The Answer Is Urban Consolidation – What Was The Question?

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The New Zealand Green Party is perpetuating the claim that development beyond Auckland’s “city limits” imposes a high cost on ratepayers.  A spokesperson claims that the current Auckland plan, which allows for some new development outside the current urban area, “will cost ratepayers $42b billion to 2042, an annual levy of $200 per ratepayer” according to a report in the New Zealand Herald.   

But is just so happens that study on which these calculations are based is a flawed commissioned report[1] rather than a peer reviewed academic study. 

Oops – Contradictory Claims
The authors of the Curtin report acknowledged at the outset that

"The challenge ...  is that infrastructure costs are so heavily dependent on area-specific values.  For instance, road costs among different prospective development areas may vary based on the necessity for major arterial roads, costs for sewerage and water infrastructure could vary immensely depending on terrain and trenching conditions, and many infrastructure components will differ depending on the level and degree of excess capacity” (p.4)

So why did they try to develop a generic tool for estimating the cost of urban development in Australiancities based on a mishmash of evidence from different cities and suburbs in Australia and the United States?  And why would anyone even contemplate applying such “findings” to Auckland with its distinctive physical geography, so different from its Australian counterparts? 

A Quick Critique
The Productivity Commission actually considered the study, among others, in a brief review of housing costs and urban form (Appendix B of the final report).  It noted substantive differences in the physical and social settings behind the data assembled to support the study’s claim to some sort of universal cost relationship between development and distance from the city centre.

And there are glaring methodological deficiencies:

An obvious one is mixing discount rates (zero for infrastructure capital costs, 7% for transport-related costs, and 3% for health and emission costs), and omitting operating costs for some items (non-transport infrastructure) and not others (pp. 295-296)

To these flaws can added the assumption of a cost of Aus$170/tonne for carbon emissions when the carbon floor price set by the Australian government (of $15) has since been rescinded and figures at or below $10.00 may be more appropriate based on today’s European prices.  So the environmental argument is seriously overstated.

And the analysis fails to deal with the costs of expanding the capacity of ageing infrastructure in long-established urban areas, of remediating services designed for far lower loadings than they are now expected to sustain, of the health impacts of apartment living in an increasingly brown – not green – environment, and of reductions in the physical and social resilience of high density and often congested urban areas in the face of possible natural disasters or infrastructure failures.

Penalizing the Household - is that Socially Sustainable, or Politically Justified? 
Even if it can be proven that the balance of public benefits favours medium or high density living, is there any evidence that such savings will not be offset by the better affordability of traditional suburban housing and the benefits residents derive from living into it?

Putting aside the flawed data and methodology for the moment, the results indicate that 70% of the differences in costs between decentralized and central locations is attributable to travel and transport.  Over half of these comprise travel costs and time carried by households.  If we take these private costs out of the equation the authors’ estimate of the difference between centralized and decentralized development falls by 40%.  

The resulting "present cost" for the average household (whatever that might be) of A$22,000 is easily  justified by savings on land and housing in “outer” areas, the benefits households get  from  additional space, greater choice over housing style, and the security and community benefits of suburban environments.

So who pays if we deny people the choice of living in medium to low density housing?  It’s new households due to exclusion from household ownership, or commitment to punitive mortgages, or through the insidious extension of housing poverty through ever higher income brackets. 

So what about the Auckland case: where does the evidence really lie?
Surprisingly, given the obstinacy of the planners and politicians pushing the consolidation barrow, no-one has actually done the analysis required to determine the relative economic benefits of different urban development paths for Auckland.  

A technical analysis of the gaps in the Auckland Regional Growth Strategy made the point that the planning model that informed it was hardly up to the task.  The principal conclusion that came from using the Regional Councils land use and transport model was that there is “little [identified] economic difference between growth options”.[2]  

The failure of the model to demonstrate economic differences between alternative urban forms was used to suggest that intensification imposes no additional costs than traditional decentralized development.  Of course, the converse is true – although it has been conveniently ignored – there were no demonstrable economic benefits from consolidation or net cost penalties to decentralization.  This suggests that it would make most sense to let the market prevail, subject to broad environmental standards and fiscal constraints.   

The conclusion  that consolidation was the best option for Auckland ignores other shortcomings  in the  model that could  tip the balance  in favour of strategic decentralisation:

  • The failure to actually define realistic alternatives that would  clearly demonstrate economic differences;
  • A failure to the marginal rather than average impacts of differences in urban form;
  • Ambiguous measurement (both omissions and double counting);
  • The failure to identify the costs of implementation.

To this list we can add underestimation of the high infrastructure and development costs associated with brownfield development and urban consolidation.  These are turning up today in high financial and development contributions for inner city projects.

Calling for Consolidation – a Case of Artificial Intelligence
So why is the Auckland Spatial Plan so fixated on consolidation –despite the begrudging lip service the final version pays to decentralization (and even that appears to have  upset so upsets the Green spokesperson)?

I can only think it is "artificial intelligence": if enough people say the same thing, it must be right.  Consensus becomes an excuse for lack of evidence, critical analysis, or even common sense.  Groupthink prevails: a phenomenon defined by psychologist Irving Janis as:
A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action [3]

Contrary evidence is dismissed while reports favouring an emerging consensus, such as the Curtin one, obtain a degree of currency which, while unjustified,  plays into the hands of policy makers looking for easy (or ideologically comfortable) answers to difficult problems.

And so we blunder on, potentially building our cities on myth and misconception and reinforcing the gap between generations as we do it.

Phil McDermott is a Director of CityScope Consultants in Auckland, New Zealand, and Adjunct Professor of Regional and Urban Development at Auckland University of Technology.  He works in urban, economic and transport development throughout New Zealand and in Australia, Asia, and the Pacific.  He was formerly Head of the School of Resource and Environmental Planning at Massey University and General Manager of the Centre for Asia Pacific Aviation in Sydney. This piece originally appeared at is blog: Cities Matter.

Aukland harbour photo by Bigstockphoto.com.



[1]         Roman Trubka, Peter Newman and Darren Bilsborough  (2008) Assessing the Costs of Alternative Development Paths in Australian Cities, Curtin University Sustainability Policy Institute, Fremantle, Report commissioned by Parsons Brinckerhoff Australia
[2]         McDermott Fairgray Ltd (1999) Gap Analysis, Review and Recommendations: Auckland Regional Growth Strategy, Technical Report, Auckland Regional Growth Forum

[3]        Janis, I L (1972). Victims of Groupthink Houghton Mifflin p.  9



















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Who is responsible if we say that the main reason is fraud? I can't blame any single person for such acts. I think we must review our plans again and again before taking a single step. Thanks for sharing with us.
http://askgilda.com/medical-alert-systems-consumer-reports-vital-link-ha...

for more followers

This is definitely bad news. I was pretty sure 2013 would be better for bonds but I guess I was wrong. Thanks for this heads up though.
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this list we can add

this list we can add underestimation of the high infrastructure and development costs associated with brownfield development and urban consolidation.logiciel winamax

Growth containment unreason: the unsquashable rubber stress toy

Newman and his various colleagues influential work on the correlation between urban density and energy consumption has been thoroughly critiqued by several authors. For example:
Michael Breheny (1995) “The Compact City and Transport Energy Consumption”
Ray Brindle (1994) "Lies, Damned Lies and Automobile Dependence"
Ray Brindle (1996) "Transport and Urban Form: The Not-So-Vital Link"; Alan W. Evans (1998) “Dr Pangloss Finds His Profession: Sustainability, Transport and Land Use Planning in Britain”
Alan W. Evans (2012) “Planning, Density, Fuel Use and Emissions: a Survey”
Michael Breheny and Ian Gordon (1997) “Densities in the Sustainable City”
Ian Gordon (1997) “Densities, Urban Form and Travel Behaviour”
Ian Gordon (2008) “Density and the Built Environment”
Michael Wegener (1998) “Sustainable urban spatial structures: do we need to rebuild our cities?”
Marcial H. Echenique et al, (2012) “Growing Cities Sustainably: Does Urban Form Really Matter?”
Steve Melia et al (2011) “The Paradox of Intensification”
Paul Mees (2010) “Density and Transport Mode Choice in Australian, Canadian and US Cities”.

The fatal flaw in Newman and colleagues analysis, and others like it, is that it is ALL CROSS-SECTIONAL; there is no TIME SERIES analysis that shows policies of urban consolidation delivering the alleged benefits. Nor will there ever BE any HONEST study that shows this. The simple reason that there might be reduced energy consumption when urban growth containment policies are enacted, is that the inflated cost of housing squeezes discretionary spending on everything else. Besides reduced energy consumption, less will be getting spent on health, education, hobbies, clothing, entertainment, food, and so on - also, rates of marriage and child bearing will be lower.

The reduction in urban footprint from increasing the density of housing, is not proportional to the increase in housing density, because typically more than 50% of an urban area is not housing. However road congestion increases in an exponential relationship with housing density. This is because roads on which traffic once flowed freely at crucial times of the day, become “stop-start” and end up carrying FEWER vehicles at those times of day than when housing density was lower. “Spill-back” of traffic occurs onto previously uncongested parts of the network. “Mode shift” is never sufficient to compensate for this effect. Even including Manhattan’s level of density in data sets, finds no reversal of the trend to addition of numbers of vehicles in the given road space, as additional population is added. The rate at which vehicles are added merely reduces slightly for each increase in the population in the given space.

Then there is the issue of how urban land markets respond to "demand", whether natural or coerced. It is impossible for more than a small percentage of the population to relocate to a central or a more efficient nodal location, without the prices of land at that location responding to "price out" everybody who was not among the few who did move early.

Anthony Downs is one of the few expert writers who understands this: here he is in “A Growth Strategy for the Greater Vancouver Region” (2007):

"......The cost of land poses a key dilemma for urban planners everywhere who want to concentrate jobs together so they can be best served by public transit. Such concentration raises the costs of land near centers; in fact, it would confer a monopoly advantage on landowners who owned such land and could exploit firms trying to locate there. Now firms want to locate elsewhere to cut their land costs.

Planned concentration of jobs in a few centers is not consistent with private ownership and control of land. Some type of collective control over that land would be necessary to prevent monopolistic exploitation of land values. In theory, this could be done with high land taxes in such areas and special zoning rules. But adopting those devices is politically difficult in a free enterprise economy.......

"......A similar but less intensive dilemma concerns land near transit stops, where it would be most efficient to concentrate high-density housing and jobs. That also creates ownership monopolies over such land unless it is specially controlled or taxed. Yet focusing development near transit stops is a key to using more transit....."

Some of the most dishonest kind of "cross sectional" analyses of all, involve the claim that "housing plus transport costs" are lower in mature, more central locations of the urban area. This is because these studies all collate ACTUAL current expenditure, including households who bought their first homes decades ago for sums that are a pittance in today's money; and including many with already-paid-off mortgages. Of course these households are over-represented in the mature, more central locations. Any HONEST study would look at the CHOICES, NOW, of "housing plus transport" costs. As a rule, the higher the median multiple in a city, the FURTHER you travel the "less unaffordable" it is. It is never possible to "move closer to the CBD" and save more money on travel than the additional cost of the housing.

London is one of the densest cities in the developed world, and it also has one of the longest average trip-to-work times in the world, some of the worst traffic congestion, some of the worst local air pollution, some of the most unaffordable housing, and it also has the most pronounced social inequity in the "rationing" of amenities such as "walkability". If you were to ask young people commuting 1 hour each way across the Green Belt to and from their job, "why don't you buy a home in the nice walkable inner city community where your job is" be ready to duck quickly because they might try and hit you in their sheer frustration.

The cost of their "housing" options probably consist of "close to work": 15 times their annual income; 30 minutes away: 10 times their annual income; 60 minutes away: 6 times their annual income (at which point the mortgage lenders are starting to look like taking the risk on them). ALL of these locations will involve minimal "space". There is no "space" to "trade off" against distance, in these long-distorted heavily-planned urban land markets. Everywhere is "dense". "Space"; will cost 40 times annual income "close to work"; 25 times annual income 30 minutes commute away; and 15 times annual income 60 minutes commute away. In other words, you can't have it. The only people who have "space" in London are celebrities, Arabian oil billionaires, partners in international finance firms, and the families of the "London Dukes" who have owned property there for centuries. Contrast the kind of space that only the top 1% in London have, with the space that the top 95% in Houston or Atlanta have. And in Houston or Atlanta, households MOSTLY manage to live efficiently enough relative to 2 jobs and schools, that trip to work times are actually better than London and all similar allegedly ideal "density" cities.

Auckland is actually going this way. 25 square metre dog box apartments in the city for $250 per week, and young people commuting daily from Paparoa and Huntly, is already as bad as London, without even having an economic global-finance-sector powerhouse like London has. There is nothing EASIER to replicate about "wonderful model vibrant cities" like London and Vancoooouver, than their scandalous, rip-off, fiscal-child-abuse housing costs. The fact that THOSE cities are de facto gated communities for global wealthy elites does not concern blind ideologues like Len Brown who actually bear responsibility for real, ordinary households in their own city and country.

Urban growth containment is a combination of fraud and unreason.

Here's to the speedy demise of Len Brown and Co's rotten ideals

It is distressing just how difficult it is to get any sense into policy making in this subject. The public are rationally ignorant and appallingly badly informed. The media gives far too much credit to ignorant and dishonest Greens and bureaucratic empire-builders.

The Mayor of Auckland, Len Brown, and his sidekicks are impervious to evidence, they are scandalously callous about what they are doing to housing affordability and the life opportunities of the next generations.

TVNZ ran a segment a couple of years ago called "Shoebox Living and What You Get For Your Rent"; apartments in tall buildings in Auckland with only 25 square metres of space are already commanding well over $200 per WEEK in rent. Excuse me; this is a scandal of social justice and the Mayor and Council should get a conscience. This is the "housing option" that young people are meant to consider instead of an affordable separate home with humane amounts of living space?

http://tvnz.co.nz/close-up/shoebox-living-and-you-get-your-rent-5-39-vid...

If the link doesn't work, Google "Shoebox Living and What You Get For Your Rent". If TVNZ has taken it down, complain to them. I bet the elitist scum smart growthers in Auckland (you know who you are) have been furiously pressuring them to take it down.

The "higher-than-necessary cost of housing" is easily "100% too high" (median multiples 6) - and more - in the case of any city with restrictions on converting rural land to urban land. This cost is all in the "land"; and this inflation is so severe that even when land consumption in new developments is reduced 90%, the price of lots still ends up more expensive than in the affordable cities (median multiples 3) where the lots have remained a lot larger and according to what people actually want.

Glaeser, Ward and Schuetz (2006) disaggregated a number of the different effects that force house price median multiples up, and they concluded that minimum lot sizes, where these exist, are responsible for 4% more expensive "housing" for every extra quarter acre of lot size mandated. So obviously this is not a game-changer, and obviously many of the cities with median multiples of 3 and under, have many suburbs with minimum lot sizes, without this having affected affordability.

There are circumstances unique to the USA's housing markets that unfortunately lead to diversions and red herrings in debate on this subject, but looking at other countries as well, helps us to understand the economics of land markets. There are not the same level of restrictions in the cities of the UK, Australia, and New Zealand, to redevelopment of existing sites at higher densities, and in fact a lot of this has taken place. Yet every city in these countries has house price median multiples of over 6, because they constrain fringe growth. And this is in spite of new lots getting smaller and smaller.

Jasmax Consultants recently carried out a "Fine Grain Analysis" of the potential for increased intensification in existing areas under the Auckland Regional Plan (although Auckland is already denser than any US urban area). The Analysis concluded that what is stopping further intensification from occurring now, is that land prices are so high that almost no potential buyers of the new development of higher-density housing, could afford to buy them. So intensification has pretty much stalled even though the Regional Plan is absolutely relying on it happening. Auckland Mayor Len Brown and his sidekicks are in culpable denial over this too.

This phenomenon is seen most starkly in the UK's cities where they have been practising these misguided planning ideas for 60 years: disgraceful old housing is not renewed, because the land cost is already higher than what most people can afford for a complete land and housing package even at high density. And at the same time, there has never been so many young people "excluded" from home ownership, and indeed people who are not young.

Planners need to understand that you cannot constrain and penalise and impose fees on fringe growth, without forcing up the basic price of urban land throughout the entire city area: density becomes a kind of "slack variable"; the cost of housing ends up dictated by income levels regardless of how much reduction in "housing" size occurs. Ironically, this was well understood 100 years ago in the context of sheer lack of mobility of urban populations; we need to re-learn it today in the context of "urban growth constraint".

For example, the UK paper "Real Earnings Disparities in Great Britain", Gibbons, Overman and Resende (2011) finds that "rationed" urban land acts as a "multiplier" effect of income disparities; social disparity, already a problem because of income disparity, is worsened AGAIN by the urban land market. The lower a person's income is, the higher proportion of their income they must pay for housing, of less and less space, lower and lower quality, in less and less efficient locations, with less and less local amenity. But this is not anything different to what Alfred Marshall, Henry George, or Karl Marx were saying way back in 1880.

It was commonly understood in those days, even by social reformers such as Charles Booth and Ebenezer Howard, that urban populations desperately needed greater mobility, so that the "supply" of land in the urban economy could rise to ameliorate the "tyranny of rent". The massive amounts of rail-based suburbanisation that occurred immediately prior to the automobile era, were well understood to be a solution to the crisis of social justice represented by "the tyranny of rent", as well as a solution to the health crisis of urban overcrowding.

Yet even though this rail-based suburbanisation phase involved even greater "sprawl" (in terms of the length that "ribbon" development penetrated into surrounding countryside) than anything later associated with automobiles, it was invariably always captured by the same rentier interests who benefited from an immobile population in the city. It was only the later automobile-based development that actually ended "the tyranny of rent", brought median multiples of as low as 3 for the first time, and brought stability to urban land prices for the first time. The previous norm of cyclical volatility with booms and busts every 15 to 20 years, ended for decades in many countries but very tellingly, not in the UK which adopted the "Town and Country Planning System" in 1947. Of course the Old Boys Network in the UK with their rent-seeking schemes in urban land have benefited handsomely from 60 more years continuation of the great urban land wealth transfer racket. No Levittowns leapfrogging THEIR land banks and undercutting THEIR fat "planning gains".

Automobile-based development is genuinely competitive and no rentier interests can capture ALL the land supply that potentially can be built on by developers entering a competitive market. The price of new lots ends up very close to the cost of farmland, plus the cost of development - as opposed to hundreds or thousands of percent "capital gain" that happens when supply is "constrained" or strictly "planned" top-down.

Rail-based "sprawl" (pre WW2) left massive wedges of underutilised land in between the radial ribbon development patterns, and this land was much more efficiently located relative to the existing built area, than continuing longer and longer rail lines out to new suburbs, would have been. (The latter is how the Kafka-esque "planned" Soviet cities spread out, which was a disaster for urban efficiency). Automobiles enabled a phase of "infill" like there has never been since.

The role of "mobility" in the urban economy causes "compounding" productivity gains. If "mobility" is constrained to where people can travel by public transport routes and "transfers", the economy will constantly lag any economy where people can go from any one point to any other point with maximum flexibility. The research of Peter Gordon et al has been vindicated over the last 20 years; the urban land market finds a balance between agglomeration economies and congestion dis-economies and land prices, so that dispersion of employment and amenities as well as of population, is a "norm". This dispersion results in remarkably stable travel times; there is little difference now in actual data, to favour denser or more strictly "planned" cities.

Consider the following remarkable reality. Households cannot locate as efficiently to 2 jobs and to schools, as a single person can locate to one job. So you would expect cities with more children and 2-earner households, to have worse commute-to-work averages. Yet they do not; even more remarkably it is the affordable-housing cities that have lower density as well as more children and 2-earner households. And even in spite of these facts, they have average trip-to-work times that are favourably comparable with unaffordable-housing, high density cities with more "single" people. In fact the densest cities, like London, are a disgrace for their trip-to-work times; Londoners would gladly swap their commutes with people from Houston and Atlanta. The simple reason for this is that when urban land prices are high and employment is "zoned" to keep it more centrally agglomerated, far more people are "priced out" of the efficient location for their home. Ultra-long commutes from rural exurbs are far more common in these cities (London...!); and it is also noticeable that high-density living right at the fringe where prices are the "least unaffordable", leads to far higher average trip-to-work times compared to highly dispersed cities like Houston and Atlanta where almost anyone can afford housing that is located closer to any particular job or amenity.

It is also noticeable that the price of "CBD" apartments or higher density housing on transit routes in the US's affordable cities, where these housing choices do occur, is many times more affordable than in any city in the UK, Australia or NZ; or Vancouver or Portland or any growth-constrained city. So "Smart Growth" claims to be about "housing choice", when in fact it DENIES "choice". Goebbels must have written the Smart growth Manifesto. 25 square metre "apartments" for $250 per week are NOT "choice"; the same thing in Houston would be either 5 times the size, or a quarter the cost.

There is usually two possible root causes for "true belief" in "Smart Growth". One is the politics of envy; when Communism collapsed in the 1980's, its stooges in the West transferred in toto into the environmentalist movement. Patrick Moore, one of the founders of Greenpeace in 1968, commented in 1986 when he quit that organisation in disgust, that he was sick of Che Guevara posters and red berets in Greenpeace offices, and that the organisation's objective had ceased to be "preserving the environment" and was now "the collapse of global capitalism". Even once Communism turned out to be unworkable, you could still try and destroy the free market, property-rights system in a fit of nihilistic rage, using neo-pagan unreason about "the environment" as the means.

The other motivation for "true belief" in "smart growth", bears the same relationship with the foregoing neo-paganism that the "Bootleggers" did with the "Baptists" in the era of Prohibition. That is, there is always a constituency of property investors who stand to make a killing in capital gains as a result of "smart growth" policies. A lot can be explained by assuming that people who post endless smart-growth Kool-Aid on online forums, either have property portfolios somewhere that depend on smart growth policies for their profitability, or work for someone that does.

Of course a lot of the "true believer" neo-pagans have never worked out whose useful idiots they are. "Of course" people like the Rockefeller family liberally fund "conservation" activist groups because they care about the environment and want to "give something back to humanity"....."of course" they wouldn't have any interests in capital gains in their property investment portfolios.....? Huh?

Paul Cheshire and Edwin S. Mills, in their Introduction to the 1999 “Handbook of Urban Economics, Volume 3”, mention an estimate that the most expensive land, for "retailing", in the most expensive growth-contained cities; is 100,000 times more expensive than equivalent land in typical non-growth-constrained cities. Yes, that is one hundred thousand times.

It is not the advocates of “freedom to develop” who need to be investigated regarding the vested interests they are serving, it is the advocates of constraint. The profits made by developers of Greenfield land under true conditions of “competitive land supply” (as in many US cities) are made on actual supply of something they have worked to produce in response to genuine customer demand; and the margins are not great. Neither are the margins great, in reality, for "big oil" or automobile manufacturers or road builders. But the capital gains made by “big property” through urban growth controls are MASSIVE and completely "unearned". Lobbying and activism in support of urban growth constraint and strict "planning" is a perfectly rational self-interested course for every single one of the incumbent property investors with seven-figure holdings, in every city.

New Zealand Green Party

So, "The New Zealand Green Party is perpetuating the claim that development beyond Auckland’s “city limits” imposes a high cost on ratepayers." How can they say this?
http://www.gurujee.co.uk

Auckland is actually going

Auckland is actually going this way. 25 square metre dog box apartments in the city for $250 per week, and young people commuting daily from Paparoa and Huntly, is already as bad as London, without even having an economic global-finance-sector powerhouse like London has. katalog stron