By Brendon Harre*
New Zealand’s housing crisis has been described as a Gordian knot.
A problem tangled with too many vested interests.
A problem that requires a cataclysmic solution.
An Alexander the Great to break the knot with one mighty sword blow.
I believe that such a revolutionary response is unnecessary, and that gradual reform is possible.
I believe understanding and synthesizing the strands of the urbanisation debate can give insights into how urban performance can be improved.
Understanding the different strands of the urbanisation debate allows a framework to be created that can gradually unravel New Zealand’s urban performance gordian knot.
The first strand of the debate to understand is spatial economics
Supply and demand for houses
This can be summarised by the following diagrams.
It is important to understand that demand for the various types of urban spaces -housing and commercial spaces, car parking spaces, street spaces, and so on, is increasing strongly in Auckland, New Zealand’s largest city.
This is due to strong population, economic and employment growth.
Increasing demand for residential space means Auckland is not a legacy city -such as an Invercargill or a Detroit.
Auckland can either be an expansive city or a expensive city.
For Auckland, its strongly increasing demand for urban space contains the seeds of its destruction, because it has become an expensive city where housing supply only responds inelastically to demand.
This has implications for productivity, academics such as David Schleicher and Alain Bertaud, indicate inelastic housing supply is a significant barrier of entry for a cities labour market. Such as Auckland’s schools are currently experiencing with their teacher recruitment difficulties.
Excessive house price inflation is also contributing to rising inequality.
Piketty has shown that returns on capital is greater than economic growth but further analysis by the likes of Rognilie has shown that this effect is due to property not productive capital.
Auckland’s inelastic housing supply is primarily due to restrictive land-use regulation which stops density and fringe growth and a broken system of infrastructure financing.
Secondary factors would be; a private sector land banking business model, a boom/bust degraded and monopolistic construction industry and a central government which has been largely absent from the provision of urban growth corridors for at least 30 years.
It is possible to derive New Zealand’s new government’s Urban Growth Agenda using a full demand and supply analysis of all the different types of urban spaces. I would refer you to my paper – Successful Cities Understand Spatial Economics to understand the sort of factors which need to be considered.
The government’s Urban Growth Agenda has five broad areas of reform, – infrastructure financing, pro-growth land-use replacing urban growth boundaries, transport pricing, spatial planning and legislative reform.
Examples of what this means would be, RMA National Policy Statements, Urban development authorities, Kiwibuild, disruptive off-site manufacturing, NYU Stern Making Room paradigm used to lay out growth corridors, congestion road pricing, greater government involvement in providing a mass transit congestion free network.
Two important strands to understand is Automobile Dependent Sprawl and the Compact City
For a long time in New Zealand, these two strands were knotted together so tightly the public debate could not move forward.
The difficulty is that both strands have great strengths but also fatal flaws, especially for Auckland.
This means they can’t be ignored but also that neither strand can be a sole solution for urban development in New Zealand.
The flaw of the compact city strand is a lack of focus on competitive land-use provision and good infrastructure financing needed for affordable housing.
The flaw of automobile dependent sprawl being the country cannot afford Auckland’s ever more expensive motorways (also until New Zealand transfers to a full electric vehicle fleet automobile dependent sprawl is not helping the country meet its climate change goals).
The above cost per added lane-km graph for new road projects clearly shows the increasing costs of motorway provision needed to feed Auckland’s expansion.
This means the urban growth model which Auckland has used since the 1950’s, being expansion provided by automobile dependent sprawl, has reached its limits.
The key solution for containing Auckland’s motorway expansion costs is road pricing. This will provide an economic incentive to transition to more space efficient transport modes, such as Auckland’s proposed congestion free network of rapid transit services.
Perhaps, more importantly than a simple transport mode shift, is that in response to congestion road pricing city residents adjust their travelling patterns at all sorts of levels. The Stockholm example indicates this change occured unconsciously i.e residents were not even aware that their behaviour had been affected.
There are many possible ways transport patterns could change. For example some residents might change the time they travel, some might move closer to employment and other important amenities, some car dependent businesses (car yards for example) might move to less congested locations, etc.
The Stockholm experience of congestion pricing is that transport is a complex social pattern that is self ordering like bread production in Western countries.
Stockholm found that congestion pricing became more popular over time, going from a clear majority who opposed the reform prior to implementation, to a clear majority who now favour it.
David Lupton’s paper on road pricing and urban performance – Cities are the Future in my opinion was one of the factors in freeing up the urbanisation debate by acknowledging the strengths of both the compact city and urban sprawl strands whilst avoiding their flaws.
Road pricing has support from across the political spectrum in New Zealand.
This approach unlocks a new vision for an expansive city. An approach that is more organic, less prescriptive, that prices rather than rations or subsidises urban space.
Many aspects of this new vision of an expansive city, compact city types favour -such as, the transition to more spatial efficient transport modes, removing car parking minima and relaxing restrictions on intensification -density, height, setback…
My paper What is the Secret of Tokyo’s Affordable Housing, is a longer description of a framework for an expansive city that compact city types favour.
Rebalancing the continuum between devolution and centralisation
This strand looks at how local government as it is currently arranged creates an insider/outsider problem which will require rebalancing.
Local government represents existing residents, both for electoral reasons and because legislation directs councils to consult their resident communities.
The problem is many local government land-use decisions affect potential future residents. Especially future workers. But these groups interests are not being addressed and as discussed earlier, barriers of entry into the city are created.
The rebalancing can occur in two directions – devolution or centralisation or both.
Centralised solutions being the most commonly advocated option.
For example, a higher form of government addresses the needs of those locked out of the city, by relaxing the restrictions on urban growth -such as Scott Wiener’s California proposals to relax building restrictions around city rapid transit lines.
Other centralising ideas would be the creation of an urban development authority with planning permission powers and perhaps even compulsory acquisition powers (if there are holdouts for site assembly).
What is less commonly advocated is hyperlocalism, where planning permission rights is devolved down, almost to the individual level i.e.-a set of neighbours or a street.
In theory, both centralised and more individualised solutions could occur simultaneously.
For example, an Urban Development Authority could encourage groups of neighbours to undertake their own streetscaped laneway development, by giving community talks, providing financial, budgeting, planning and architectural advice.
Fairness is the final strand
As I described earlier in the spatial economics strand, Auckland’s housing crisis increases inequality.
An example of rising inequality in New Zealand is the increasing number of homeless – 41,000 in the 2013 census, nearly one percent of the population is severely housing deprived.
Renting reform in New Zealand historically has not been a priority as it was considered a temporary state for most people. This is no longer the case.
To improve Auckland’s housing inequality problems, reforms will need to provide a minimum health standard of warmth, dryness and ventilation for rental housing, security of tenure contracts, more state housing for the most vulnerable and a housing first philosophy for the homeless should be best practice.
There is much frustration that home ownership, a previously achievable milestone for low and middle-income earners, has become unattainable in Auckland.
There is a fear this loss of social mobility will mean Auckland’s society fractures into generation rent serfs and landed gentry masters.
Losing the kiwi dream of a fair go society would be a big risk for creating political instability.
Globally angst against elites has translated to increasing popularity of populists -Trump, Brexit….
Historically, gradual reform has been an antidote against revolution.
In the 19th century the UK enacted laws on electoral reform (1830s – abolishing the rotten boroughs) and free trade (1840’s – abolishing the Corn Laws), this helped prevent the UK being swept up in the European 1850’s revolutions.
Internationally, housing and urban development reforms have not always been successfully implemented though.
George Romney considered that the then race riots had a root in the federal practice of ‘redlining’ coloured neighbourhoods so that they did not qualify for federal insured loans.
This sort of institutional racism in housing was pervasive in the US by both the public and private sector. Richard Rothstein documents the forgotten history of how the US government segregated America in a book titled The Color of Law.
George Romney’s Housing and Urban Development department attempted to provide a remedy by instigating an Open Communities Plan of allowing the building of multi-family dwellings in single family housing suburbs in 1970.
This plan would have benefited low income earners and the black communities who were being excluded by zoning from accessing affordable housing near places of employment or economic activity.
Because the development of this plan was siloed to Romney’s department and due to personal conflict between Nixon and Romney this plan was never enacted.
In New Zealand, falling home ownership has impacted Maori and Pacifica particularly severely and hopefully they would be major beneficiaries of successful urbanisation reforms.
I believe that New Zealand can follow through with needed urban performance reforms. The advantage New Zealand has is the public perceive the housing crisis to be unfair.
The media coverage of Auckland families sleeping in cars turned the housing crisis into a moral imperative and my study of the likes of the Corn Law movement, indicates this moral imperative is a critical factor for ensuring the political will to implement progressive change.
The ‘why’ of improving urban performance is as important as the ‘what’s’.
Understanding the various strands of the urbanisation debate illustrates there are many reforms that New Zealand could and should pursue to improve its urban performance.
Creating a successful urbanisation framework for Auckland would have modelling benefits for other cities, both in New Zealand and overseas.
Gradual and effective urbanisation reforms can provide an antidote to reduce the global risk of spreading populist revolutions.
This is a repost of an article here. It is used with permission.