Afternoon roundup

Eight browser windows each full of tabs. Something's gotta give.

• Excellent quips from our Treasury Secretary in response to RBNZ pleading for even more money.
• All the BS speech restrictions that apply on election day. 
• I don't get how Brian Albrecht doesn't yet have a syndicated national column in the US. Gold!
• Bits from me and a few others on whether National or Labour is 'better for business'
• My column at Newsroom this week expanded on last week's post on the NIMBY problem. 
• British Columbia's Supreme Court backs the Squamish Nation's push to build a pile of needed apartment towers on Squamish land in Vancouver, batting back NIMBYs. 
• A Commerce Commission that were on its game would be checking into just how the existing cartels have managed to block a new nurses' training school from training new nurses. 
• Excellent piece by Bill Watson on competition policy versus actual competition.
• Interesting ideas from Andrew Body and Simon Jensen on improving prudential bank regulation in NZ. But there's still the bigger question of whether we ought to split monetary from prudential.
• Noah Smith thinks a three-state solution is needed. I can't see how that works while Hamas runs Gaza, but maybe somebody will figure it out.
• "The region's pipes are ageing at a faster rate than they can be fixed." Wellington is such a mess. But I simply don't buy the claim that "Our councils are pushing their ratepayers to the limit in order to fund [Wellington Water]." Our council is set to spend $350m earthquake strengthening a building that could be bulldozed and just built a convention centre and is spending $100m more than necessary on a central library.  
• Queenstown has the country's worst housing shortage. The Infrastructure Commission points out that Queenstown's new plan will enable about 31-149 houses over ten years. Neither National nor Labour are really serious about housing.
• The final chapter in BusinessDesk's excellent series on the state of the NZ public service and the legacy of Peter Hughes. I still think an incoming government should fire Hughes pretty much on day 1 rather than let him see things through to February. 
• Years back we'd been arguing for a variant on city deals. They're in fashion now, with some risk of monkey-paw problems. 

The NIMBY Problem

Standard drill in a lot of the urban econ lit is that governments need to pull planning up to higher levels to get around local NIMBYs. The small number of loud people with infinite time to stall local planning just don't get the same hearing if planning's decided at a regional or state-level rather than at town council. 

And there's some decent evidence for that. Auckland's Unitary Plan is more enabling than the prior underlying plans were. A pile of apartments were built because of it. 

David Foster and Joseph Warren go through a countervailing force in the Journal of Theoretical Politics.

Nimbyism is widely thought to arise from an inherent tradeoff between localism and efficiency in government: because many development projects have spatially concentrated costs and diffuse benefits, local residents naturally oppose proposed projects. But why cannot project developers (with large potential profits) compensate local residents? We argue that local regulatory institutions effectively require developers to expend resources that cannot be used to compensate residents. Not being compensated for local costs, residents therefore oppose development. Using a formal model, we show that when these transaction costs are high, voters consistently oppose development regardless of compensation from developers. But when transaction costs are low, developers provide compensation to residents and local support for development increases. We conclude that nimbyism arises from a bargaining problem between developers and local residents, not the relationship between local decision-making and the spatial structure of costs and benefits. We suggest policy reforms implied by this theory.

Ben Southwood goes through it here, arguing that when NIMBYs can't be paid off at the margin, they instead aim to wreck everything: throw so much sand into every set of gears that nobody can ever build anything anywhere because building is just too hard. 

I've liked the idea of giving councils a share of the upside that central government enjoys when councils facilitate growth, so that councils can both find ways of dealing with costs they have to face in facilitating growth, and so they have the resources to provide whatever local amenity improvements are needed to overcome local opposition. 

Valuing food security

Suppose you got $500 in annual value from owning your car. Would you consider paying $6500 per year to insure that car? I'm not talking about third party liability or anything like that, just insurance for the value of the car. Would it make sense to pay thirteen times the annual value of the car for insurance against the car failing?

Obviously not, right?

My last couple of columns over at Newsroom go through the latest report from the Infrastructure Commission on the cost of the Auckland urban-rural boundary, and the proposed Auckland Future Development Strategy.

Together, they mean that Auckland is blowing about $1300 per square meter in real value (or about $65 per year at a 5% discount rate) in order to protect precious agricultural land that might generate maybe $5 per square meter in gross (not net) potato revenues.

Bonkers. But such is the Cult of the New Zealand Potato. 

Adherents of the Cult of the New Zealand Potato and Ancillary Horticultural Products worry greatly that if houses are built on Precious Agricultural Land, there will be no food. 

Normally we'd figure that, as developers buy agricultural land for housing, the price of remaining agricultural land will go up if it's actually scarce. And that that process is an automatic governor. But the Potato Cult knows that markets don't work that way and that markets undervalue that which is truly priceless: potatoes, grown on very specific pieces of land, decades from now. 

The Potato Cult, combined with restrictions under the National Policy Statement on Highly Productive Land, and a few other bits of wiggle room, gave Auckland Council all the room it needed to ban new subdivisions. 

So. 

My column at Newsroom, a fortnight ago, covered the latest paper from the Infrastructure Commission. The Commission found that a square meter of land just inside Auckland's urban boundary is worth about $1300 more than a square meter of land on the other side of the boundary, after accounting for the costs of making ag land ready for urban use. 

$1300 per square meter. $600k added cost for a 500sqm section at the edge of town. $5 million per acre. 

If you're willing to pay half a million more for a home close to downtown amenities, as compared to one out in the suburbs with a long commute, just think through the effect when a house at the edge of town costs $600k more than it really ought to. Prices are inflated across the entire urban gradient. Density is great, but rules banning building at the fringes make central townhouses more expensive too. 

So far so good. The rules at the fringes are dumb, but our enlightened leaders will see that and fix things right?

This week's column went through Auckland's draft Future Development Strategy. The FDS is, I think, the first to be produced under the new sets of rules. It doesn't bode well for the future. You see, Auckland Council reached for every possible excuse for restricting development. The incentives they face have not changed, so of course they would. 

The FDS basically forbids the private plan changes that have otherwise enabled paddocks to turn into housing. 

There are lots of reasons. 

Since NPS-HPL restricts turning ag land into housing, they've noted the importance of that highly productive land. Sure, NPS-HPL allows building on ag land if there's a good case for it, but Auckland Council doesn't want a good case for it. They want to prevent development. 

Since councils are now supposed to consider carbon emissions, that gets brought in here too. Never mind that urban emissions are covered by the ETS. And ignore that it would make sense to set new bus routes to any big new developments anyway. 

Neither of those are the underlying reason. They're the palatable excuses. The former appeals to the potato cult. The latter to cargo-cult notions of how to get emission reductions. 

If we took the potato cult seriously about what they claim to want, it would almost certainly be more cost-effective to build a giant cold-store facility for a Strategic Potato (and Ancillary Horticultural Products) Reserve. Keep five years' supply. Pretend we're in Game of Thrones and Winter is Coming. Every year, release the oldest frozen supply from the reserves while replenishing with fresh. Would tide us through all manner of implausible scenarios.

It would be really really stupid. But it would be less stupid than banning building on Precious Agricultural Land when letting housing be built on that land is worth an extra $1,300 per square meter - or about $65/sqm year if you run it at a 5% discount rate. 

As compared to about $5 gross revenue/sqm/year from potatoes. 

Which is where I got the numbers for my stupid insurance example at the start. You shouldn't be willing to pay more than the value of a thing as an insurance payment against the thing ceasing to exist. But that's what we're doing. We are foregoing $65 in value-as-housing per year to protect $5 in gross potato revenue per year, just to be sure we never run out of potatoes (which can be imported way more easily than housing services, if we don't impose anti-dumping duties, which NZ has threatened before when frozen European potatoes were cheap). 

Except that's just the rationalisation.

The FDS points to the real reason. Council doesn't like out-of-sequence or leapfrog developments because that makes it harder to plan, fund, and finance infrastructure. They want development to happen exactly in council's planned sequence, so any new water pipe very quickly has lots of users to help cover its cost, because council at its budget constraint has to pay off infrastructure very quickly, because infrastructure funding and financing is a mess. And because council sees little of the upside from growth but has to deal with the potato cultists, why bother? Failing to fix the problem also helps prop up property values for existing owners in town - they vote, while those unable to move to Auckland don't vote in Auckland elections. 

Fundamentally silly outcome, but right in line with what you'd expect given the incentives. 

These restrictions will worsen the problem that the Infrastructure Commission pointed to. Making it harder to build at the urban/rural boundary will reinforce that land price differential and help ensure that the carbon-friendly walkable downtown developments remain unaffordable. 

How to get out of the mess?

• Let councils use project-based funding with long-term infrastructure bonds, ring-fenced away from council main balance sheets, financed by payments over time from the beneficiaries of that infrastructure. Making it not impossible to fund and finance the kit needed to support growth would get rid of one important barrier. 
• Let councils share in the benefits when they enable, rather than block, urban economic growth.
• Over the medium term, have tighter restrictions than NPS-UD and MRDS on councils where the median house price is very high relative to median household incomes - with freedom earned by restoring housing affordability. Council cultures will take a long time to shift otherwise. 

Afternoon roundup

The closing of the tabs:

• Environmental review laws have long been used for NIMBY purposes. This is a new one. The best that could come of this is a recognition that environmental review needs to be fixed.
• If Australia starts enabling nuclear power, NZ should consider a trans-Tasman approach that would let us piggyback on some of their regulatory efforts. There are economies of scale in this kind of reg. And Australia should be sure to kick NZ out of the arrangement if we start behaving like dicks. 
• The simplest explanation for Labour's approach to labour-market regulation is that they base their expectations of employer behaviour on how government behaves when it is a monopsonistic employer. 
• The simplest explanation for occupational regulation for medical workers is that it's a cartel arrangement that proved sticky when conditions changed.
• They've stopped pretending to be playing at anything other than extortion. “By doing things with news organisations, Facebook was attempting to reduce the risk of government hitting them with a big invoice,” one publisher said. “By pulling out, they’ve made it more likely that they will be whacked with regulation.”
• Could make for a fun test around Peltzman effects, if they gathered numbers on it.
• More reasons to be sceptical of the value of peer review, in some disciplines. The most obvious explanation for the problem (department demographics will reflect international demographics in the field, with some home-country bias, rather than home-country demographics full-stop) is ignored. But the paper's problems are bigger than that. Almost reads as a Sokal hoax. But it seems sincere. At U Manitoba, where I went for undergrad, there were more profs who were US Vietnam draft dodgers than there were in the Winnipeg population overall. An overrepresentation of them necessarily means an underrepresentation of the Canadian-born. Which is totally fine. Canadians will be overrepresented on US university faculties too. 
• David Harvey on problems in proposed changes to hate speech regs.

Poachers and gamekeepers

May 2020 seemed like the perfect time to start building on a hospital expansion. 

The Eden-Epsom Residential Protection Society disagreed. 

It's been tied up in the courts for the two years since then. 

Their successes in blocking a hospital expansion, during a pandemic, might seem surprising. Except that their President is sufficiently expert in Resource Management law that he's the guy that Labour asked to head up their review of the Resource Management system. 

Randerson's involvement with an organisation working to oppose a private plan change that would allow a hospital expansion was disclosed by Randerson before his appointment.

My column in the Stuff papers.

Auckland Council notified the proposed plan change on March 21, 2019.

The Eden-Epsom Residential Protection Society organised meetings to block it.

A spokesperson for the society, who did not want to be named, was quoted on March 31, 2019: “We are not opposed to hospitals per se and part of our case is there are suitably zoned areas of the city laid down under the Unitary Plan which could accommodate this activity.”

Hospitals are fine, you see, but Not In My Backyard – even if they are situated on a reasonably major thoroughfare.

Auckland Council approved the plan change in May 2020, with a few modifications.

Think back to May 2020.

New Zealand had just finished its first substantial lockdown.

Building more hospital capacity, so we would be ready if Covid got here, is the kind of thing that a sane place might do.

And May 2020 is exactly when the Government, and a lot of economists, were expecting unemployment to be heading toward double-digits. The Government planned a lot of make-work projects, some of rather dubious value, to ensure that construction workers would not flee overseas.

The hospital project could have been shovel-ready. It would have been a perfect project for May 2020.

Alas.

The Eden Epsom Residential Protection Society appealed the decision.

It has been working its way up through the courts. The High Court is scheduled to hear the case in September of this year – more than two years after Auckland Council had provided its initial stamp of approval.

In its submission of May 9, 2022 to the unitary plan team, the Eden Epsom Residential Protection Society highlighted the importance of the three affected properties to the designated special character area.

Later in that same submission, the society argued that “intensification is best directed to the CBD and metropolitan centres rather than the fragmentation and ultimate destruction of irreplaceable areas of special character”.

Allowing a hospital in the area would not just affect properties considered significant, it might also set a precedent of allowing people to build things.

It is an indictment of our resource management system that a hospital expansion can be tied up in the courts for two years during a pandemic.

Can a country that worries more about a special character designation than about hospital capacity in a pandemic really be considered sane?

The Government has wished to progress an ambitious urban growth agenda, including a National Policy Statement on Urban Development requiring councils to enable more housing, and the Enabling Housing Supply legislation requiring Tier 1 cities to allow far more intensification.

David Parker, the Minister for the Environment, launched a comprehensive review of the resource management system in July 2019.

Tony Randerson, QC, chaired that review, which was completed and has been reported back to the Government. He is eminently qualified. There will not be many who better understand the system.

His panel’s review forms the blueprint for the Government’s approach to resource management reform.

The Eden Epsom Residential Protection Society’s submission of May 2022 lists Tony Randerson, QC, as the society’s president.

In answer to a written Parliamentary question on any potential conflicts in Randerson’s appointment to chair the RMA review, Minister Parker stated that, “Hon Tony Randerson CNZM QC declared that he was the president of an incorporated society that was going to oppose a private plan change request by Southern Cross Hospitals. A management plan was put in place to address the potential conflict and the treatment was that Hon Tony Randerson will not be involved in any hearings.”

This ironic coincidence has not previously been reported, but has been open secret in some parts for at least a year. 

Funny old country, New Zealand.

Afternoon roundup

The closing of the browser tabs, so the poor thing can reboot, brings some worthies:

• Work from home is proving sticky in New York. The number of workers going into NYC offices is well under half of what it was pre-Covid. They're looking to turn underused commercial skyscrapers. That's what living with Covid looks like, in places that have been living with it longer than us. I don't think removing NZ's traffic light settings are going to return us to December 2019. 
• Nice. Now do contracting for PCR testing. 
• Face it. The NIMBYs are going to try to block your development in court no matter what you do to appease them. Spread the costs of inevitable lawsuits across more dwellings.
• It's not cancel-culture, it's cancel technology. 
• The Parliamentary Commissioner for the Environment warns against locking into hydrogen. Always the danger with winner-picking: you might bet the wrong one. Why not just let ETS prices take lead?
• Oh this is neat. ORBIS gives you the travel time between places in the Roman world. Rome to Alexandria in July? 14 days by fastest route and by cheapest route. Rome to Londinium? 39 days by cheapest route; 27 days by fastest route. 
• Fix the select committees already. 
• Covid testing is cheap relative to the alternative, but costs are still adding up for businesses.
• The return of the shibboleth.
• This looks fun: Townscaper.
• NZIER's tallied up employment, contribution to GDP and such for the alcohol sector. Here's the media release from the NZ Alcohol Beverages Council, and here's the report. We have 134 distilleries! There's a lot of the usual drill in portraying employment as a benefit rather than a cost, but it's a useful compilation of a pile of stats. I expect I'll be regularly googling the blog here to re-find the link to it. 
• Paranoia about the Mont Pelerin Society. Alas, it's just not that influential. 
• Would that more public goods could be coin-operated. 

Afternoon roundup

The tab-closing worthies:

• ACT supports a carbon dividend. Good!
• I had to point a lot of people at this last week on Twitter. The 2018 TWG's advice about GST. Says the same thing as the prior National Government's TWG. Good backgrounder for those needing background.
• Peter Martin worrying that Australia picks up NZ's stupid excise holiday.
• Matt Nolan also doesn't like the excise holiday.
• A helpful reminder that at least some of lockdown's costs were inframarginal.
• The borders are opening. Hope there's more hospital capacity by then, or that visitors are provided with appropriate warnings.
• Rotorua asks to be counted as a Tier 1 City, so it can more easily build houses. It's a fun one to think about. Nothing in the Medium Density Residential Standards rule applied to Tier 1 centres is outside of Councils' ability to do on their own. They could upzone on their own. Perhaps best to think about it as a way of binding to broad upzoning, and avoiding the salami-slices that councillors might otherwise be pushed into?
• Larry Summers worries we're heading for stagflation. I wish I had confidence that RBNZ has the competence to navigate the waters ahead.
• Running urban development through environmental planning processes gives NIMBYs lots of room to veto things. Here's Will Rinehart on how it plays out in California under the California Environmental Quality Act. Sounds a lot like New Zealand's Resource Management Act and its problems. PRI has reform suggestions for California.
• Nobody expects the Royal Society's inquisition. Fortunately, it has now been dropped. 

NIMBY tears

The taste of NIMBY tears. It's palpable in Simon Wilson's latest Herald column. 

But by my reckoning this new bill subverts the NPS-UD in at least nine ways.

Julie Stout, a leading architect and member of the Urban Design Forum (UDF), a coalition of design professionals, calls it "a slum enabling act".

Those nine factors:

1. While "up to three" dwellings can be built on any site, there are to be no minimum section sizes. You could put two extra dwellings on your section, or subdivide it into two, or three, or more, and put three dwellings on each new site.

That allows for more housing so more awesomeness. 

2. The "do it anywhere" provision is an invitation to developers to build where it's easiest and cheapest.

That also enables more housing so more awesomeness.

That, says Auckland Council, "would see widespread intensification dispersed across the city in places not served by essential public transport, water and community infrastructure and in areas located far away from employment centres. This includes smaller coastal and rural towns on the outskirts of the city." It's an invitation to urban sprawl.

The nice thing about bus routes is that you can redraw them if people move to different places. 

The Environmental Defence Society (EDS) says this could even lead to "areas with significant landscape and environmental values, like Waiheke Island, being destroyed".

The map of Waiheke already has piles of land cordoned off as sites of ecological significance.

3. Developers will no longer be required to consider sunlight, privacy, safe pedestrian access, access to nature, servicing and the interface with the street.

Buyers of the properties will consider those. Along with whether the house is comfortable, well-built, and everything else. 

4. There are standards governing size and location, but even they are flawed. They'll encourage what's called "sausage flats": rows of apartment blocks running back at right angles from the street, with little usable land for a garden or backyard.

The Coalition for More Homes submission encouraged getting rid of setbacks so that perimeter blocks could emerge as alternative. 

5. Want to object? Sorry, it's all "permitted activity". The council can't do much, either. Even on matters of national environmental significance, there's no recourse to the Environment Court. The minister for the environment will decide.

Housing should be a permitted activity. 

6. Will developers have to include any social housing in their projects? Nope. What about universal design standards, so at least some of the units are fit for people with disabilities? No again.

If you allow building everywhere, housing costs come down. Social housing issues will all get easier. Developers wanting to sell houses will build them to suit what people want. Shifting from housing scarcity to ample housing means developments compete for buyers. We have an aging population. Plenty of developers will want to cater to those needs to attract more buyers. And even if none of them did, there would still be far less pressure on existing accessible homes as buyers who didn't need those amenities would be looking elsewhere. 

7. Are they preserving environmental standards or keeping up with the demands of a changing climate? Also no. Encouraging urban sprawl fails that test. So do the lack of standards for construction techniques and emissions over the life of the building. There's no requirement for trees or other vegetation, either on sections or in public spaces near larger projects. "The first casualty," says Stout, "will be the trees of the city."

Oh come on. The building code still applies. That covers construction techniques. The Emissions Trading Scheme covers urban emissions, including building and transport. The city can put trees on the verges by the sidewalk if it wants. If a developer is putting in a larger project with public spaces, and figures the sections will have an easier time selling if there are trees in the public spaces, there'll be trees in the public spaces. 

8. The "rules and standards one might expect to find in a district plan", as the EDS puts it, now rest with the Government. It means councils could become bystanders in the development of the cities they are supposed to be running.

The rules and standards that one might expect to find in a district plan are the problem the legislation seeks to fix. 

9. Why the rush? The announcement was just over a month ago and already the deadline for submissions has passed.

Here I won't disagree. I will note though that this is a general problem. Lots of legislation is going through in rather hasty fashion. 

Our submission on it all is here. We're supportive of the legislation, and propose a few measures to make it even better. 

Update: the more I look at this piece, the weirder the framing is. The column's structure is "Here are a pile of people who initially said nice things about the legislation but then, on reading it, recanted or had second thoughts. The first half of the column cites politicians (Woods, Collins, Parker, Willis), organisations (NZ Initiative, Coalition for More Homes, and Infrastructure Commission), and an academic (Tookey) as supportive.

Then there's the bridge. It initially read, "Then they all read the bill. And were appalled." It's since been updated to "many" being appalled. 

After the bridge, it cites an architect, Stout, who says it enables slums. It cites Auckland Council/Mayor in opposition, along with EDS. 

It cites Tookey noting an urgent need for more "strategic investment, skills training and availability of finance. That's what the NZI said too." That's about right on our side, but hardly counts as opposition. It's more of a "Yes, and". I can't speak for Tookey, who may or may not have changed views. I don't know Tookey. 

And it cites Coalition for More Homes supporting the intent of the bill but wanting some tweaks.

I wonder whether a single one of the people or organisations cited at the outset would agree that they were appalled. 

Bayesian updating and deities

Maybe we should upweight the chances that there is a deity - one that cares a lot about poetic justice.

Last year, a Bottle-O bottleshop tried to set up in Khandallah Village.

The shop was opposed by a pile of local NIMBYs. 

Among the objections raised were that:

• The branding was too down-market for snooty snooty Khandallah. Maybe if it was a Glengarry instead of a Bottle-O.
• That young children walk through the village and while they wouldn't be able to purchase alcohol, they'd see unhealthy things being sold and that would damage their fragile little minds.
• That the nearest bottleshop is only 1.2 km away, which is probably already too close in Ngaio; there's also one over in Johnsonville. Surely nobody could be inconvenienced by having to walk 1.2 km to get their alcohol. And, there is already beer and wine in the local supermarket.  
• Maybe disreputable types - persons of low quality - would take the train to Khandallah and sit in the little park and drink alcohol there. [Heavily racist overtones in the Khandallah town hall meeting, we all know what you meant, you horrid elderly lady.]

Imagine that you were a poetic justice God. What would you put in that spot?

Walking through the village today, I finally saw a sign over the window.

25 paces from the Hell's Pizza, we will have a Dominos.

YIMBY strategies

How can YIMBYs overcome the NIMBYs? Local action and state-level policy reform says Kenneth Stahl.

Stahl argues that NIMBYs block development because of worries that increased supply will hurt the value of owners' biggest asset - their homes. I'm not sure that's right though. Upzoning will reduce the cost of housing while increasing the value of the newly upzoned land. And this should be especially true for neighbourhood-level upzonings as compared to broader upzonings, and it's the local ones that seem to draw the most local opposition.

But the problems with incentives facing councils have a lot of parallels with New Zealand's problems. 

Where local government there is debt constrained due to unfunded pension liabilities, they're debt constrained here because of debt limits, poor prior spending decisions, and voter reluctance to authorise debt because of sensible worries brought on by poor prior spending decisions. Where councils there get a share of sales tax revenue that distorts council decisions in favour of zoning for business rather than housing, here councils get the costs of new development offset by rates revenue while central government gets the bulk of the benefit of growth. 

And does this sound like the RMA?

Streamline Environmental Reviews.  Some states require all new development to go through an extensive and costly environmental review process.  This process can easily be manipulated by neighbors to fight development they dislike for reasons having little to do with environmental protection. The California Environmental  Quality Act (CEQA), for example, has become a preferred tool of homeowners looking to squash new development, as they can force developers to spend additional time and money on environmental reports. Previous efforts to streamline CEQA in order to lower the cost of housing have failed due to opposition from environmental groups, and it is notable that amid the flurry of housing bills passed by the California legislature in 2017, not a single one touched the CEQA process.

The article doesn't explain why California's such a mess while Houston and Atlanta aren't. Better mechanisms for financing urban expansion is part of the answer.  

One-way heritage bets

What a mess of a system.

Suppose you want to force owners of heritage buildings to protect them for you at their expense rather than your own. You can lodge legal challenges to consents issued to the owner allowing changes.

If you win, you've succeeded in forcing the owner to provide you a service for free.

If you lose, you might have costs awarded against you. And if you do...

One of Auckland's most active, successful heritage groups is planning liquidation after a $27,000 bill from losing a battle to save one of the city's oldest hotels.

Devonport Heritage Inc is holding a special meeting on September 14 to vote on the appointment of a liquidator and a notice has just gone out to all members from chairwoman Trish Deans.

Margot McRae, deputy chairwoman, today said that liquidation was planned as a result of a $27,000 bill for court costs after the group's unsuccessful Environment Court attempt to save the Masonic Tavern in 2010.

The story goes on to talk about the hundreds of thousands of dollars in court costs faced by Councils defending issued resource consents against these kinds of collection-proof outfits. Left unmentioned are the even higher costs when a property owner's plans are put on the back burner for years while waiting for the legal challenges to wind their ways through - and the costs of unaffordable housing in Auckland when NIMBY organisations have an easy time doing this.

I had a chat yesterday with an interfaith group representing the owners of a pile of historic churches.

One of the costs of heritage building ownership that I hadn't considered: how it ramps up the cost of insurance. It's one of those things that's immediately obvious the second it's pointed out, but otherwise you might miss - and I'd missed it before. Insurers obviously demand more to insure a building that has to be reinstated to a historic standard than they do to replace a building with equivalent functionality.

A lot of small congregations would be more than happy to replace an older building with a new one with the same functionality anyway. But replacing a badly damaged old building with a new equivalent is tough when the old building is under heritage protection. And so these churches are facing substantial annual insurance bills reflecting the costs of rebuilding to an unwanted heritage standard.

There really should be a put option in there where the heritage people objecting to a change should have to purchase the building at its RV on request by the owner - or withdraw the heritage listing.

Auckland housing

The Spinoff knows how to frame things:

Auckland housing crisis: Solutions and shit-lutions, by @EricCrampton:

 

https://t.co/zlMkuFR74i

 

— The Spinoff (@TheSpinoffTV) June 27, 2016

 

My piece there summarises a few things on Auckland's housing affordability crisis. Ultimately, it comes down to incentives.

A snippet:

Over the past four years or so, we’ve achieved a generalised political consensus in Wellington, across parties and agencies, that the bulk of the problem comes down to statutes and council regulations that make it too hard to build out or up.

So far, it might sound like I am blaming Auckland Council for the entirety of this mess. But that would be far too simplistic. Would you blame the birds for flying, the children for laughing, or the sharks for biting? No. Or, at least you shouldn’t – even if some people lodge objections to new playgrounds because of the potential for loud laughing children.

Councils operate within financial and legislative constraints. The problem is that what is best from the perspective of council or any councillor can differ from what is best for the country.

But just as it is too simplistic to just blame Council for this, so too is it too simplistic to just blame the Resource Management Act.

The RMA lets councils set whatever district plan that councils want to set. It doesn’t force councils to be very restrictive, though it doesn’t make it easy to subdivide. What the RMA does do is make it very hard to amend a district plan once one is set.

There are reasons that Auckland Council has taken years to produce the unitary plan. And, there’s also a reason that local objections have had so much sway.

Just look at the mess in Auckland where a developer wanting to build housing for 1500 households in an old gravel pit at Three Kings, turning much of it into parks and open spaces, has bought almost a decade’s worth of objections and processes and hearings. How can anybody build anything to scale under those conditions? In the middle of a housing crisis, with daily news stories about the number of children having to live in cars with their parents because there are not enough houses to go round, NIMBY activists block new construction.

Every time a NIMBY cries, an angel has to sleep in a car, or in a garage.

It follows on from my chat last week on housing affordability with Bryan Crump on Nights at Radio New Zealand.

Enjoy!

Good urban policy makes for good refugee policy

A few months ago, when there was more pressure on government to increase the refugee quota, one of the push-backs from opponents asked where the refugees would live when housing markets are pretty tight.

Bad urban policy that limits supply naturally leads to this kind of view. One more house taken by somebody is one fewer house available for you or your kids when urban policy has made it too hard to build new dwellings to keep up with demand.

And now we have a nice bit of evidence on it by counterexample. Houston gets housing policy right. They allow expansion in the suburbs through use of municipal utility districts in which the subdivisions cover their own infrastructure costs through use of targeted rates that pay off the bonds used to finance things - the policy that Nick Smith reckoned to be some kind of voodoo economics. It just works. 

Turns out that Houston also is able to support a lot of refugees. 

Houston, which admits more refugees than any city in the nation, still supports Syrian refugees, even in light of the hard position carved out by Texas Governor Greg Abbott. "Not allowing refugees makes America look weak,” Houston Mayor Annise Parker told reporters. “It is the only humane thing to do.”

Humane housing policy that maintains housing affordability by allowing both densification and expansion also allows humane refugee policies.

It's also fun to think about the political economy of the mayor/governor divides across America on refugee policy. My first cut at it is that governors' median voters are more rural than mayors', but I doubt that's all of it.

Land use policy and the good we can do

Let's put a few things together.

First, Peter Singer argues that effective altruists should, in most cases, aim to earn as much as possible so that they can give it away to charities that are proven effective in saving and improving lives.

Second, high human capital types are best able to do this when in locations complementary to their human capital. High earners do best when able to live near downtown.

Third, land use policy has made it ridiculously expensive to live close to the downtown of most major cities. Restrictions preventing densification downtown and preventing mid-rises and townhouses in the inner suburbs work to capitalise the productivity benefits of living downtown into land prices, building wealth for those who happened to be there early on. In other words, living downtown so you can earn more mostly gets eaten up by the cost of living downtown. Effective altruists then are less effective than they otherwise could be.

Fourth, land use policies will particularly affect those committed to effective altruism. Those who are committed to minimalistic lifestyles and smaller apartment living will have a tougher time where land use regulations mandate minimum apartment sizes and minimum amenities that some of these altruists would prefer to forgo in order to give more to effective causes.

Finally, one of the most effective national policies for improving global well-being is vastly more open immigration policy. Giving a thousand dollars to a poor person in Africa is incredibly effective. Letting that person move to a place where they can live a better life is even better still. But getting increases in immigration, let alone in refugee numbers, immediately hits onto the "but they'll take our precious scarce houses" constraint.

Conclusion: liberalising land use policies is one of the most effective humanitarian measures a government can put in place. It's a metapolicy allowing other things to work better. Effective altruists can be more effective. We could accommodate more immigrants and refugees. We could make housing costs less burdensome for the domestic poor, reducing pressure to provide them transfers rather than providing transfers to those in greater need abroad. Blocking such liberalisation, because of your particularistic concern for your neighbourhood's character, is the opposite of what humanitarians should do.

Corollary [self-interest watch, though]: Effective altruists might consider supporting organisations helping to liberalise land use policy.*

This will be among the things I plan on discussing with Singer on Monday.

* And here's another good one.

Dead capital: Council ownership edition

I've worried that perhaps Councils haven't fought back against the NIMBYs because they haven't quite enough skin in the game.

The basic model in my head has run as follows:

Councillors need to be re-elected. High preference intensity local NIMBYs get disproportionate weight because they're vocal and very likely to vote. And so things like Auckland's Unitary Plan unravel: local pressure pops up, local Councillors stand by their neighbourhoods, and Council has little incentive to push back.

Any new development that goes in does add to the ratings base, but the link to Council revenues is weak: absent other changes, an increase in the value of land in one place means a greater fraction of a fixed tax bill falls there with minute and diffused cuts elsewhere; the increase in the rateable base can allow the total budget to increase if Councils are discretionary budget maximisers, but the hassle costs involved in dealing with the NIMBYs just might not be worth the small increase in Council budget that could come from it.

Maybe allowing some site to be turned into low-rise apartments would allow Council to raise another $150k/year without increasing any other property owner's taxes, but is that really enough to be worth the years of town hall meetings with angry people all promising to throw out the local Councillor because of it?

If that's the issue, giving Council a bit more of a stake in development could help out. The NZ Initiative a while back proposed, for example, giving Council the GST on new construction activity. On a $20 million construction project, that would be a $3m kick encouraging Council to allow appropriate land use. Council then has a better reason to find solutions that compensate the NIMBYs at the margin while allowing development.

That's still the model that's in my head, but what are we to make of this kind of case?

Auckland Council owns massive vacant-lot car parking spaces in Tekapuna. They could transform the space, with parking built into whatever complex went up, if there were compelling public interest in having those parking spaces there. They'd then appropriate almost the entire surplus from the project: put it up to competitive tendering, take the money from the best proposed development, use the money for other projects that compensate the NIMBYs enough to make the deal go through.

Maybe the existing use - the weekend market - is just really really important to local residents. But what of all the other surface parking lots owned by Council? They could easily be turned to commercial or residential use, with a parking garage built into the facility if needed.

Perhaps the opportunity cost of the land just isn't considered by Council when setting priorities.

Auckland SimCity

Some reports make you want to find a city planner and beat it with a heavy muddy stick.

Arthur Grimes and Ian Mitchell's latest MOTU report is the latest. They demonstrate just how badly Auckland Council has wrecked housing affordability. Stupid "it was a good idea at the time" rules compound on one another to make it impossible for developers to innovate in providing affordable housing.

Read the whole thing. But Table Two has the main effects.

Every one of these things would have seemed like a good idea to somebody at the time, but nobody stopped to think about the cost.

• Height limits appeal to NIMBYs, maintain viewsheds (the notion that there's infinite value in being able to see some mountain in Auckland from some point on the Harbour Bridge), and appeal to idiotic planners who reckon nobody would want to live that high up anyway.*
• Floor to ceiling height limits appeal to planners who think that it's not fair that poor people's apartments would have low ceilings; they ignore that tenants could otherwise choose between higher ceilings and higher rents and lower ceilings and lower rents. Some people prefer the cash in hand; planners imagine this stuff's costless.
• Minimum balcony area regs appeal to planners' sense of aesthetics; they ignore the cost and cannot imagine that others might prefer the cash.
• Delay is costless to planners, who imagine the costs of a poor (ie, not what they like) design to be huge because buildings last a long time. 

Grimes writes:

In some cases, developers felt that they may even face additional challenges gaining planning consent if their proposal includes innovative solutions that are not typically included in other developments. Specifically, developers considered that being innovative in order to reduce cost heightens the risk and uncertainty when trying to obtain a consent, both in terms of the time required to work through the consenting process and the ultimate outcome in terms of the number of dwellings. Developers commented that urban designers do not like small uniform dwellings which are easy to produce and which reduce costs.

He also specifically cites Grey Lynn people as part of the problem around NIMBY activism.

While I broadly support Nick Smith's look at how the RMA might be fixed so it stops enabling this kind of Council ridiculousness, I doubt it goes far enough. Underpinning all of this is that Councils have zero current incentive not to behave this way. The RMA was never intended to enable this kind of mess; planners used it to set rigid district plans and to fob off blame for lengthy processes. If Councils instead had better incentives, so that growth were in their interest instead of just NIMBY-appeasement, we'd have better outcomes. 

New Zealand is the 7th least affordable place in the world to live. Bad urban planning takes a good chunk of the blame.

Update: See also:

• RMA Changes and Council Incentives
• Costs, Benefits, and apartments

* I'm not exaggerating. That was one of the reasons behind Christchurch CBD height limits. Never mind that it's developers' money on the line if they're the ones wrong about what customers might want. 

Herne Bay and Property Rights

A correspondent tells me that this flyer's been showing up in mailboxes around Herne Bay.

Let's go through the purported rights here enumerated:

• The right to object to neighbours' putting up a 4-story building that "steals daylight, privacy, perhaps views, and devalues your property".
• Some of this is legitimate; a process that facilitates Coasean bargaining with truly affected neighbours would be better. 
• The right to have ample on-street parking available whenever you might want it.
• Unless they've bought an easement from Council providing guaranteed spots in front of their houses, this is no more a right than having an unconstrained commute with no traffic.
• Pragmatically, this stuff should be handled by putting in time limits on parking on residential streets with exceptions for those with residents' passes. Hand out two per house and let them on-sell them if they want.
• The right to have the neighbourhood look as it always has looked.
• Again, unless they've gone and purchased easements from the neighbours preventing substantive changes to properties, there's no right here. 

The rights that are missing:

• The right to use your owned property as you wish;
• The right to change how your house looks, even if some other people who don't own your house don't like that anything anywhere ever changes.
• The right of others to join together buy a property on the street with their own money, from a willing seller, and to put up townhouses to live in.

The "If you think your home is your castle, think again!" line is a howler. If it's my castle, I can paint it purple and change the front gate without getting resource consents even if the Herne Bay Residents Association Incorporated doesn't like it.