to build many neighbourhood parks and preserve major green spaces like the Waitakere Ranges and Maungawhau / Mt Eden, very few homes are more than a kilometre from the nearest park. Because there are many parks, access to them doesn’t have to be rationed by price.

Capital accumulation and Auckland’s housing affordability crisis

In Limits to Capital, geographer David Harvey observed that capital tends to seek a ‘spatial fix’ through investment in urban housing and infrastructure that promises a deferred (but potentially large) return. While we could debate aspects of Harvey’s narrative, it is clear that house prices have experienced a structural increase in most places since the 1960s. This reflects increasing allocation of capital to housing, and in turn results in rising wealth inequality.

This is happening in Auckland, too. Capital has flowed into Auckland’s housing market for a variety of reasons, including falling global interest rates and tax preferences for residential property investment. By and large, the money hasn’t been put to work building new homes. Instead, it’s bid up the price of existing housing. As Stu Donovan pointed out in an article on Transportblog[i], we’re living in a topsy-turvy world in which the best way to make money off housing isn’t to develop it, but to own it and speculate on future price increases.

Rising house prices may be appealing in the short run, but in the long term they add up to a social catastrophe. For one thing, the benefits of rising prices aren’t shared equitably, as home ownership is falling and wasn’t evenly distributed to begin with. Effectively, rising house prices represent a transfer of wealth from young people to older home-owners and investment property owners. If this persists for generations, young people without inherited wealth may never catch up.

For another, rising prices compel people to do a range of undesirable things to economise on housing costs. For some, this means staying in overcrowded or unhealthy accommodation because there isn’t anywhere else to go. As a result, Aucklanders suffer unnecessarily from preventable diseases like rheumatic fever and asthma. For other people, it may mean saving money to buy a home rather than starting a family or a business. You can see the effects of these pernicious trade-offs throughout society.

Fixing Auckland’s housing problems

David Harvey also points out, in The Right to the City, that it is possible to enlist capital inflows to benefit society, rather than to benefit private speculators. He focuses on the role of taxation in reallocating capital, but I’d like to generalise the point a bit further and discuss a few ways that current capital inflows can be put to work to overcome Auckland’s problems of scarcity.

As discussed above, when nice things are in scarce supply, prices tend to rise until some people give up and go elsewhere. We can see that effect clearly in the market for coastal property, but it’s also very real for housing in Auckland in general. We don’t have enough housing to meet the needs of the people who are living here, or who would want to live here. So prices have risen, which has induced a few people to leave, either to elsewhere in New Zealand or overseas, and forced others to cram into overcrowded or unsafe housing. Some people have no home at all.

Scarcity of housing in Auckland isn’t immutable, like a physical law. It’s true that land is scarce in Auckland, as the city sits on a few narrow strips of land in the middle of a large ocean. But if we do things differently, we can house more people in the space and break our vicious cycle of housing speculation.

The first and most important step is to ensure that urban planning rules allow more housing to get built, in the right places. Some people have sought to build walls of rules around neighbourhoods or entire cities, to keep them from growing and changing. But there is another way to achieve good urban outcomes: planning rules that enable more to be done and ensure that what’s done is done well, with good attention to the interface between buildings and the street and the long-run quality of neighbourhoods.

Design is important, but location is even more important. In Auckland, there are a number of amenities that are concentrated in a small number of locations. For instance, people value coastal living and they value the consumer amenities and good employment accessibility that are concentrated near the geographic centre of the region. Rules that limit new housing in these areas will result in an inequitable city, in which nice locations are the exclusive preserve of the well-off.

Auckland’s urban planning rulebook has come a long way in recent years. As I wrote on Transportblog last year[ii], the final Unitary Plan has roughly tripled the number of homes that could be built in Auckland, which gives us room to ease the housing shortfall.

With luck, this will change the property game in Auckland, tilting the incentives away from speculative investments (i.e. buying and holding for capital gains) and towards socially beneficial investments in new housing. But it may not be sufficient on its own, because private developers aren’t going to continue to build homes if prices start dropping. The data on building consents and house prices makes it clear that they, too, are in a boom-bust cycle: When prices fall, or stop rising as rapidly, developers pull back the number of homes they build.

consents

This is where state housing, a long-standing progressive solution to housing equity issues, can play a vital role. The government (or the council) doesn’t necessarily need to build most of the new homes, or even more than a small share of them, to improve the fairness of the housing market. If it simply commits to stepping forward when private developers step back, it will help to stabilise boom-bust cycles in home construction. This will in turn ensure that the people at the bottom of the ladder don’t fall off the ladder when the next boom comes around.

Inequalities in Auckland’s transport system

So far I’ve talked mainly about housing, but transport is the other side of the urban equation. This, again, is an area where Auckland has a number of inequalities that could be addressed by redirecting a bit of the capital that’s sloshing around.

I want to focus on three specific aspects of transport inequality. The first is cars. Due to a set of choices that we made over the last 60 years, Auckland has a transport system that is heavily reliant upon cars. It’s possible to get most places in the city, most of the time, by car, but not necessarily by public transport or cycling.

This has its benefits, except when everyone’s trying to drive at the same time or when there’s a crash on the motorway, but they aren’t evenly distributed. Census data shows that over one in five low-income Auckland households lack access to a car, meaning that they face significant difficulties in reaching destinations.

This is linked to unequal levels of accessibility to jobs and education from different parts of the city. This measure reflects the combination of where people live and work and how easy it is to get around. The Auckland Transport Alignment Project recently looked at this, as shown in the maps below. Over the next decade, working-class suburbs in West and South Auckland are expected to experience declining accessibility to jobs by car and, with the exception of areas around Auckland’s rail network, relatively modest gains in public transport accessibility.

This reflects the scarcity of non-car transport options in these parts of the city. Where it exists, Auckland’s rapid transit system plays a key role in supporting accessibility by all modes. Busways and rail lines speed up public transport journeys, benefitting those who do not own cars. And by giving people the option to get out of the car if the roads are stuffed, they also moderate traffic congestion. But unless we take measures to reduce the scarcity of rapid transit options, these benefits will not reach all Aucklanders.

Finally, there are serious inequalities in health outcomes related to physical activity. Although obesity rates are an imperfect proxy for physical activity, they point to some serious differences in the accessibility and safety of walking and cycling options between different parts of the city. In North and Central Auckland, obesity rates are below the national average. In South Auckland, obesity rates are 26% higher than the national average for adults, and 70% higher for children.

People living in places where it is easier and safer to walk and cycle tend to walk and cycle more. In addition to saving people money, this can reduce the burden of preventable illnesses for individuals and communities. But this will not happen if walkable neighbourhoods and safe cycling facilities remain in scarce supply.

Abundant access for Aucklanders

To fix the inequities in Auckland’s transport system, we must move from scarcity of transport choices to an abundance of choices. We can build a city that has what public transport expert Jarrett Walker calls “abundant access”, in which:

The greatest possible number of jobs and other destinations are located within 30 minutes one way travel time of the greatest possible number of residents.[i]

Jarrett’s concept of abundant access focuses on accessibility via public transport, but similar goals could be outlined for all transport modes. For instance, we should also aim to ensure that:

  • It is safe for all Aucklanders to walk to school or the shops
  • People of all ages, from 8 to 80, feel comfortable cycling to a range of destinations.

Delivering abundant access will not necessarily be easy. It will require us to make some hard choices about how to deploy scarce resources, ranging from transport budgets to road space. It may require some capital to be reallocated towards infrastructure development. But it is possible, and, if we want Auckland to become a more equitable city, it will be essential.

Space for new politics?

This article has been primarily focused on policy, not politics. However, it is often the case that new forms of politics are needed to deliver policy change.

As I’m an economist rather than a political organiser, I won’t pretend to know how to catalyse new political movements. That being said, I hope that this article has offered some useful suggestions for shaping a progressive political agenda. First, it’s important to recognise that many of Auckland’s social and spatial inequalities are driven by scarcity – in particular, scarcity of housing, especially in desirable locations, and transport choices.

Second, we must react to scarcity by building bridges, not walls. In an urban context, progressive politics must respond to scarcity by delivering abundance. If people don’t have places to live, build more homes. If people can’t get around, provide them with abundant access. In a city, we are all citizens – we have a right to the place where we live.

[i] http://humantransit.org/2013/03/abundant-access-a-map-of-the-key-transit-choices.html

[i] http://transportblog.co.nz/2016/07/29/developer-profits-and-capital-gains-on-housing/

[ii] http://transportblog.co.nz/2016/08/31/zoning-reform-is-the-unitary-plan-any-good-2-of-n/

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37 comments

  1. Peter, this article is just as relevant now as it was then.

    First, I am refreshed that some developers are pushing back against the restrictions imposed by the Unitary Plan within the city. The proposal for 1300 apartments at Smales Farm is an opportunity that seems to make sense being located on excellent transport routes – obviously the bus way, but great connector services to employment options in Milford and Takapuna.

    I completely agree about providing equitable transport options other than the car; the huge number of people without cars demands that this should be so; it also seems that the number of people choosing a carless lifestyle is increasing; and will only do so as the cost of carbon increases. While nearby routes at good frequency is important I still believe that cheap public transport for all is vital. While the more affluent don’t need a subsidy, inducing them to use PT will certainly encourage buy in. For example, on the Shore public transport users are a very diverse group of people and the success of PT therefore becomes important to them (e.g. I was talking to a lawyer this week and one of his main concerns was the recent unreliability of the Devonport ferry).

    Somehow we need to break the current cycle where public money is diverted to supporting the status quo of driving and parking, a model that has not been sustainable for years due to congestion, and now emissions have to be factored in as well. Having the majority of people regularly using PT is likely to change people’s mindsets so that the majority will see the value of IT.

  2. Wonderful choice to pull this out now, honestly you couldn’t have timed this better!

    We don’t know when the building boom will turn but there are signs of it now. If the government could leverage its kiwibuild program and use it to gear up financing for development as private financing declines, kiwibuild could finally prove its worth.

    Stray question: I wonder if just the existence of kiwibuild might help keep the industry ticking along by giving developers the confidence to keep planning new developments? Perhaps kiwibuild might help the industry just by promising to step in and fund if the private funding drops off – that promise might itself ensure the private activity keeps ticking along.

  3. This is the downside to improving PT access (and cycling infrastructure as well) mostly in areas which already have reasonably good coverage. The good thing is you get a network effect bonus. The bad thing is only a select few benefit from it and you leave most Aucklanders behind.

    1. Roeland, It would be interesting to see Matt’s maps of proximity to bus/train routes and find out exactly how many people are being left behind. I really struggle that “only a select few” are within say 1000m (12 minutes walk) of a bus/train stop.

      I note that AT works on a much longer walk up distance, although for some a longer distance will be manageable by cycling, scooter or kiss and ride.

        1. Wrong… That is pretty obvious when looking at a map.

          And only a tiny minority has a safe route to cycle to that station.

        2. You seem to either think only certain people are ‘important enough’, or have very poor map reading skills.

          There are a few areas which I’m pretty sure are populated, but have no RTN nearby. That would be most of Kaipātiki, the area around Westgate, Te Atatu peninsula, almost all of the East Tamaki peninsula, and Māngere. That is less than half, but still I would not consider that “practically nobody”.

          Then again, the 3 km metric is irrelevant since in most areas nobody, within experimental error, is going to cycle.

          Obviously this metric will improve in a few years, but the assumption that almost all of Auckland is already covered is wrong.

    2. I’m not sure that’s really being done is it (unless you mean the CBD?). Most of the recent PT investment has been in trains which has given decent PT to the south and west, before that it was the northern busway which gave decent PT to the north.

      1. The nearest rapid transit service to where I live in Devonport is 7km away, so yeah many people are left behind. Probably a majority.

        1. If you mean Akoranga station, it would be faster to get on the ferry and go to Britomart to go South, East, West or to Albert Street to go North.

          In the morning at peak times the ferry probably meets the RTN criteria anyway with 15 min ferries.

          I really don’t think us Devonport people can claim to be left behind with public transport. Especially with that massive rort of the Local electric shuttles operating. What a waste of money in one of the wealthiest suburbs in Auckland.

        2. Devonport is around 7% of the population of the North Shore, and about 1.5% of Auckland. It’s hardly representative.

    1. I’m watching the whole phenomenon with a critical eye – will the domination of advertising, and thus society, by the automotive industry eventually be replaced by control by micromobility firms? If they’re going to make lots of money in this sector, should these firms be taking the lead in advocacy for safe cycle lanes? Why is there sometimes a narrative from the micromobility firms that suggests micromobility is an alternative for feeder buses? The modes are complementary and competition between them doesn’t serve a public good.

      But looking at this research, it doesn’t seem to add much to the discussion.

      They work out the footprint of a scooter ride, based on what other modes they believe it displaces – using their own research into displacement proportions that don’t match other research (and this will be highly location-specific.

      Yet they don’t work out the footprint of a car trip based on what other modes that car trip displaces. Or prevents, because cars affect more trips than just the driver’s trip. This is a major flaw in the research. It assumes the status quo is the normal. In fact, walking is the normal.

      You might also note in that study, the assumptions that scooters are not left out overnight, and that they are all charged centrally. This doesn’t hold in Auckland. With the Auckland situation – individuals charging them overnight, and no requirement on the company to pick up any scooters each evening that aren’t low in battery – the reduction in emissions will be more than the 19% the researchers say will happen if just this latter assumption is changed.

      They also say you would need to reduce the emissions a further 6% for our renewable electricity generation; we have a high renewable electricity rate.

      If there were safe lanes for scootering provided by reallocating traffic lanes, a far higher percentage of the trips scooters would displace would be car trips – only the imbalanced network is preventing more modeshift.

      Scooters are just stuff, and they do have an impact, but research like this needs to be scrutinised carefully.

      1. Plus, they’re looking at the first generation of Bird scooters (manufacturing costs, and associated emissions, will be dropping rapidly as the tech scales up), and focusing on scooter share schemes – which of course do generate extra emissions by having people drive around to pick up the scooters and recharge them.

        But privately owned scooters are pretty popular too (4 people have them in my office of 20, and you can see plenty of them in town on any given morning – including e-skateboards etc), and likely to become more so.

  4. +1

    Also
    A) “The greatest possible number of jobs and other destinations are located within 30 minutes one way travel time of the greatest possible number of residents.[i]” – I’ve noted in other articles central/local government fails to provide full coverage PT networks so all urban O-Ds are accessible. We can do a lot better & can use on-demand transit to cover areas where fixed routes are not economic. The full coverage PT network also needs maximum headways of no more than 30min & preferably with pulsed transfers where possible.

    B) I agree with state housing having a significant role to play. Also, the immigration rate needs to reduced to something sustainable to reduce the demand pressures

    1. Accessibility is a good metric. That said, few PT systems deliver much in the way of 30-min accessibility, largely due to time spent walking to/from stops and waiting for services. I’d suggest 45-mins is a much better metric.

      1. Are you sure? Then why would anyone even bother with it? Even during peak cars give you significant 30 and even 15 minutes accessibility.

        I would agree 15 minutes isn’t relevant, those short trips are almost always faster on a bicycle.

    1. On demand should read on-demand PT, and would be part of the PT system. Provides feeds only between your O or D and a transit hub where it is more efficient than fixed route services.

      Point to point on-demand should be privately paid & not part of the PT system.

        1. Theoretically, but I’m not sure how well the Devonport service is set up. As a high socio-economic area & presumably lowish PT ridership the catchment would need to be relatively large.

        2. Devonport has one of the highest PT usage in Auckland as it has the ferries.

          The shuttle service there is a rort. The only way it could possibly work is as a driver less service and that is 10 years away at least.

          Driverless buses running a set route at a slow speed like 30km/hr will be much more likely.

  5. Given how socially destructive rising land prices are, it’s weird that consideration of a land tax as the principal revenue source isn’t given more air time. At least enough for it to be clubbed around the head by impending and current retirees, anyway…
    And it can be done slowly so it wouldn’t slice property owners off at the knees- phased in over a few decades as income tax, company tax and GST are phased out.
    Land tax would be simple to collect, virtually impossible to evade, can be tuned to make it equitable (say, have a nominal percentage which ratchets up for higher $/m2 land, and down for lower $/m2 land).
    Land taxes seem to be universally favoured by economists throughout history, but the prevailing method is to punish working through income tax, and savage the poor through GST (~41% and ~33% of IRD’s revenue respectively). Is it because humans are just naturally territorial? Or is this manipulation by the wealthy? Or have I just totally missed something?

    1. +1,

      However, the government semi shut the door when it left family homes out of scope of the capital gains tax (& land tax)

      We already have land tax to varying degrees via property rates, but its a mix of land and capital valuations + uniform charges.

      Ideally central government could legislate to require local government to tax on land value only. The RMA needs freeing up at the same time.

      1. Thanks KO.
        We do have property rates, but a land tax to discourage holding land for a future ransom needs to be WAY higher than its current portion of rates (like nominally 8%pa), and income tax WAY lower (like 10%). I feel like the resistance to a land tax is mostly down to being short sighted and territorial. I.e. human…
        It would be good to get economists’ definitive views on it.

        1. Yes, maybe central government needs to take a land tax slice as well, & then reduce other taxes.

    2. JohnB I think its a great idea. And the first step which is easy to implement is a change to unimproved value for local authority rates. This was the standard system a few decades back – but owners in the wealthier suburbs naturally objected and got it changed. It discourages land banking and makes rates cheaper for the poorer areas of course.

    3. JohnB, the Treaty of Waitangi maybe? My understanding of a land tax is that, if you can’t afford to pay it from other sources and can’t or won’t develop your land yourself, you end forced to sell the land. I can’t see a land tax getting traction in a country where land confiscation is the source of so much grievance and the return of land is a spiritual imperative.

      I like the idea of a land tax, for all the reasons economists favour it. But I’ve never seen any consideration of how it would work against New Zealand’s particular cultural circumstances.

      1. Practically, the effect might be different of course. Land tax will be highest closest to town where it’s worth the most. Aren’t we seeing that iwi have a pretty good idea about land development and intensification?

        My problem with taxing the land more and the improvements less, is that taxing the improvements does mean you pay more for a MacMansion than for a small house, and I think that’s right. Is there a chance to be more specific? Is what we really need a balance between the two as we have now, plus a tax on landuses such as carparks and unused or undeveloped brownfield sites?

  6. That first graph shows how broken our tax system is. People on wages pay way more tax than people sitting on houses raking in capital gains tax free. I should know, I own a few houses. One “earned” more last year than I did in my well paid job. And no tax! yay. Thanks Jacinda!

    For the record, The Opportunities Party is the only party focusing on removing that flaw in the tax system with the least worst answer. What is essentially an annual asset tax. They are proposing a tax neutral policy (no increase in government income) where income taxes are cut to balance out increased asset taxes. Most people won’t notice because the bank owns most their house. Asset-rich old people who just rely on welfare money will be able to defer payment after they die.

  7. Interesting post & comments thanks. Yes state house building of some sort in the economic troughs seems a good idea to keep the industry more constant & give us more housing supply.

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