A line in Wednesday’s agenda for the monthly meeting of Auckland Council’s regional strategy & policy committee refers to an information item, technical publications from the council’s research & evaluation unit produced over the last 8 months, but you will find the latest publication only by chance.
The research unit highlights 2 reports, Auckland’s housing market: spatial trends in dwelling prices and affordability for first home buyers, published last September, and the 2014 State of Auckland report cards.
The one that’s missing, with a publication date of 13 February, is Moving on up: Relaxing land use restrictions can lift Auckland city, a discussion paper prepared at NZIER (the Institute of Economic Research) by Dr Kirdan Lees and quality assured by the institute’s principal economist, Shamubeel Eaqub.
It’s an exhortation to build beyond a number of the limits imposed by councillors when they finalised the proposed unitary plan for consultation last September. But, like a report by Motu Research which Building, Housing & Environment Minister Nick Smith hailed in January, it’s a low-rent attempt at swaying people with what can not be called research.
The Motu paper’s authors said it was the view of developers and therefore lacked balance, and they were true to their word. It was unbalanced. The NZIER paper has a headline which isn’t substantiated anywhere in the report’s 25 pages.
According to the executive summary, “We use a simple, calibrated, monocentric spatial model (the Alonso‐Muth‐Mills model) that does not account for the benefits of land use regulations such as improvements in amenity values associated with the city. We estimate that the collective suite of land use regulations, that apply to height, density & other land uses, currently costs families about $933 every year. Removing these rules reduces travel times and lowers the cost of housing.”
This is perhaps the most explanatory sentence in NZIER’s discussion paper for Auckland Council: “Even polycentric models would give but we need to be clear – we are approximating a rich reality – that includes polycentric centres of activity – with a simple model.”
You could describe that as congested nonsense. I’ve picked on a sentence which is missing at least one word and, with 3 dashes, gives options on how to connect the pieces.
The selection may be unfair, but the sentence is important because it’s an attempt at describing the modelling exercise, and assumptions from it, as difficult. The exercise was a failure.
While it produced some theoretical travel costs – a theoretical consequence of a case not made out – the nearest it got to substantiating a case that rules imposed for a reason amount to an unnecessary cost was to run a stock model. If the exercise had been to pick rules without clear reason for their continued existence, and to assign both costs & benefits to them, the paper would have had some validity. But that wasn’t done.
Throughout the paper, dated 13 February, much is made of Auckland’s geography, the isthmus, the harbours, inability to crowd much housing at the centre, but the modelling is used to demonstrate that housing density reduces and house size increases the further from the city centre.
Geography & topography certainly make Auckland an unusual city, one that doesn’t easily fit the model best applied to landscapes that stretch forever, as around Australian cities and much of the US. As far as I can see from this attempt, the best advice would have been to abandon that model and try some other gauge.
One that might have been much easier to use, and would have produced more useable results, would have been to take a selection of suburbs – fringe, middling & distant. For example, Remuera, Epsom, Mt Eden, Mt Roskill, Herne Bay, New Lynn, Massey, Takapuna, Glenfield, Browns Bay, the Hibiscus Coast, Warkworth, Papakura, Hingaia, Pukekohe.
Most on that list are “middle class”. They’re a range from which a researcher could ascertain comparative housing price & cost movements over a long period, along with transport costs.
But, as NZIER recognised, Auckland’s geography & topography make it unusual. There are many small areas where the land & house prices vary sharply from those of near-neighbours, places such as beach & clifftop streets.
On the upmarket side of that equation, a beachfront bach 40km from the cbd can be worth $3 million and a house 1km away an eighth of that figure. Much of the housing in an old bach suburb might be worth not much more than land value, while housing on similarly sized sections around the cbd fringe has been escalating in price because of scarcity, with absolutely no view beyond the boundary.
The model NZIER has used counts commute distance, time & cost from home to the cbd, and only to the cbd. NZIER might have been better to use meshblocks (small groups of houses), which other researchers have used to make calculations about Auckland housing, and, for the commute, might have used typical travel times & distances (this kind of study was done for the abandoned eastern corridor motorway that was to have taken traffic from the eastern isthmus & Manukau’s eastern suburbs into the cbd; as that proposal morphed into the Auckland-Manukau eastern transport initiative at the end of 2004, the important point about the route was that few commuters would have travelled the full length).
Auckland has at least 50 centres with retail activity of some substance, a number of commercial districts and several large industrial suburbs. Commuters travel in all directions, but research could show a range of common standard commutes. Owners of businesses in those retail centres, and their staffs, are likely to live locally, while many industrial workers will have much longer commutes.
Many people working in the building trades will work locally, yet may face inordinately long travel times due to worsening congestion. The cost of their production is increased unnecessarily by a failure, not of their making, to provide basic infrastructure. Those tradespeople – and governments (local & central) – have a common aim of erecting more buildings for a decent return.
Well, you would think they have a common aim. The tradespeople do, at least. Governments? Along with exhortations to build more, we’re into our second migration spike of the millennium, so the build that was considered desperately necessary without that spike is becoming even more desperate. Tradespeople don’t create migration spikes.
On the local & regional government fronts, one of the major exercises of the last 15 years has been to plan, and plan, at exceedingly large cost to all the contributors to intended development. Among the outcomes, there’s a patchwork of catchment & structure plans, but now central government wants things to move faster. Was that a decade-plus of unnecessary caution on behalf of the receiving environment, or will the next decade be one where caution is thrown to the wind and the next generation is left to fix yet another mess?
One of the sub-headings in the NZIER study is this: “Many factors lift house prices but land use regulations matter”. Writing from a one-dimensional perspective of immediate financial cost, the NZIER researchers figured that the many rules & regulations for construction increase the price of a house.
The researchers could have looked at the array of rules introduced for apartment construction in Auckland over the last 20 years, as an actual example, and could have ascertained the reasons for them quite easily. These are rules requiring minimum apartment sizes, balconies, direct sunlight into living spaces, bike storage space.
And why were these rules introduced? Because developers were erecting apartment buildings without any of these basic features. Yes, those rules added to the immediate cost. And yes, allowing construction that doesn’t meet even a modest standard is the surest way to create slums.
As the Motu research paper did, the NZIER research counts rules to ensure the building trades meet minimum standards as a cost, with no benefit taken into account.
The NZIER study paper refers to other constraints, too, such as maximum building heights affecting floor:area ratios. It says policies such as this that restrict land use “increase amenity in highly localised areas of the city but increase the cost of land through the rest of the city. As activity relocates elsewhere, demand to access the amenity in those areas increases, while restricting supply means people have to live further away. That pushes up the cost of development, not just in the local community but right across the city, as demand for housing shifts to other locations across the city.”
Both pieces of “research” amount to empty quote marks without the balancing input on the value of rules: If the rules kept developers from creating slums, those rules had more enduring value which should be taken into account.
23 January 2015: Building cost research a onesided analysis
8 October 2014: Affordability: An essay in response to today’s council economic quarterly & housing research
Attribution: Council agenda, RIMU reports, Motu Research paper.