Friday, 28 February 2014

Bit of English

NZ Finance Minister Bill English is awesome. I love every last bit of this.
"With respect to so-called urban sprawl, I think that's a nonsense. If you're against urban sprawl and that means lower to middle income Kiwis can't buy a house and you can't build an apartment in the middle of Auckland for less than NZ$600,000, then that's too high a price to pay. And if it means driving up house prices in a way that wrecks the economy then that's too high a price to pay," he said.
"Funnily enough the people who are most worried about urban sprawl live in the middle of the city. They don't get to see it. How much time to they really spend out the end of the Western motorway or Botany? None actually. They think you should be able to walk to the countryside. Well...welcome to Gore. If you're really mad, that's where you should go. But they don't. They stay in Auckland Central," he said to laughter from the audience.
"What's actually happened is that the local authorities were keen for a denser city, but the inhabitants weren't, so they've jettisoned a fair bit of the densification aspect," he said.
"So if Auckland wants to grow now, it has to grow out because you don't want it to grow up. Now that's a fair choice, but please don't stop it from growing out as well, otherwise we'll get another few years of 15% house price growth and you get a real mess when it crashes," he said, adding the special housing areas agreed under the Housing Accord with the Auckland Council "do spread the city because the planning rules don't let you do anything else."
"We're indifferent as a government as to whether you grow up or out. But you said don't grow up, so we expect to help you grow out."
English said people making planning decisions in Auckland, Wellington and Christchurch needed to understand they were making decisions about New Zealand's largest asset class, where the decisions they make affect the whole economy, not just your neighbourhood.
"Of course there's tension there, but we are pretty determined to turn ourselves into an affordable housing market," he said.
"There's no obvious reason why little old New Zealand should be one of the most expensive housing markets in the developed world. It really puts pressure on our households. It's one of the reasons why we have interest free student loans, working for families, subsidised early childhood care and savings are low," he said.
High mortgage costs were a reason why the Government provided payments supplementing incomes costing billions, "and a lot of that is driven by planning decisions in this city."
When land use regulations are all messed up, everything else gets screwed up too.

Oz economist Leith van Onselen's right:
But while he pines for sound people on the Australian right, I wish that the New Zealand left could match the Australians. Here's Australian Council of Trade Unions economist Matt Cowgill on housing in Australia:
There's a trade-off at play here, one that can't be wished away or ignored. With a growing population, you can't restrict rising density in established suburbs, prevent sprawl on the urban fringes, and prevent housing from being unaffordable. Pick two out of the three. The urge to preserve historic neighbourhoods, the desire the conserve all the green bits around our cities, and the wish to maintain affordable housing are all noble impulses with which I sympathise. But, again, we can't have them all.
Which is pretty much the same thing that Bill English said. Sound economics, left or right, is on the same page on this stuff. Stupid land use regs hurt poor people while benefiting middle and upper class homeowners.

Here in NZ, we're stuck with the Council of Trade Unions' Helen Kelly.

Bill English, in the speech linked above, talked about selling off some of the Housing New Zealand stock of housing so that they could better match social housing to locational needs. It makes no sense to have a Housing NZ house in an expensive part of town when selling it off could fund social housing for three families instead. Here's English:
"In housing and other areas we will continue recycling taxpayer assets to free up money for reinvestment in areas where there is genuine demand," he said.
Later in the questions and answer session with the audience, he expanded on the plans.
"We actually don't need to own all those houses to help those people who need help,"he said, referring to the Government's partnership with the likes of the Salvation Army, the New Zealand Housing Foundation and IHC's Idea Services.
English said the Goverment wanted to assess a family's need for housing in an area close to jobs and schools, which was difficult to do with its existing stock of 60,000 to 70,000 houses. "You've got to stick them in a house that's empty," he said.
"That will mean growing the non-Housing Corp social sector and redeveloping the Housing Corp assets."
English said there were big tracts of Auckland such as Mt Roskill and Tamaki where "there's endless potential for supplying medium housing to the Auckland housing market if we redevelop those areas."
"But our top priority is to meet the needs of the people in the houses first, and then redevelop what we don't need in order to supply the market better, and there could be a lot of that happen."
Here's how Helen Kelly responded.
Pure partisan idiocy. Why oh Why is the NZ left so freaking dumb?


  1. What English is saying rings true, but I still think we should nuke the suburbs.

  2. All comes down to trust doesn't it? Bill English says - sell X (sensible reason), then use the money to buy Y (consequence of the sensible reason). Helen Kelly hears - sell X (sensible reason), pocket the profits.
    If someone was certain that the purchase of Y would follow and they still complained, that would be insane.

  3. Good post. I quoted the Australian union economist on radio today. It is depressing how stupid most unions in NZ are compared to their Australian counterparts.

  4. jesus Christ Eric, we worked like dogs to defeat old yellow tooth Geoff Palmers RMA and we lost. We lost completely and absolutely. We fought the bloody Nat Government and that wimp Simon Upton and we lost,. Here is to your memory forever Owen McShane .

  5. Akld Commercial lawyerTue Mar 04, 09:42:00 am GMT+13

    I have only recently discovered your blog, thanks to DPF, and like the way in which you have dissected and debunked a few my myths using logic and some sensible economic analysis (in a way that I can understand). So much so that I have suggested to a Canterbury student in my household that they might see whether there is scope for adding an Economics paper or two as a tack-on to their degree.
    But I digress.
    Bill is at least half right with his skewering of some Auckland nimbyism. However, the devil in in the detail of the draft UP and now the PUP and some of the proposals are the work of naive and blinkered planning undertaken from the comfort of a desk. And whilst the work of the Council/Govt jv on Tamaki transformation is much needed and logical - other bits much less so. In part this seems to be because the planners fail to grasp that landowners, particularly developers, will act rationally and want to extract maximum dollar as early in the timeline as possible. When you sit and listen to a planner say that they have modeled development to occur at an even pace over 25 years, you know you are in trouble. Especially, when they are unaware that a number of developers have land-banked the areas under zoning change already.
    Infrastructure is also an issue in those older parts of town and the North Shore where there is often only one or two roads in and out and the utilities follow those routes. The shape of the Auckland isthmus is also a complicating factor. Much of that infrastructure is already at capacity and will need upgrading - a cost that won't be borne by developers. Transport planning has been poor - and independent voices such as those on the Auckland Transport blog show that there is still a lot of detail to be resolved here. Schools too that don't have the land footprint or the buildings to cope with 10%+ uplift in the roll in short periods.
    All up, much of what is proposed in the PUP is bold and necessary even if some of the underlying projections may not be realised (or realised at a slower pace) but it is the existing residents and ratepayers who will have to live with the changes and the cost and they cannot and should not be simply overridden.
    Living in an area where the rising tide of house prices have made some of my neighbours very wealthy on paper but facing a huge rating impost, the overall thrust of smarter land use makes a lot of sense - but it is not an overnight revelation. It took my some of my elderly relatives the thick end of a decade and several attempts at down-sizing to embrace apartment living. And having embraced it, they have begun to enjoy what the city can offer in ways that they never imagined. Others in my neighbourhood are vehemently anti-growth and have the financial muscle to fend off all-comers.
    All up, I think that much of headline changes in the PUP are likely to be beneficial to cope with the growth that is occurring. The hard part is getting the underlying detail right.
    So all power to Bill for leaping into the fray - but there is much hard work to come and not all of it can be left to either the Council planners or the developers. Similarly, there is little room for polarising views such as those of Helen Kelly.

  6. Thanks for the long and thoughtful comment. Either Seamus or I would be more than happy to talk with your Canterbury student about options.

    I understand the problem of land-banking; what I don't get is how it could be a problem under a more relaxed zoning situation. Since the land-bankers know that not much more land will be zoned for development, they can afford to hold back and let it out onto the market in small drips, keeping prices up. Now imagine if all the land bankers knew that, effective a month from now, the amount of land zoned for intensive development would increase by some sizeable percentage, with a commitment to ongoing release of substantial amounts of new land for intense development. The value of the regulatory rents on which the land-bankers are sitting would start collapsing, and they'd have to scramble to get anything onto the market in advance of new developments' coming in in places they don't control. I agree that land-banking is a problem; I have a hard time seeing it as other than a consequence of constrained zoning permission systems.

    I also agree that infrastructure constraints are very real. While some of this can be handled via MUDs for local infrastructure, that doesn't hit onto trunk infrastructure. On transport, I wish that Gerry Brownlee hadn't stuck a knife into proposals for congestion charging. I like the flexibility that dedicated busways can provide - it's a lot faster to turn part of a road into a busway than to lay down rail track in response to population changes. And it's more easily changed down the line if things change.

    I'll disagree with you, though, on the deference that we should be paying to existing residents. Existing residents have created a situation where they've been able to appropriate much of the agglomerative gains of urban growth through land price appreciation caused by restrictions on development. I do not believe that policy should prioritise either the maintenance of their rents or of the particular character of particular neighbourhoods over the overall welfare of the city; it should only be part of the broader consideration. I really really like Matt Cowgill's piece on this.

  7. I expect much of that "As soon as they rezone it, everything gets real dense real fast and locals get mad" effect is due to the shortage of areas zoned for such development. Imagine that the whole city had a presumed right to build. So long as you could show that the existing trunk could handle what you were doing and paid a fee toward future trunk expansion, you could go ahead and put an apartment building or townhouses wherever you damn well pleased. I expect that much of that burden that now gets concentrated in a few spots by the combination of popularity and zoning restrictions would be dispersed more broadly: increased density all over town, but less intensely in particular pockets except where those ones had become particularly fashionable.

    I'm only putting the system to suggest that some of the current opposition to relaxing zoning regs "near me" is due to the current lack zoned land. Were it opened up much more broadly, the effects of that change on any particular location would be much smaller.