In a post the other day, I noted in passing that the political Opposition parties seemed to be as lacking as the government in any serious ideas or analysis as to how New Zealand’s dismal post-war economic performance might begin to be reversed.
That prompted a commenter to suggest that the Labour party did seem to be offering fresh ideas for dealing with the housing market, drawing my attention to a recent substantial post by Labour’s highly-regarded housing spokesperson Phil Twyford. Twyford’s post is written with a left-wing audience in mind, but for anyone interested in housing policy issues it is worth reading.
There have been some encouraging words, at times, from Twyford on getting at the root cause of the housing problems – the pervasive land use restrictions imposed or facilitated by central and local governments of both parties that have driven what should be quite a cheap product (suburban land) into one of the most expensive around. It isn’t just a New Zealand phenomenon, but one seen in the United Kingdom, Australia, Canada, large chunks of the United States, and no doubt plenty of other non-Anglo parts of the advanced world. Deal to those restrictions and houses will be as affordable as they still are in many other parts of the United States, or as they used to be here before the planners (bureaucratic and political) got control.
Twyford goes as far as to say that
The next Labour Government, led by Andrew Little, will be defined by how we respond to the housing crisis.
Of course, the current housing “crisis” got underway under the last Labour government – and neither that government, nor the current National-led government, have done anything much structural about it.
I’ve been a bit skeptical about quite how serious Labour is about structural reforms to make the housing market work better over the longer-term. Unfortunately, Twyford’s latest piece doesn’t give me any reason for greater optimism.
He outlines a five point plan, as follows:
- “Bring back active government again” – which means having the state building lots of houses for first-home buyers
- Tax changes
(“We are going to tax speculators who sell a rental property within five years
We are going to shut down the tax breaks that allow speculators to write off their losses.”)
- Restrict foreign buyers (“We will ban non-resident foreign buyers from buying existing homes. And we will review the immigration settings to find a better balance between the country’s need for skilled workers and the impact on housing and the labour market”).
- Free up the planning system
Build lots more state houses
Sure enough, doing something about the planning system is on his list, but (a) it is a long way down the list, and (b) it is the shortest section of any of those in his post. Here is the total of what he had to say on the topic
4. We should be pragmatic about finding solutions and willing to adjust our policies when the facts change.
The right have constantly blamed Councils and planning laws for expensive housing. The left has always reflexively defended planning. But it’s a fact that restrictive land use controls have stifled building, and choked off the supply of land driving up prices.
We will reform the planning system so it can both protect the environment, while allowing us to build more and build better.
Which is fine, I guess, but says almost nothing of substance at all. It has the feel of a ritual incantation – feeling the need to acknowledge the point – rather than being any sort of centrepiece of a housing reform programme.
Some of the other things on Twyford’s list may, arguably, be useful, or not harmful, in a transition (I’ve argued myself that if governments won’t/can’t reform the planning system they should pull back on immigration targets to give young New Zealanders more of a chance), but none get to the heart of the issue: allowing individuals and firms, and private markets, to much much more easily build houses in locations, and of densities, that suit them.
I hope I’m wrong. Perhaps Twyford just felt the need to play down the market-oriented reforms because of his left-wing audience, but even if so that hardly fills one with confidence that his party has grasped where the fundamental problem is.
So I’m skeptical. And for a number of reasons. First, and a point I’ve made often before, there has been no case anywhere – here or abroad – that I’m aware of where once the planning mentality has taken hold it has been enduringly unwound. Perhaps the debate is a little further advanced in New Zealand than in some places – although even the Obama Administration has made good, and sophisticated, noises on the importance of the issue – but I see little reason to hope that New Zealand is about to lead the reforms. At other times, and on other issues, New Zealand has been a reform leader, but there is no sign of any such appetite this decade. Bad ideas and bad policies usually get discarded eventually, but it can take a very long time.
And for all the talk about the housing crisis, the National Party remains pretty popular. It could well lose the election next year – lots can happen in a year – but right now there is little evidence of a popular groundswell demanding far-reaching change. For all the talk, bread and circuses – and a few small measures to temporarily paper over specific cracks – seems to be enough to distract the populace.
And whatever the Labour Party genuinely thinks, if it should lead a government after the next election, it seems most unlikely that Labour will overwhelmingly dominate the government. Perhaps they will have two-thirds or even three-quarters of the seats, but the Greens, and/or New Zealand First would have the rest. In such an arrangement, each party has to decide what really matters to it, and what they can trade. Perhaps far-reaching liberalization of planning law will be one of those things for Labour, but Twyford’s speech content doesn’t give one much confidence of that. And the Greens aren’t known for supporting the physical expansion of our cities, or allowing markets to make such choices. The other items on Twyford’s list look much more like the sort of stuff Labour and the Greens could happily agree on as a common housing policy: suppress demand, further mess up the tax system, and fall back on government as a chief provider of new housing.
And lest anyone think this is just an anti-Labour piece, it is also worth remembering that Opposition parties have talked a good talk on fixing the housing market before. The National Party used a parliamentary select committee to run an inquiry into housing affordability in 2007 – over the objections of the then Labour government – and went into the 2008 election suggesting that it would fix the system. Despite dominating all three governments since then, almost nothing has happened – just more first home buyer subsidies, various demand suppression tools, and now talk of large government house-building programmes.
Labour and National are almost equally to blame for the mess we are in – although of course, any incumbent government has to take a bit more of the blame. But, no doubt, neither has done any far-reaching reform because there just isn’t the public demand for it – and because neither really believes it enough to (a) properly prepare the ground, and (b) take some political risks and expend some political capital in a cause they think would genuinely advance the long-term well-being of New Zealanders.
I’d like to think I was wrong, and that Phil Twyford’s words really do foreshadow a Labour-led government that would lead a process of substantially freeing-up the housing supply market.
But if Labour is serious, perhaps they should think about the leadership opportunities they now have in local government. Of our three largest cities, two now have Labour mayors, and the third has a mayor who was a former Labour Cabinet minister. Central government might be an enabler of the land use restrictions, but it is local governments that put, and keep, the specific rules in place. And local governments could lead the charge in removing those rules, freeing up land use restrictions in ways that could make a real difference. Those three mayors can’t do everything in just a year, but if Labour is serious about liberalizing land use restrictions, Justin Lester, Phil Goff, and Lianne Dalziel could surely go quite some way before next year’s General Election to show us that Labour is serious about this stuff. Sure, mayors don’t control councils, and only have one vote, but they have a fresh mandate, and a bully pulpit (media cover mayors), and they lead our three largest cities.
Sadly I don’t expect much. Here is the housing policy of the new Labour Party mayor of Wellington.
For starters, I’ll be sending a bill through to parliament to make rental WoF a reality in Wellington. If you’re paying rental for a house it’s only fair that house meets basic standards. Living in a warm, dry house that’s free of mould should be a right for every Wellingtonian.
I’ll also invest in social housing, so there’s more available for the people who need it most. This means a long term building program, partnering with third sector housing providers to increase the number of live-to-own dwellings. It also means improving the 2500 existing Wellington council owned social housing units, making them safer and better to live in.
But that’s not enough. It’s vital that we look after those in need, but we also want Wellington to grow and prosper. That’s why I’m offering a $5000 rates rebate for anyone building their first home in Wellington. Newer homes means better quality homes, and Wellington needs to encourage fresh young talent and new families to move here if we want to keep thriving.
Plus, I’m committed to establishing Build Wellington, an urban development agency that will utilise existing green-field land holdings for affordable, good quality residential development in the tradition of state and Council housing in years gone by.
Nothing, at all, about freeing-up land supply, just more statist “solutions”, and a local version of the sort of first home buyer grant central government offers – the sort of tool that has been proved, time and time again, to do precisely nothing to improve housing affordability.
For those interested in housing policy and urban planning issues, I’ve been meaning to draw attention to the stimulating new website/blog Making New Zealand
31 thoughts on “Labour and housing supply liberalisation”
A fundamental underlying problem is we all want a 21st century home with all the bells and whistles, built with 21st century safety rules, paid for with 20th century incomes. We simply cannot afford what we want and refuse to accept what we need.
The cost of land is an artificially created supply/demand problem.
Houses are cheap. I got offered 2 seprarate houses for removal around 180sqm each in Auckland. Price? $5k. Only problem is I need to get plans approved for the relocation and resite and I need to move it within a month. Too tough a timetable. My current project I am doing which I bought a house 3 years ago for $25k for a 140sqm house took 2 years for the RMA plus another 3 months for the building consent. 2nd hand houses are getting cheaper but the time, effort and widespread corruption by tradesmen has escalated.
Auckland has plenty of available land.
1. We have the Waitakere Ranges. All we need to do is chop down hundreds of kauri trees and we even have the wood freely available to build houses.
2. We have 57 sacred mounts that we can’t even drive cars up these days. Again all we need to do is allow building all the way up each and every slope.
3. We have unlimited heights right up to the clouds. All we need to do is remove the viewshaft height limits that require visibility of the top of each sacred mount from every public park from eye level. It is extremely hard to build houses up to eye level which leaves most of central Auckland a gigantic carpark.
4. We have lots of streams and rivers, perhaps floating houses would work for us. But if Labour and Greens wants swimmable lakes and rivers then we cant build floating houses on rivers and lakes.
All market pricing is artificial. Bartering would be more natural.
“…All market pricing is artificial…”
But I would argue that any city with a median multiple of around 3, has urban land prices very close to “market derived”. This will be pretty close to “the cost of the cheapest land in an alternative use (i.e. rural land), plus the transport cost savings from location relative to that cheapest land, plus local agglomeration effects (reflected in higher local incomes), plus local amenity values”.
Every urban land market that has been derailed from this “differential” system of land pricing (by urban growth boundary policies or de facto ones) ends up with a kind of “gouge” or “monopolistic” or “extractive” element in land prices, which is orders of magnitude greater than what could historically be explained by “amenity” or “agglomeration” effects. This does not stop certain idiot economists who ignore the distortions resulting from urban land quota schemes, from trying to claim that city A has land prices 100 times higher relative to local incomes, than city B, “because of amenity effects” rather than city A’s growth boundary!
A long period of rhetoric usually precedes any substantive change. So even a change of rhetoric is welcome. If he gets prise for his rhetoric, he will keep saying it.
Sorry, praise not prise.
Can’t disagree with your first sentence (empirically). But whether a long period of rhetoric actually protends any substantive change is another question altogether.
Yes, what we see in political history, is a kind of “ratchet effect” in principles. A mainstream Party can spend years in opposition keeping up rhetoric about its principles, and then reinvent itself in the mold of the popular government so as to regain and retain office. John Key National in many ways, might as well just have been Helen Clark’s 4th, 5th and 6th terms. Rhetoric up to 2007 on numerous issues did not translate into ultimate action, quite the contrary. ANZUS, the RMA/ urban planning / housing affordability, WFF (“socialism by stealth”), natural resource extraction, logging on the West Coast, the Treaty Industry, the Rainbow agenda, capitulating on Len’s Train Set, etc etc.
I guess a Clark administration might not have got highway building going to the same extent – I don’t think the list of real differences is a substantial one. Clark might have done some things differently on immigration – such as the rules on “investor immigrant” and “property” which National changed. And she was actually tougher on some Treaty Industry issues.
Michael thanks for the shout out for “Making New Zealand”. I sometimes write for this website and I also have my “medium” publishing site. I would be interested in any comments about an article I recently wrote about MUDs -a new developer tool which could assist in providing cheaper housing. The article is a bit rough. But I thinks it captures some of the issues of state vs private built housing.
View at Medium.com
Mike Greer has indicated that he is ready to build a factory in Auckland to mass produce cookie cutter houses. But he is waiting for someone to give him a contract to build 300 houses a year.
Greer said the key is getting hold of the land. “In Auckland you pay $400,000 to $500,000 for a postage stamp section.”
It is clear that Mike Greer would need lots of very large vacant land for this to work which pretty much equates to greenfield sites. Auckland Council has already handed to the government a big fat budget for $17 billion for greenfield site development.
Its very simple mathematics.
Intercity rail to Mt Eden $3.4 billion and no where else. Add another $15 billion to connect Manukau, Slyvia Park, Albany, New Lynn plus contingencies and we have a whopping $20 billion spend up.
Add a second bridge to the North shore $5 billion plus rail $2 billion.
Plus the $17 billion greenfield infrastructure.
Plan for a whopping $44 billion budget. Not going to happen.
However if you rezone Mt Eden, Epsom, One tree Hill, tree kings, Mt Roskill to St Lukes 18 to 50 levels. The already approved $3.4 billion Intercity rail to Mt Eden would make sense.
Sorry, but under the status quo distortions to Auckland’s land market, as Grimes and Aitken (2010) pointed out, “all the profit potential from redevelopment is impounded in rising site values”. It is a delusion that waving zoning wands over suburbs and building train sets, magically produces multi-level buildings.
The Poms have still not worked out what Grimes and Aitken have, with decades of real-life evidence staring them in the face. Plan after Plan after Plan since 1947, with more and more vigorous upzoning each time, has only resulted in a greater and greater screaming shortage of housing and higher and higher urban land prices. The boost to urban land prices in all upzoned locations actually increases the price of existing properties in quantities that swamps the quantities of “affordable” housing (translation: dog boxes) that gets produced – at prices that are still something like 2.5 times higher than a median normal family home in a median-multiple-3 city.
New York got most of its skyscraper building done simultaneous with the urban area sprawling on greenfields for dozens of miles in several directions – in fact the goosed urban land values if you “ban sprawl”, is an obstacle to ALL redevelopment. The crucial thing for the evolution of something like Manhattan’s built form, is the evolution of a local economy like Manhattan’s – and it is cargo cultism to think that any Planning of any kind at all can produce the latter. I think it is probably close to the truth to say that binding urban plans can ONLY “obstruct” and “forego”. Planners are deluded in thinking that by obstructing what they don’t want, what they “do want” will magically spring up instead. In fact no-one will never have a clue what has been “foregone” – even in terms of beneficial exurban cluster evolution of the “Silicon Valley” kind.
I thought it was a useful article Brendon, and MUDs seem like the way to go – at least while NZ persists with the rapid population growth policy (with my immigration policy, the population would be largely flat and I’d expect we’d see only quite limited new housing building).
UDAs scare me – getting the incentives correctly aligned, while respecting property rights and individual interests, seems extremely difficult to do well.
Thanks Michael. I agree NZ shouldn’t be running a rapid population growth policy while it doesn’t have policies and mechanisms to fairly accommodate or “Make Room” for that population growth.
UDA’s scare me too, CCDU/CERA in Christchurch’s CBD was essentially a UDA and its performance was not good. I understand the argument for a large state house building programme to help transition from unaffordable to affordable housing. It would give the construction and building industry certainty to invest in upskilling a workforce, new plant and equipment and new methodology like prefabrication and new housing types -quality terrace housing and so on.
The downside is it could potentially create an even stronger oligopoly industry structure where the efficiency gains go to the owners or managers not to the workers or consumers (first home buyers or renters).
This is why I think UDA’s should be balanced out by allowing non-state or big business controlled entities to have a chance at being involved in constructing the built environment. That is the thinking behind the MUD article and an earlier article on reciprocal intensification.
Michael you only needed to ask if you wanted to know more about our urban growth policy.
Here’s an op ed I penned with Oliver Hartwich of the NZ Initiative: http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11553128
My call for Auckland’s urban growth boundary to be abolished: http://www.labour.org.nz/government_should_abolish_auckland_urban_growth_boundary and the Herald’s report: http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11640374
A speech I gave in Parliament recently on an amendment David Parker put up that would have replaced the urban growth boundary with a smarter approach to managing urban growth: https://www.parliament.nz/en/pb/hansard-debates/rhr/document/HansS_20160906_147900000/twyford-phil and David’s speech in the same debate https://www.parliament.nz/en/pb/hansard-debates/rhr/document/HansS_20160906_148800000/parker-david
Thanks for commenting Phil. Yes, I think I’m familiar with all of those links – and am encouraged by the talk of abolishing the urban growth boundary, and by David Parker’s attempted amendment. My unease is really about how significant deregulation of land use restriction would end up being in a Labour-led government – and on that score the recent post of yours increased my unease, even recognizing that it was initially aimed at a Standard audience – both because in these matters much of the devil is in the detail, and because you will need to deal with other parties to form a government.
But, to be clear, I welcome the support you have provided for the case for land use liberalization. And, as I noted, the current govt has had eight years, and has done almost nothing.
I guess just one other point: surely if Labour is really serious about substantial reform in this area, Labour mayoral and council candidates should have been campaigning on such issues, which are quintessential local govt issues? I quoted Justin Lester’s housing policy, and there was nothing more encouraging from my local Labour council candidate (deputy mayor designate).
I should add that National and ACT and United Future voted against David Parker’s amendment to abolish the urban growth boundary. Labour, the Green Party, NZ First and the Maori Party voted for it.
Phil Goff got elected because he said 4 key things to ratepayers who actually vote.
1. We will not touch the leafy suburbs of Central Auckland
2. We will make Central Government pay for all the new infrastructure for new housing for greenfield sites
3. We will tax foreign buyers.
4. We will cap rate rises to 2% per annum
Then he painted his billboard blue to indicate to voters he is dissociating himself from Labour’s red socialist policies and can be considered a moderate candidate.
There are many factors tied up with the housing debate and I believe it would be a priority to ask the people of this land what population they think is desirable.
Many of the best points about our country are because of a small population and the present increase in the Auckland population is having a flow on affect in other areas.
It appears as though the current high level of immigration is planned to push our population to some figure that has never been discussed or consulted on and that no politician is prepared to discuss.
It is all very well saying remove boundaries ,open up land for housing , but the different regions have different reasons for rules relating to landuse.
You rightly point out about councils and rules (RMA) but I add that the plans formulated around the country have been put together after years of consultation with their communities and the long consideration of issues , many area specific.
This is New Zealand and not the USA or Australia where land is more plentiful .New Zealand has only 7% of Class 1 land.That is land that can be cultivated and is suitable for productive purposes.
The clamour to build ,build,build is a serious concern where those who don’t have a clue where our wealth is generated just see opportunities that may not necessarily be in the best long term interests of our country.
I detect a mood that wants to ride roughshod over all those who have participated in the process that has given us our planning documents and an attitude that shows little regard for the people who actually produce widgets and income for the country.
The huge emphasis on Auckland is unhelpful in developing workable and acceptable policies for the rest of New Zealand.
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Absolutely agree Allan. And I guess that a very large percentage of greenfields development takes place on that 7% of NZ’s land. While the market may sort out such inappropriate use of land, I don’t know if I want to stake my children’s future on such. While NZ is a long way from reaching the population size of the UK, it is worth noting that urban development covers approximately 10% of the UK, and with NZ towns and cities being much lower density (not to mention life-sentence blocks) it is not inconceivable that much of NZ’s class 1 land could be lost to production in the foreseeable future.
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Allan and Dave the protecting agricultural land argument is a farce. NZ allows 100,000+ lifestyle blocks to exist. The vast majority of blocks are ultra low density housing for the rich and only in a small minority of cases are they genuinely used for productive farming purposes.
Lifestyle blocks consume more land than all our towns and cities combined. The urban area of NZ is less than 1%. NZ is one of the lowest population density countries in the world. The built urban environment threatens less farmland here than almost anywhere else. I live in Canterbury a place with about 1/2 m residents. Holland is the same size as Canterbury and has a population of 17m.
It is a nonsense that a rich family can consume 4 hectares of lifestyle block land for themselves but poor people cannot build a village on the same amount of land that would benefit hundreds of people.
What I find the most distasteful about these pseudo environmental arguments is the way the costs of these dubious environmental goals are entirely paid for by the least well off in our society.
Thanks for the reply Brendon. Yes, I agree that lifestyle blocks are the largest consumer of prime agricultural land, yet, as outlined in Andrew Atkins’ post, a lifestyle block would be the choice of many NZers if they had the means. So what do we do?
However, I disagree with your assertion that “protecting agricultural land argument is a farce”. It may be farcical if your horizon is short, however, on a longer horizon I believe it is only prudent to protect the very best soils. If Auckland’s population keeps doubling every 40-50 years, then it is likely to have a population of over 5 million by end of century and under current development patterns urban (and lifestyle) development would consume a vast amount of surrounding productive land. As Allan pointed out, only 7% of NZ landmass is class 1 land, but of that 7%, a much smaller percentage is suitable for high intensity tillage necessary for vegetable production (such as the volcanic soils surrounding Pukekohe and the soils that have been asphalted over on the Isthmus and Manukau/Mangere).
Clearly, if we want continued population growth and a larger population then we have to accept reductions in our lifestyle choices. Obviously it is not physically possible for everyone to live on a 1 hectare mown lifestyle block in the Netherlands…
Dave. I have no problem with protecting exceptional areas -due to their outstanding beauty, ecological diversity, disaster risk, soil quality or some other important factor. Sure permanently make them off-limits.
The built urban environment expands along infrastructure corridors and areas of importance can be protected from development. This is discussed at NYU by urbanist experts like Solly Angel -https://www.youtube.com/watch?v=wQkuoPFq3PM
You can see how Christchurch initially was expanding along tram tracks in the following picture. http://www.teara.govt.nz/en/map/10370/the-expansion-of-christchurch-to-1926
So given proper planning, through the location of infrastructure corridors and the careful demarcation of areas that cannot be developed, special areas can be protected, with the remainder being a freely accessed -possibly utilising new tools like MUDs or within the existing built area -reciprocal intensification.
But that is not what we do. We inadequately set aside enough land and funding for infrastructure corridors -especially as Michael says given we are running a high population growth policy. Further, we create this stupidly tight urban boundary -both up and out. Which then periodically needs to be released like a fat man letting out his belt a notch -so land isn’t being permanently protected. Frequently residents seeking cheaper house/land packages leapfrog over these boundaries to distant satellite towns/lifestyle blocks -so compact urban forms are not created. Land bankers given both the lack of infrastructure corridors and the slow relaxing of boundaries can easily predict where development will occur and are given a perfect opportunity to buy up land (so again it is not used for farming purposes) and make enormous capital gains, which the next generation of home buyers and renters have to pay for. The whole thing is ridiculously stupid and inequitable. It is a massively expensive way to run our urban areas, where the majority of us live, causing efficiency losses to all urban based workers and businesses and it doesn’t even achieve the environmental goals it claims to be protecting.
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Allan, within the next 20 years New Zealanders aged above 65 would be 1.25 million an 80% increase from the 700k today. If we do not bring in more younger people how do you expect to resolve this issue of people drooling on floors?
As far as real migrants are concerned, we need them. The government pursues largely a replacement policy. The real issue is the 3.3 million tourists increasing steadily to 4 million tourists that is the real problem.
Michael, how about interviewing Phil on Labour’s housing policies, Phil seems keen. I’m sure you could ask some really interesting questions that we would’t see from the MSM.
What would be good would be an interview of a couple of politicians from Labour and Greens who have been involved in the housing issue. Maybe Phil Twyford, David Parker, Metiria Turei and Julie Anne Genter. That might give us some indication re Michael’s question of “can they work together”.
I think I’ll leave interviews to someone like Bernard Hickey.
I’m not uneasy about whether Labour and the Greens can work together. As far as one can tell, they look like they could assemble a perfectly competent government. My only unease is about how seriously I should take the Labour words about a much more liberal functional urban land market as a sign of what might happen in a Labour-led government.
If I go to the Greens’ housing policy https://home.greens.org.nz/policysummary/housing-policy-summary there is nothing suggesting greater choice, flexibility, or even recognizing the role of regulaton in having delivered us here. Sure it is the 2014 policy, and perhaps next year’s will be better, but for now of their five “key principles” the only one relating to new developments say
“Housing developments should optimise land use, reduce car use and be built to sustainable building principles.”
Which has, shall we say, a strong top-down tinge to it, and little emphasis on choice.
But even with Labour, here is an extract from the speech Twyford linked to in his comment
“But it is not enough just to do away with the boundary; we must do other things. We must, for example—as we say in proposed clause 12(2)(b)—use more intensive spatial planning to set out over space and time what should happen, what developments should be allowed to happen in the identified growth corridors. ”
On this issue, I’m keen to see Labour be at the forefront of a much more liberal responsive less regulated land market, and I welcome the noises in that direction. But for all the reasons in the post – some of which just say “because Labour politicians are people who need to get elected in Anglo countries, where there is little strong public appetite for land use liberalization” – I remain a little skeptical. And, in a sense, the occasion for the post was the local body elections: Justin Lester,and the others, could show us the way if Labour is really serious about far-reaching land use liberalization.
The question of how much state involvement is optimal in urban development is under-discussed. Even free market types like Glaeser, Romer and Tabarrok see a role for central co-ordination. (E.g. see here https://mason.gmu.edu/~atabarro/Lessons%20from%20Gurgaon.pdf). It seems to me that there is a clear role for government to set at least a baseline plan for key infrastructure and transit, because without this there are just too many co-ordination problems for private sector. But even this can be a self-fulfilling prophecy by forcing development into outer areas, sparing “leafy inner suburbs”.
A second issue is whether central govt has a role to constrain local govt from micromanaging land use, in order to prevent NIMBYs having a baleful impact on the interests of the general population. In my view, they probably do.
A third issue is how we can avoid uniformity, while benefiting from the amenity value of having harmonious and consistent design in our cities. I think we can do this by requiring the private sector to agree on a common design language (for new development and redevelopment) on a neighbourhood-level basis.
Very interesting link from Blair there. Rajagopalan and Tabarrok, lessons from the “private sector city” of Gurgaon in India. Failure of government to provide protected corridors for trunk infrastructure, was not overcome by the private sector “after the fact”, because of the obvious difficulty in co-ordinating so many affected site owners. However, the authors point out the connection with tight quotas on land supply:
“… if the government had allowed, or even required, much larger initial purchases of land then entire competitive cities could have been built under the umbrella of a single firm. A single firm seeking to maximize the rents from a large urbanizing area would have an incentive to build infrastructure – such as sewage, water, and electricity – that would cover the entire area under its purview.
Are there examples of such systems in practice? Yes…Walt Disney World is one of the largest private governments but in the United States there are also hundreds of thousands of typically smaller private governments in the form of homeowner associations, planned communities, condominiums, and co operatives….
“…Sridhar and Verma (2013) argue that Indian cities such as Gurgaon are dysfunctional because they
are typically characterized by conflicts between multiple agencies on who should provide roads, parks, water pipelines, and sewage, and no one seems to have the answer, with authorities passing the buck all the time. Jamshedpur, on the other hand, has succeeded, because through Tata Steel it began with a single owner, and now with the creation of JUSCO, the city has a single provider with encompassing interests and accountability. The result is the provision of integrated and co-ordinated world-class
utility services, including water supply, power supply, waste management, and civic services…”
In their conclusion, Rajagopalan and Tabarrok point out that rent-seeking under such arrangements can be minimised by having multiple “private cities” in the same region competing with each other. Interestingly, they do not seem to mention that this is exactly how it does work in practice, in parts of the USA. But they are really discussing 100% private provision of trunk infrastructure; government involvement, as they point out (and Angel, Bertaud, Romer and their colleagues point out) can overcome these problems by providing the corridor protections well ahead of growth, and letting the free market do the rest. A significant issue in India is the endemic stickiness of government involvement in all supply of land able to be converted from rural to urban use. Rajagopalan and Tabarrok do not seem to discuss land PRICES; it would go without saying that these prices, in India, will not vary from “extractive” regardless of the quantity of land and number of integrated enterprises, simply because of the initial government involvement and the quota / “permission” process. Unless government’s involvement changes to one of “enabling”, which is what I hold to be the big difference in our own switch from housing affordability and competitive land supply, to the current debacle.
Councils (and central government) always had authority over the process, but for decades they operated as “enablers”, setting standards and providing the trunk infrastructure in co-operation with “the market”. Developers securing low-cost greenfields sites with development potential did not expect to be told to wait decades until more contiguous sites were developed first. The provision of trunk infrastructure under these conditions of “splatter” growth was by default, more efficient. It was rightly assumed that infill development would efficiently follow the trunk infrastructure. However, the value uplift brought to the owners of the more contiguous sites was both an inducement to sell to later developers, AND substantially lower than the uplift that occurs because of a growth boundary. The uplift was not a zero-sum “gouge” of status quo income levels, either, but reflected efficiencies and growth that also manifested in real incomes.
Most heartening to see a politician browsing an economics blog!
All this assumption that prescriptive and restrictive urban planning is the ONLY way to achieve the claimed objectives, displays an appalling economic illiteracy. I mean a large proportion of well-meaning Kiwis, as well as most Greens and people of the Left.
The Green movement back in the day was actually identified with “going off grid” and “back to nature” and using new “enabling” technologies. At some stage the movement was hijacked by some kind of quasi-religious belief system that seems to hold that humans interacting with nature is a form of sacrilege, and therefore we must be penned up in concrete jungles. Going along with this, was lavish funding of “compact city” advocacy from powerful one-percenters (actually zero point one percenters) with substantial holdings in prime urban property and interests in the profitability of the mortgage lending sector. Piketty points out that these people are not where they are by 1) being stupid or 2) sharing their secrets. I can see the lines between the dots here, why can’t the Green and Lefty useful idiots?
NZ’s (Unitec Prof) Dushko Bogunovich is one of a few sincere environmentalists who see “solutions” as a broad spectrum of approaches. This “compact living and train sets” approach is just a loss of reason, it is riddled with unintended consequences anyway. The former USSR dd not fail “in spite of the advantage of” being able to force everyone to live this way, this was an inherent part of the implosive inefficiency of the whole. Either your land market thwarts your objectives, or abolishing the land market and centrally planning everything, causes so much loss of market efficiency that your system implodes anyway (Bertaud and Renaud, “Cities Without Land Markets”, is an enlightening read).