Urban Growth Boundary

Sydney to Abandon Radical Urban Containment Policy

Wendell Cox — Wed, 20 Mar 2013 09:56:12 -0400

The New South Wales government has proposed a new Metropolitan Strategy for the Sydney area which would significantly weaken the urban containment policy (also called urban consolidation, smart growth, livability, growth management, densification, etc.) that has driven if house prices to among the highest in the affluent New World (Australia, Canada, New Zealand and the United States) relative to household incomes.

According to the Australian Financial Review, the state's Liberal-National government plans to allow the building of more than 170,000 new homes, with the vast majority being on greenfield sites, largely beyond the current urban footprint. Premier Barry O'Farrell and his party had promised in their electoral campaign in 2011 to liberalize land-use regulation and to moderate the previous Labor government's quota that required 70% of new houses to be built within the current urban footprint and 30% on greenfield sites. In fact, however, under the Labor government's administration, new house building had been produced at a well below demand level.

Among the major New World metropolitan areas rated in annual Demographia International Housing Affordability Surveys, Sydney has been the most unaffordable, along with Vancouver, in recent years. Sydney and Vancouver have had among the most stringent urban containment policies in the New World, and the resulting unaffordable house prices under such circumstances are consistent with economic principle.

Premier O'Farrell told the Sydney Morning Herald that the government wanted to "make home ownership a reality again." He continued, "The more blocks of land (lots) we can release, the greater downward pressure we can put on housing because it's been so high for so long." In a press release issued by his office, the Premier recalled that “Before the election, I said I wanted to ensure owning a home wasn’t a fading dream for young families" and noted that the massive housing package "will go a long way to delivering on that commitment."

In the longer run (by 2031), the government intends to provide for a total of 545,000 new homes, while abandoning the practice of allocating locations based upon planning theory. Planning and Infrastructure Minister Bradley Hazzard told the Sydney Morning Herald that the government intended to “look further afield” than the presently planned greenfield suburban growth centers. He continued: "We're trying to [be] less constrictive and restrictive and what we're saying is the marketplace should have far more of a say in what the mix of housing is and where it should be,'' adding that ''it doesn't matter'' what percentage was delivered in greenfield and established suburbs. He concluded: ''No one should be preoccupied by particular prescriptive formulas.''

The government also indicated its intention to encourage one half of employment growth over the next 20 years to be in Western Sydney. Western Sydney is virtually across the urban area from the central business district. This dispersion of employment, along with roadway improvements in the area, is likely to improve the metropolitan balance between jobs and housing.

The plan for greater job dispersion would, if successful, bring Sydney more into line with urban best practices, which are exhibited by the location of most new jobs in edge cities, as well as throughout the entire urban area. Sydney has among the longest work trip travel times in the New World. The one-way work trip travel time is newly reported in the Metropolitan Strategy to have reached 35 minutes. Work trip travel times are worse only in Melbourne, at 36 minutes. By comparison, Dallas-Fort Worth, with a larger population, a much lower urban area density and a mere fraction of the Melbourne or Sydney transit work trip market share has a far shorter one-way work trip travel time (26 minutes).

The Sydney developments are the latest in a trend toward liberalizing urban land use in four nations.

In October, the New Zealand government announced plans to liberalize land-use amid growing concern about the extent to which that nation's urban containment policies have destroyed housing affordability. In the introduction to the 9th Annual Demographia International Housing Affordability Survey, Deputy Premier Bill English said:

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.

Recent polling has shown support, by an almost 2 to 1 margin for government action to improve housing affordability, with even higher stronger support in the 18 to 34 age group, where the margin was more than 3 to 1.

The United Kingdom Cameron government is also embarked on a program to liberalize that nation's restrictive land use policies, which former Bank of England Monetary Policy Committee member Kate Barker found to be the cause of severe housing unaffordability in a report commissioned by the Blair Labour government. Planning Minister Nick Boles has characterized the unaffordability of housing as "the biggest social justice problem we have."

In 2011, Florida repealed its statewide smart growth mandate and closed the administrative bureaucracy that had overseen the program. Before that, the government of the Australian state of Victoria substantially expanded the urban growth boundary of the Melbourne urban area.

Making Stuff Up at Atlantic Cities

Wendell Cox — Thu, 12 Apr 2012 09:37:46 -0400

Editor Sommer Mathis over at The Atlantic Cities has taken to making stuff up. In a recent post she reported on a dispute in the city of Seattle over minimum parking requirements relating to multi-unit buildings. She said:

Defenders of suburban-style development like Wendell Cox and Joel Kotkin would argue that these young people just don't understand how their lives and desires are going to change once they start families. Single-family, detached homes with a quarter acre of land and two cars in the garage are suddenly going to look a lot better to all these idealistic, bicycle riding twenty-somethings once the reality of parenthood sets in.

Kotkin and Cox also worry that developers and city planners rushing to meet the youth-driven demand for denser housing options that don't necessarily include parking are shooting themselves in the foot.

The only problem is that I have never commented on minimum parking requirements. I checked with Joel Kotkin and he advises that he has never covered the issue.

Mathis continues (after an citing a quote by Joel Kotkin article in Forbes):

What's funny about these assumptions is their total lack of faith in the free market.

Of course, since our alleged positions on minimum parking requirements are figments of Mathis' imagination, her "free market" conclusion misses the mark. Indeed, the most destructive impact on urban land markets today is urban growth boundaries and "winner picking" land use restrictions that deny people their preferences (as my Wall Street Journal piece, California's War on Suburbia, argued on Saturday). I am most concerned about these because of their potential for hampering the metropolitan economy, interfering with upward mobility and increasing poverty (I suspect Joel would agree). Moreover, young households soon figure out that they need more than the 4th floor (or 40th floor) balcony to raise a child.

Australia Central Banker: Higher House Prices a "Social Problem"

Wendell Cox — Sun, 28 Aug 2011 13:11:54 -0400

Glenn Stevens, the Governor of the Reserve Bank of Australia expressed concern about the growing gap in housing affordability in the nation to a parliamentary committee on Friday. Stevens raised questions about the cost and supply of housing, asking:

"How is it that we can't add to the dwelling stock for the marginal new entrant more cheaply than we seem to be able to do," he asked.

According to an article in the Perth Western Australian ("High price of homes 'stealing future'") Stevens went on to say that key State and local government issues around supply, zoning, transportation and infrastructure seemed to be making a simple block of land more expensive than was necessary.

Virtually all of Australia large urban areas have implemented urban containment policies (called "urban consolidation" in Australia and "smart growth" in the United States). The result has been to increase house prices from 2 to 3 times the historic norm relative to incomes. These price increases are consistent with the overwhelming economic evidence of a strong association between urban containment policies, especially those that ration land for development through devices such as urban growth boundaries.

The Chairman of the Reserve Bank of New Zealand has identified a 10-times "across the urban growth boundary value" difference per acre in Auckland, which is similar to findings in Portland, Oregon.

Stevens concluded his housing comments noting that: "There's a very big inequality between generations building up and I think that's a social problem as much as any economic point."

Property Values 11 Times Higher Across Portland's Urban Growth Boundary

Wendell Cox — Tue, 12 Oct 2010 10:09:52 -0400

One of the starkest impacts of smart growth policies is the huge differentials in property prices that occur on virtually adjacent properties on either side of an urban growth boundary.

The extent to which regulatory restrictions can drive up prices is illustrated by the differences between the values of undeveloped lands just a few steps from each other, but across the urban growth boundary. Research from more than a decade ago in Portland indicated that land on which development is permitted inside the urban growth boundary tended to be 10 times as valuable per acre as land immediately outside the urban growth boundary, on which development was not permitted. In Auckland, New Zealand, recent research found virtually adjoining undeveloped land value differences at 10 times or more as well. Research in the London area by Dr. Timothy Leunig of the London School of Economics indicates that this difference can be as much as 500 times.

Recently (February), I examined tax assessment records for all parcels in Portland's Washington County that abut the urban growth boundary to see if value differences exist. The properties had to be 5 or more acres and be undeveloped. Research was conducted based upon Internet information in February 2010. Property along 25 miles of the urban growth boundary from Cedar Hills to Hillsboro to southwest Beaverton was included in the analysis.

The land adjacent to, but outside the urban growth boundary (on which development is prohibited) was assessed at approximately $16,000 per acre.
The land adjacent to, but inside the urban growth boundary (on which development is permitted) was assessed at approximately $180,000 per acre, approximately 11 times the price of land that is virtually across the street (across the urban growth boundary)

A sample was also taken of more remote developable parcels of more than 5 acres, on which development would not be permitted. These parcels, which were from one to five miles outside the urban growth boundary, had a value of approximately $8,500. Thus, the developable land inside the urban growth boundary was 21 times as expensive as the more remote land.

These data indicate the impact of urban growth boundaries on the price of raw land, which is inevitably passed on to buyers of new housing. Without an urban growth boundary, it would be expected that land on both sides of an urban growth boundary would have similar values. Further, land would be expected to drop in value beyond the urban fringe, but not by the drastic amounts indicated in Portland, Auckland and London.

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Photograph: (By Author)