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The release of the 9th Annual Demographia International Housing Affordability Survey on Monday appears to have caused a political storm in New Zealand. This year’s Survey was particularly controversial in New Zealand for two reasons.

Not only did it show deteriorating housing affordability, as measured by a worsening of New Zealand’s ‘median multiple’ (median house price divided by gross annual median household income), but the foreword of the Survey was written by none other than New Zealand’s Finance Minister, Bill English, who had some stern words to say about the state of housing affordability in New Zealand, brought about largely by the strangulation of supply:

“Housing affordability is an important focus for the New Zealand Government . Last year’s New Zealand Productivity Commission report on housing affordability, relying in part on Demographia affordability data, showed a substantial worsening in housing affordability in New Zealand in the last thirty years…

In its response to the Productivity Commission, the Government agreed with the Commission’s analysis that supply side factors explain the deterioration in New Zealand’s housing affordability.

The Government’s response to the Commission’s report concentrated on land supply, infrastructure provision, costs and delays due to regulatory processes, and improving construction sector productivity…

It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand. When demand shocks occur, as they did in the mid-2000s in New Zealand and around the world, much of that shock translates to higher prices rather than more houses. It simply takes too long to make new land available for development.

We may be seeing the beginning of a repeat of the mid-2000s demand shock. As interest rates stay below historic norms, expectations are shifting that these rates are here to stay. As a result, demand for real assets has increased, observed in booming equities markets in 2012. Demand for real estate is also increasing, with the median house price in Auckland recently exceeding the highs of 2007.

Costs of other housing inputs contribute to New Zealand’s affordability problem. Building materials cost more in New Zealand than neighbouring Australia. The structure of infrastructure financing, and the timing levies are to be paid, raises the market price for housing. Appeals under the Resource. Management Act, New Zealand’s land use regulation, can hold up developments and city planning for a decade or more in some cases. Time is money because development is risky…

Certainly, the affordability situation in New Zealand has, once again, started to deteriorate, with house prices in New Zealand’s two major markets – Auckland and Christchurch – rising strongly over the past two years (see next chart).

In late 2009, the Reserve Bank of New Zealand dropped the official cash rate to just 2.5%, where it has remained ever since. In turn, the discount variable mortgage rate has fallen to just 5.45%, which has fueled a sharp rise in mortgage finance commitments and house prices (see below charts)

At the same time as credit demand has been rising, the supply situation in New Zealand has also deteriorated. The February 2011 Canterbury earthquakes wiped‑out more than 10,000 homes in Christchurch, New Zealand’s second largest city, adding to the already tight housing supply.

Meanwhile, in New Zealand’s largest city – Auckland – the Council has moved to tighten the city’s already highly restrictive urban growth boundary (called the “Metropolitan Urban Limit” or MUL) into an even tighter “Rural Urban Boundary” that would effectively ban development outside of the rural-urban line and limit the area in which development could take place (see here and here for details).

The Productivity Commission’s Final Report into housing affordability, released last year, was scathing of land-use planning in New Zealand, citing a body of evidence showing that strict policies of urban containment and slow development approval times had adversely affected the rate of new home construction and housing affordability in New Zealand.

In particular, the Productivity Commission’s Report noted that the land value of housing had risen significantly, particularly in Auckland, with land-use constraints a key driver of this escalation (see next chart).

Moreover, the Productivity Commission report showed that the cost of new housing blocks had escalated in real terms, particularly in Auckland:

And that the land price escalation has occurred at the same time as the number of sections sold has plummeted:

The release of the Demographia Survey on Monday appears to have brought New Zealand’s housing affordability problems into the limelight.

Yesterday, in response to the study, the New Zealand Prime Minister announced a reshuffle of Cabinet, assigning Nick Smith to housing in an attempt to improve affordability. The Government has also threatened to take planning control from local councils if they do not improve the supply situation, with the Auckland Council, in particular, in its sites.

For its part, the Auckland Council is holding firm to its Plan to tighten the city’s growth boundary, stating that it doesn’t “agree with the unplanned wholesale release of land which is going to cost the ratepayers a fortune to service”.

Meanwhile, the Opposition Labour Party has promissed to build 100,000 basic homes for first-home buyers, focusing on Auckland, over 10 years, in order to relieve the supply situation and improve affordability.

It looks like housing affordability is, once again, gearing up as a hot political issue in New Zealand.

This piece first appeared at Macro Business.

Last month The Urbanophile posted his statement of beliefs about cities, and a lot of them resonated with me about Houston.  Here are some favorite excerpts along with my own thoughts.

* Great cities, like great wines, have to express their terroir. There is no one-size-fits-all model of urban success. Our cities are as diverse as their citizenry. To succeed, they need to express their own essential and unique character.  

 This is why you always have to be skeptical when somebody says something like "For Houston to be world class we have to do X like city Y."  I believe that especially applies to heavy rail commuter transit in our decentralized, car-based city, but it also applies to recent questions like "Why can't Houston have downtown retail like Chicago's Magnificent Mile or New York's Fifth Avenue?"  Because we're not like them, and we already have our pedestrian-oriented upscale shopping district: it's called The Galleria, one of the largest malls in the country, and with plenty of parking and climate control to boot!

* Don’t try to beat other cities at their game. Instead, make them beat you at yours. Cities are unique – yours included. Instead of fretting about measuring up to the planet’s elite metropoli or trying to emulate them, cities should figure out their unique strengths that other places can’t match.

Hear, hear! To quote an old post of mine: "Houston starts the 21st-century with a set of amenities 99% of the planet’s cities would kill for: a vibrant core with several hundred thousand jobs; a profitable and growing set of major industry clusters (Energy, the Texas Medical Center, the Port); the second-most Fortune 500 headquarters in the country (26); top-notch museums, festivals, theater, arts and cultural organizations; major league sports and stadiums; a revitalized downtown; astonishing affordability (especially housing); a culture of openness, friendliness, opportunity, and charity (reinforced by Katrina); global diversity; a young and growing population; progressiveness; entrepreneurial energy and optimism; efficient and business-friendly local government; regional unity; a smorgasbord of tasty and inexpensive international restaurants; and tremendous mobility infrastructure (including the freeway and transit networks, railroads, the port, and a set of truly world-class hub airports)."

* It says something powerful about a city when people vote with their feet to move there, to plant their flag, to seek their fortune. There is no more telling statistic about a place than in-migration. It’s important to know if people are moving into or out of a city–and why.

The most ignored statistic of the creative class city boosters, because their idols - NYC, Boston, Chicago, SF, LA - fail horribly on it.

* Moreover, new blood isn’t just nice to have, it’s essential. In an ever-more globalized, rapidly changing, competitive world, a city’s best interests are not served by being populated with people who’ve never lived anywhere else.

 Points for our global diversity.

* But it isn’t just about the best and brightest, either. Attracting the educated is important, but cities are also where the poor come to become middle class, where immigrants come to build a better future for themselves and their families. Their needs must be taken up, too–and equally.

Hallelujah for Opportunity Urbanism (and more here).

* A great city needs great suburbs. To pull our cities up, there’s no need to tear our suburbs down. To be successful in the modern era, its important for every part of a metropolitan region to thrive and bring its “A game”. 

* “Building on assets” is a trap. The only reason we have any man-made assets in the first place is that previous generations of leaders didn’t follow that strategy. Only building on assets is a strategy about defending the past, not embracing the future. It is the spending down of our urban inheritance. Yes, leverage assets, but also add totally new things to the pot for future generations.

Absolutely.

* We need to look forward, not backward. There is no more corrosive force than nostalgia. We should know where we’ve come from and what we stand for. But we can’t become imprisoned by a yearning for an imagined past that never really was.

* We need to embrace a 21st century vision of urbanism. Urbanism – Yes, but trying to copy Greenwich Village 1950 is not the answer. To find it, we must boldly re-imagine the possibilities of what a city can be and bravely identify what works today-and what doesn’t.

Yep - time to rethink Jane Jacobs.

* We don’t know where this ride is taking us. We’re at a pivotal time in America’s urban history. So much is changing, and more change is yet to come. For our own sake, we should not assume that we’ve arrived where we’re headed, or that we have the answers. If there’s one thing we should take away from the urban planning failures of the past, it is a strong dose of humility.

"Planning for utopia" doesn't work.  Cities need the freedom to evolve organically.

This piece first appeared at Houston Strategies.

My latest post is online over at GoLocalProv. It is called “My First Impressions of Rhode Island” and is a first take on the Providence region after six months of living there. Here’s an excerpt:

Thinking about it this way, the basic problem of Providence (and by extension the rest of Rhode Island) becomes obvious: it is a small city, without an above average talent pool or assets, but with high costs and business-unfriendly regulation. Thus Providence will neither be competitive with elite talent centers like Boston, nor with smaller city peers like Nashville that are low cost and nearly “anything goes” from a regulatory perspective. There’s little prospect of materially changing either the talent/asset mix or the cost structure in the near term even if there was consensus to do so, which there isn’t. So expect struggles to continue, even if there’s a bit of lift from a change in national macroeconomic conditions.
….
But as a place to live, there’s a lot to enjoy about being here. One thing that has really surprised me is the people of Rhode Island. I come from the Midwest and the land of “Hoosier Hospitality.” I was thinking honestly it would be hyper rude and abrasive, like some stereotype of Boston. Yet the people of Rhode Island have been fantastic to me. And while the total talent pool (college degree attainment) is about average compared to peer cities, I’ve met some truly top notch people who would thrive in any city. The people of Rhode Island are really first rate.

Click through to read the entire op-ed.

Here are some related articles you might enjoy:

New England vs. Midwest Culture
Providence and the Virtues of Scale
Is Providence the Rust Belt’s Most Northeasterly Point?
A Quiet Revival in Providence
Don’t Fly Too Close to the Sun

Beijing's xinhuanet.com reported on December 30 that 11,000 kilometers (7,000 miles) of new freeways (motorways) were built in 2012. This is equivalent to more than 150 percent of the freeway mileage in California.

Based on figures reported at the end of 2011, the additional 11,000 kilometers would increase China’s national freeway system (the National Trunk Highway System) to approximately 96,000 kilometers (60,000 miles). This is approximately 20,000 kilometers (12,000 miles) longer than the US interstate highway system, as reported in 2010. As a result, China's national freeway system is the longest in the world.

Both China and the United States have additional freeway segments that are not a part of the national systems. In 2010, the United States had approximately 99,000 kilometers (62,000 miles) of freeways, including the interstate system. Data is not readily available for a number of urban and provincial level freeways in China that are not a part of the National Trunk Highway System.

It seems likely that the US continues to lead, though by only a small margin, in total freeway mileage. However, China is continuing to expand its system at a rapid rate. This is evident in the map below, which uses purple and green to indicate uncompleted freeways, while blue and red indicate open segments. Long stretches remain to be completed to Urumqi, the capital of Xinjiang, and beyond to the border of Kazakhstan in the Pamir Mountains, as well as two long routes to Lhasa, the capital of Tibet. A number of additional routes are also planned in the densely populated eastern third of the nation.

Map by WikiCommons user Pafun

Also see:
China's Expanding Roadways (February 2012)
China Expressway System to Exceed US Interstates (January 2011)

The new state (and DC) population estimates indicate a substantial slowdown in growth, from an annual rate of 0.93 percent during the 2000s to 0.75% between 2011 and 2012. This 20 percent slowdown in growth was driven by a reduction in the crude birth rate to the lowest point ever recorded in the United States (12.6 live births per 1000 population).

The big surprise was the population growth leader, North Dakota, which has experienced a strong boom in natural resource extraction. Between 1930 and 2010, North Dakota had lost population. However in the first two years of the new decade, North Dakota has experienced strong growth, and reached its population peak, according to the new estimates, in 2012. North Dakota's population growth rate between 2011 and 2012 was 2.17%. Nearby South Dakota also grew rapidly, ranking 10th in population growth. The other fastest-growing states were all in the South or the West. The District of Columbia, located in the strongly growing Washington, DC Metropolitan area ranked second in growth rate behind North Dakota (Figure 1).

Two states lost population, Vermont and Rhode Island, as the Northeast and Midwest represented all but one of the 10 slowest growing states. West Virginia, in the South, was also included among the slowest growing states (Figure 2).

The domestic migration trends continue to favor the South and West. Texas continues to attract the largest number of domestic migrants (141,000), followed by Florida (101,000). These two states have been the domestic migration leaders in the nation every year since 2000 (Figure 3). Four states gained from 25,000 to 35,000 domestic migrants (Arizona, North Carolina, Tennessee and South Carolina).

Generally, the same states continued to dominate domestic migration losses, with New York losing the most migrants, Illinois ranking second, followed by California, Ohio and Michigan. With the exception of California, all of the 10 states losing the largest number of domestic migrants were in the Northeast or the Midwest (Figure 4).

Overall, domestic migration continues to be dominated by the South, which attracted 354,000 residents from other states. The West added 52,000 domestic migrants, however virtually all of this gain occurred in the Intermountain West. Gains in Oregon and Washington were far more than offset by the large losses in California, as well as losses in Hawaii and Alaska. The Intermountain West gained more than 70,000 domestic migrants. The Northeast lost 221,000 domestic migrants, while the Midwest lost 185,000.